Information about municipal bond issuers is becoming more complete, more readily accessible, and its availability is going to improve the market.
Last week, the movement made headway on two fronts, and we laud them both.
The National Association of State Auditors, Comptrollers and Treasurers met in Rapid City, S.D., and approved a resolution encouraging states and cities to issue "popular" financial reports to help meet the needs of ordinary citizens.
A few days later, the Public Securities Association joined forces with the National Association of Municipal Analysis to ask bond issuers to state whether or not they intended to provide ongoing information to the secondary market. Bond issuers should state their intentions at the start one way or the other, the two groups said.
The resolution of the auditors, comptrollers, and treasurers, while aimed at the average taxpayer and not at the investment analyst with an MBA, is an important statement for the munisipal market. Popular reporting must be simpler and easier to understand, but it must be based on clear thought and analysis. Good popular financial statements, like any spare writing, likely will be more difficult to do well than more complicated financial reports with too many numbers to comprehend.
We suspect that popular reporting will help municipal analysts as much as it helps the average citizen who demands more governmental service and lower taxes and can't understand why he can't have both. The volume of information available to municipal bond investments is less of a problem than a scarcity of clear up-to-date information. If cities and states heed the association's resolution, both the municipal bond market and the citizenry will benefit.
Frustration is evident on several sides. State treasurers and comptrollers complain that the media don't do a good job in disseminating important information, preferring crime news and natural disasters to complex financial matters. Reporters complain that government finance officials resort to "smoke and mirrors" and are not candid when they cannot balance their budgets. Both sides are seriously worried that too many Americans are uncaring and poorly educated and don't want the information in the first place.
If local governments follow the recommendation of the state auditors, comptrollers, and treasurers, these shortcomings will decrease. If public securities dealers and municipal analysts persuade issuers to divulge more information on an ongoing basis, the municipal securities market will move a small step toward becoming a perfect market. That's progress.