WASHINGTON - The National Federation of Municipal Analysts has nearly doubled its list of bond issuers that have pledged to meet the federation's rigorous standards for secondary market disclosure, Chairwoman Victoria Westall announced yesterday.
Some analysts have voiced frustration that the group's call for improved disclosure has not met more of a response. But a major bond insurer has indicated that it considers improved disclosure a top factor when deciding prices.
Ms. Westall, director of municipal research for Edward D. Jones & Co. in St. Louis, said the following 12 issuers were added to the federation's list: the cities of Chicago, Fort Worth, Tex., and Grass Valley, Calif.; the Village of Buffalo Grove, Ill.; CGH Medical Center of Sterling, Ill.; the Florida Municipal Power Agency; the Greater Orlando, Fla., Aviation Authority; the Intermountain Power Agency in Utah; the North Carolina Eastern Municipal Power Agency; the North Carolina Municipal Power Agency No. One; the Piedmont Municipal Power Agency in South Carolina; and the Prince William County Park Authority in Virginia.
The additions bring to 22 the total number of cities, counties, and other entities that have adopted resolutions or provided written statements from authorized officials pledging to provide regular audited financial statements, comprehensive financial reports if prepared, and other key credit information about their outstanding bonds.
Issuers also must pledge to send periodic credit information to a rating agency for rated deals. And they must state in the introduction to official statements that they have made these commitments.
The announcement comes amid growing frustration among analysts about what they view as the sluggish response by issuers to calls for improved secondary market disclosure. Federation officials said last week they are putting the final touches on a broad survey that will go to the group's 800 members this summer to gauge improvements in the area.
To date, no buyers have reported paying premium for bonds strictly because of the quality of secondary market disclosure, nor have any insurers reported giving a discount exclusively for that reasons. Market observers say such statements are unlikely because of the many factors that go into price determinations.
But the Financial Guaranty Insurance Co. last week clearly indicated it is rewarding issuers that provide ongoing disclosure by reducing the cost of providing credit enhancements.
Pricing "was based on outstanding operating performance, strong legal covenants and detailed ongoing disclosure," John Cassidy, vice president of Financial Guaranty's utility group, said in a statement announcing that the company had been selected to back an upcoming $100 million issue of variable-rate certificates of participation by the County Sanitation Districts of Orange County, Calif. Financial Guaranty said credit enhancement for the issue resulted in an interest-rate savings of roughly $2.5 million over the lie of the bond issue.
Meanwhile, the upcoming survey by the analysts federation drew an angry response from at least one municipal official, who said that some issuers have already been providing excellent secondary market disclosure and that improvements by the rest will happen only when they have a price incentive.
"Issuers have been painted as the bad guys for not being responsive," said John Gunyou, commissioner of the Minnesota Department of Finance and chairman of the Government Finance Officers Association's committee on governmental debt and fiscal policy.
"Why should an issuer respond if the market will always pay him, regardless?" Mr. Gunyou continued. "There's no financial incentive. Until investors stop buying paper or attach a penalty to that, people are not going to be responsive. GFOA is encouraging people to do it. Now the other side of the market has to start responding."
Mr. Gunyou was critical of a recent federation recommendation that issuers declare in official statements whether they will or will not supply ongoing disclosure. "NFMA is hung up on the negative," he said. "Some of us have been doing an excellent job of disclosing for years. But there is no [price] differentiation."
Richard Ciccarone, chairman of the federation's standards and practices committee, responded to Mr. Gunyou's charges is a telephone interview yesterday. "We're in this together," he said.
Talking to the association's members is "like singing to the choir," he added, nothing that many association members had already been providing ongoing secondary market disclosure.
