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    Entries in disclosure (6)

    Saturday
    Oct082016

    The Week in Public Finance: Pensionomics, Hidden Bank Loans and Private Equity Fees

    BY  SEPTEMBER 16, 2016

    Do Pensions Help the Economy?

    A new study on how pensioners spend their money will likely give a boost to those who want to keep traditional, defined benefit pension plans in the public sector.

    Published this week by the nonprofit National Institute on Retirement Security (NIRS), the analysis on pension retiree spending in 2014 estimates it resulted in $1.2 trillion in total economic output. The total is based on about a half-trillion in benefits paid to public and private pensioners in 2014. State and local pension benefits account for about half ($253 billion) of those benefits.

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    Thursday
    Aug252016

    SEC Censures 71 Governments for Lack of Fiscal Transparency

    Financial timeliness is a problem that's 'widespread and pervasive,' the SEC said.
    BY  AUGUST 25, 2016

    More than 70 state and local governments have been censured for failing to disclose certain financial information about bonds they sold to investors, the U.S. Securities and Exchange Commission announced Wednesday.

    The SEC reached settlements with 71 governments across 45 states as part of a voluntary self-reporting program called the Municipalities Continuing Disclosure Cooperation Initiative (MCDC). Only five states -- Arizona, Florida, Nevada, Oregon and Rhode Island -- had no governments or government entities censured.

    The number of citations show the problem is “widespread and pervasive,” said SEC Enforcement Director Andrew Ceresney in a statement.

    MCDC is part of the commission's push for better transparency in the municipal market. Under the program, governments had to review documents associated with bonds they issued over the past five years. If they found anything amiss -- be it that they failed to disclose a previous annual financial report or didn't notify investors of a credit rating downgrade after the sale -- they could voluntarily come forward and obtain favorable settlement terms.

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    Friday
    Aug192016

    The Week in Public Finance: Demanding Better Government Disclosure, Uneven Recoveries and a Party at the Pump

    A roundup of money (and other) news governments can use.
    BY  AUGUST 19, 2016

    More Disclosure Pressure on Munis

    Investors in the municipal market have long demanded better access to governments’ financial information, particularly since the 2008 financial crisis. But tired of waiting, an industry group stepped up its calls for federal regulators to intervene this week in a letter to the Securities and Exchange Commission (SEC).

    “The failure to publicly disclose bank loans to all market participants can lead to unexpected rating changes that negatively impact bond pricing,” said Lisa Washburn, chair of the National Federation of Municipal Analysts (NFMA). The group is calling for governments to disclose all interim but relevant information, such as an approved fiscal year budget and tax receipts, as well as clearly report any long-term debt obligations.

    The letter also suggests that the SEC adopt the authority to ensure that municipalities file their financial disclosures in a timely manner. Currently, there is no enforced deadline, and governments typically file annual reports anywhere from six months to a year after the close of a fiscal year.

    The Takeaway: The problem from an investor point of view is that the more troubled an issuer is, the more likely it will delay releasing relevant financial information. Take Puerto Rico, which is essentially out of cash and only recently issued its annual financial report for the 2014 fiscal year.

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    Thursday
    Jun302016

    Who Should Police Municipal Markets?

    A questionable bond sale in Illinois has left some wondering why there's no one to stop financially troubled governments from borrowing.
    BY  JUNE 30, 2016

    Borrowers have long assumed that banks and other traditional lenders will only loan them as much money as they can responsibly afford. Almost a decade ago, the subprime mortgage crisis shattered that belief. But it might still persist in the municipal market.

    Take Illinois, whose fiscal woes are no secret. It has the lowest credit rating (BBB+) -- by far -- of all 50 states, its pensions are among the worst-funded in the country and it's entering its second fiscal year without a budget. Yet earlier this month, Illinois borrowed more than a half-billion dollars from municipal market investors with relative ease.

    The state paid a higher interest rate for its troubles. But thanks to the high demand for municipal bonds these days, the rate was actually lower than the one Illinois paid on its last bond issuance in January.

    "That's the biggest weakness of the municipal market," said Matt Fabian, managing director for Municipal Market Analytics. "We will help issuers borrow as much as they say they want, whether or not they can afford it."

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    Friday
    Jun172016

    The Week in Public Finance: Defending Wall Street Fees, Ranking Property Tax Rates and More

    A roundup of money (and other) news governments can use.
    BY  JUNE 17, 2016

    Defending Wall Street Fees

    The performance fees that public pension plans pay private equity and hedge fund managers are coming under scrutiny. Some say the high fees aren’t worth the returns on investment and complain that many costs remain hidden. Those two points were part of a critical report last month by the right-leaning Maryland Public Policy Institute on Maryland’s hidden Wall Street fees.

    Now, the Maryland State Retirement Agency has issued a lengthy response questioning the institute’s conclusions. In a letter published this month by Executive Director R. Dean Kenderdine and Chief Investment Officer Andrew C. Palmer, the system’s officials attack the institute’s methodology while defending its own financials.

    Maryland reported paying $85 million in performance fees in 2014, but according to the report it may have actually paid more than $250 million. The policy institute made that estimate by comparing Maryland’s disclosed performance fee rate against the rate of performance fees disclosed by New Jersey, which has a similarly sized alternative investment portfolio and fairly comprehensive fee disclosure policy.

    But Kenderdine and Palmer say Maryland's $85 million in reported fees are accurate because New Jersey has been “much more aggressive in its pacing of investments.” In other words, the private equity funds New Jersey invests in are designed to start producing returns soon after the pension puts money in the fund. Maryland’s private equity funds, however, haven’t hit that so-called harvesting period when investments are sold and managers receive performance fees from that profit, said Kenderdine and Palmer. So the performance fees are smaller but could theoretically be larger in the coming years.

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