Today’s Tip: Use the Electronic Municipal Market Access program (EMMA) from the Municipal Securities Rulemaking Board to access financial statements and disclosures for municipal bonds, including conduit bonds.
That’s what Yamil Berard of the Fort Worth Star-Telegram used to discover that her home county, Tarrant, is among the nation’s leaders in municipal-bond defaults. In part, that’s because it’s also among the leaders in issuing a kind of muni known as conduit bonds. Here’s how Nathaniel Popper of the Los Angeles Times describes them:
“Conduits allow private entities to tap into low-cost municipal-bond financing for projects that boost economic development. State or local governments are paid fees to issue the bonds on behalf of companies or nonprofits, which are responsible for repaying investors.”
Using EMMA, Yamil found that Tarrant County was “authorizing financing for billions of dollars of projects all over Texas, including risky deals others had rejected.”
She says of the two-year-old EMMA website: “It’s like the SEC of municipal bonds. It’s a reporter’s dream. It talks in English.”
EMMA offers free access to offering statements for municipal, which can be about 300 pages. They provide specific details about projects and financing details. Users also can find disclosure information such as lawsuits and loan defaults.
Because of the volume of information, Yamil says it can be intimidating. The system allows you to search by issuer name and also by CUSIP, which is the number assigned to a specific bond issue.
For her story, Yamil searched “Tarrant County” and located bonds issued by the county. She found:
“Almost a half-billion dollars of the projects have run into financial problems….In some cases, that’s left disabled people in assisted-living centers that put their lives in jeopardy and low-income people in housing complexes that have fallen into disrepair. It can also leave investors holding the bag.”
Nathaniel reported in June that conduit bonds have grown roughly three times faster than the general municipal market over the last five years, with $84 billion in such bonds issued last year. He writes:
Although conduits account for roughly 20 percent of all municipal bonds, they have been responsible for about 70 percent of all defaults in the municipal-bond market in recent years, according to Income Securities Advisors, a Florida research firm. Over the last two years, the five municipal-bond issuers with the most troubled bonds have all been conduit-bond issuers, according to Municipal Market Advisors, a Concord, Mass., research firm.