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Well beyond bonds: Digging into reports from muni borrowers

Understanding the muni bond market can make you a better reporter, even if you never write about bonds.

If you are writing about the bonds, great, but if not, these documents are also really useful if you are covering state or local governments, charities, hospitals, transportation authorities, school districts, or public utilities, or any corporation that borrows money in the muni bond market.

Bonds and a trader The Securities and Exchange Commission has less authority over borrowers in the municipal bond market than in other markets, but they do require muni borrowers to provide investors offering documents filled with legal and financial information about the borrower.

The documents, known as preliminary official statements before the bonds are sold and official statements afterwards, are public documents readily available to reporters through the Municipal Securities Rulemaking Board’s Electronic Municipal Marketplace or EMMA database.

The database is a great resource, but it is not always easy to use, so some practice might be required.

When searching on EMMA, the fastest way is to use the so-called CUSIP identifier, a nine-digit combination of numbers and letters assigned to each individual security. But CUSIPs are often hard to find, so it is easier to search the database to find what you need. Start with the name of the issuer, for example the District of Columbia, or the State of California.

You will get a ton of results, many irrelevant to your search, but don’t be discouraged. Page through until you find the most recent offering and download the pdf of the Official Statement.

Examples: The District of Columbia Income Tax Secured Revenue Bonds Series 2012A and 2012B (PDF)

The State of California Various Purpose General Obligations bonds (PDF), dated April 12,

These documents can be expected to have the most current information about the fiscal health of an issuer at the time the bonds are sold. Keep in mind that these are static documents, and only reflect the finances at the time of the initial offering, not at resale of the bonds after the offering. If you want the most current information, find the document for the most recent offering.


Here are a couple of examples of what you can find:

Anyone covering California knows that revenues are coming in below projections. But do you know what the state is telling borrowers about its fiscal health?

Starting on page 3 of this document, State of California Various Purpose General Obligation Bonds (PDF),  the state describes its financial pressures and refers to elsewhere in the document
where even more information is available.

And when you look, you find out that California was anticipating that the Facebook IPO could help. On page 43 of 398 in the OS, you find this:

Potential Facebook Initial Public Offering. Facebook, Inc. is a Delaware-incorporated company that is headquartered in Menlo Park, California. In an initial Form S-1 registration statement dated February 1, 2012, Facebook released a preliminary prospectus for a possible future initial public offering (IPO) of its shares on either the New York Stock Exchange or The NASDAQ Stock Market. (This filing  is available via the Securities and Exchange Commission’s website, and it is expected to be updated after the date of this official statement.) It has been widely reported that such an IPO may occur as soon as the spring of 2012. At this time, the state is unable to estimate, with any degree of certainty, the budgetary effect of the Facebook IPO, if it were to occur. It is possible that activity related to the Facebook IPO could generate additional revenue in the billions of dollars in the current fiscal year and/or the following few fiscal years, beyond the amounts estimated in the 2012-13 Governor’s Budget, but there can be no assurances of such a result.

If you are covering Facebook, Silicon Valley or its impact on the state, this could be a jumping off point for a fascinating story. See what Santa Clara County, or the City of San Jose, or the City and County of San Francisco have disclosed about the potential impact of specific tech businesses on their respective tax bases.

Keep in mind that for the state, the impact would largely come from income taxes related to the millionaires and billionaires minted in an IPO, but for local governments the impact might be seen in the property tax base or as homes are built, bought or sold.


For the District of Columbia, the story is somewhat different. Being the U.S. Capital and seat of the federal government and home to many hospitals and universities, means the district has a tremendous amount of property on which it cannot assess property taxes, which are among it’s (and most local governments’) largest sources of revenue.

The issue has come to a head as tax-exempt institutions put demands on government for public safety and other services, but don’t contribute to the tax base. It is front and center lately in Providence, RI and in Illinois. For stories on these entities, Official Statements are a valuable resource.

Most offering documents will offer lists of a jurisdiction’s largest employers and its largest taxpayers. If the lists don’t overlap, you can deduce that some of the biggest entities in a community are not contributing, and that affects the amount of taxes all other businesses are paying.

The District of Columbia’s most recent Official Statement (PDF) offers this information on page 128 of 132:

Table 11 Principal Employers in the District 2010

Georgetown University
The George Washington University
Washington Hospital Center
Children’s National Medical Center
Georgetown University Hospital
American University
Howard University
Fannie Mae
The Catholic University of America
Providence Hospital

Note: Table 11 is ranked by size of workforce. It does not include the federal and local government as employers. With the exception of Fannie Mae, all of the employers listed above are not-for-profit entities.

Source: District’s Fiscal Year 2011 Comprehensive Annual Financial Report; Statistical Section     (unaudited) Exhibit S-4B



Other muni market resources that can be very helpful for anyone covering the businesses in a given community come from rating agencies. Despite some of their failings during the financial crisis, rating agencies offer a wealth of information, if you know what to ask for.

If you are covering a company, always check with the rating agency to see if they have rated it and request the most recent report. It will have financial information and also cite the biggest challenges and opportunities for the company’s growth.

You also want to get the ratings reports for the cities and states that you cover. They are usually easy to read and full of great data on population, debt per capita and other metrics reporters can use.

For ratings reports, the best thing to do it to contact the agencies’ press desks and get on their distribution lists.

There are three major rating agencies in the U.S.:

  • Fitch Ratings, 212-908-0500
  • Moody’s Investors Service, press desk, 212-553-0376
  • Standard & Poor’s, 212-438-2124

In Basics, Economy, Featured, Investing | Banking.

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