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Abstract: 

Since 1992, the Municipal Finance Journal has published edited proceedings of the annual conference of the National Federation of Municipal Analysts. NFMA is the leading association of market analysts. The 32nd Annual Conference was held in Las Vegas in May 2015. We publish four of the sessions in this issue. Municipal bankruptcies are front-page news, with reverberations across the market. A panel that focused on the issues raised by recent bankruptcies included the Honorable Elizabeth L. Perris, who served as the mediator for the Detroit bankruptcy; Bruce Bennett, who was the lead counsel in Detroit and Orange County; Jeffrey E. Bjork, who represented bond insurers in Detroit, Stockton, and San Bernardino; and moderator and analyst Ty Schoback. Their fascinating exchange offers a compelling argument that Chapter 9 is evolving as a result of recent municipal bankruptcy cases. A mainstay of the NFMA conference is the Industry Roundtable, which allows key market participants to engage in a wide-ranging discussion of issues facing the municipal market. This year’s roundtable handled topics that included public pensions, bank loans, tax exemption, and statutory liens in bankruptcy. Engaging in this conversation are NFMA chair and analyst Jennifer Johnston; Lynnette Kelly, who is executive director of the Municipal Securities Rulemaking Board; David Bean, who is research director of the Governmental Accounting Standards Board; J. Ben Watkins, who is an issuer official and the representative of the Government Finance Officers Association; and bond lawyer Dee Wisor as the representative of the National Association of Bond Lawyers. Fiscal stress requires attention to both sides of the budget—expenditures and revenue. The 2015 NFMA conference offers two panels that illustrate the difficulty in analyzing expenditure flexibility and revenue volatility. A panel session organized around two case studies helped focus attention on the ability of local governments to cut spending in times of fiscal stress, a difficult topic for credit and municipal analysts to judge from a distance. On this panel, credit rating analyst Jessalynn Moro is joined by municipal advisor Mike Nadol and local finance officers Darren Adair and Mark Vincent. They offer insights on the “low-hanging fruit” for budget cuts, compensation factors, cost structures, the short- and long-term implications of cuts, and the decision-making process. Emergency relief and bankruptcy are discussed as well. Revenue volatility can upend budget plans. Municipal analyst Andy Shin is joined by Pew research director Kil Huh, legislative fiscal analyst Jonathan Ball, and former state economist Charles Steindel to explore state revenue volatility. Panel members focus on national trends regarding revenue shortfalls, short- and long-term best practices over the business cycle, and alternative mechanisms for improving revenue estimates. On a personal note, I have concluded my three-year term on the board of directors of the Municipal Securities Rulemaking Board. It was a distinct honor to serve on the MSRB and to work alongside an outstanding group of regulated and public members who took seriously their job to promote a fair and efficient municipal securities market. Any achievements as a board rest on the dedicated professional work of an outstanding MSRB staff, headed by Lynnette Kelly. Thank you, Lynnette and the board chairs during my term—Jay M. Goldstone, Daniel Heimowitz, and Kym S. Arnone—for the judicious handling of my probing questions, suggestions, and comments. The discussions were lively yet focused, and the results in terms of rules and other formal pronouncements are visible for the market to judge.

Keywords: Municipal bankruptcy, Chapter 9, Municipal securities, disclosure, bank loans, pension risk, expenditure flexibility, fiscal managers, forecasting errors, volatile revenues, business cycle management

Affiliations:  1: Georgia State University.