Massachusetts creates the gold standard for municipal bond disclosure
Here is the hottest thing in muniland disclosure right now: http://www.massbondholder.com/
The Commonwealth of Massachusetts has poured a lot of effort and creativity into figuring out how to keep its bond investors up to date with financial data. Today it consolidates lots of municipal bond data in one place. It’s a muniland “one stop shop,” and I hope it inspires other states and municipalities to improve their games on disclosure.
In an email, Colin MacNaught, the debt manager for Massachusetts, wrote this about the site (emphasis mine):
We think some of the tools we’re providing on our investor website distinguish it from any other muni investor relations website – but also some of the corporate investor relations sites we’ve reviewed.
To wit, we have provided on the website all of the state’s financial and economic data that is currently provided to bondholders every 60 days when we formally update our investor disclosure (we developed a set disclosure schedule last year to make life easier for the credit analysts who cover Massachusetts).
So both retail and small institutional investors (smaller banks, insurance firms, family offices etc.) will be able to get Massachusetts financial data at the same time as the big players on Wall Street. This is hugely impressive. Consider this free analytical tool described in MacNaught’s email:
Using software that we provide free on the website, investors can drag any and all of the data sets/data tables that we’re providing back to their own computer desktops for customized analysis. Once we update the data on our end, then the updated numbers are pushed automatically to investors’ desktops. There are mobile apps as well if an analyst needed access to certain data.
This is like comparing walking through muniland to having a supersonic jet. Previously an investor would have to pull up a PDF of the financial data on a muni bond and, if she wanted to do an analysis, manually re-key all the data. This improved functionality brings the ease of using machine data in muniland. I recently told Alisha Green of the Sunlight Foundation, who is working on muniland transparency issues, that this is what muniland needed, and that we wouldn’t likely see it for five to 10 years. Go Massachusetts!
This is truly a case where a market participant is voluntarily pushing the boundaries and not waiting for a regulator to impose these requirements. What will Massachusetts get in exchange? Likely its borrowing costs will be lower because investors have easy access to data, and they won’t have to wait on credit raters to render their opinions. Transparency pays.
Here are a few other great things about the site.
Municipal bonds often have these funny names (eg. Grant Anticipation Notes Bond, Special Obligation Dedicated Tax Revenue Bond) and the site does a good job of explaining exactly what each named bond program represents on the Bond Program Summaries page. For example, here is the description of the Transportation Fund Bond Program:
You immediately know the size of the program (the larger the amount of bonds the more liquid the trading generally is), the security for repayment (where does the cash come from to pay off the bonds) and what credit raters think of the program. These are the essentials of understanding a class of bonds. The only suggestion I would make here is to add some identification of seniority of payment. Massachusetts is very sound, but less sound issuers, like Illinois or Puerto Rico, should detail which bonds would be paid first if a problem occurred.
And check out this simple tool to find out how a specific bond has been trading. You simply drop down the menu for the year your bond was issued and select the CUSIP of the specific security. No need to navigate over to the MSRB’s EMMA system, the Massachusetts site links you directly the trade prices that you need.
Generally, improvements in disclosure and functionality have either come from the MSRB or from private vendors. It is fantastic to see a major issuer jump into the game. Kudos to those involved in the project. If you are a Massachusetts resident you might want to get on the email distribution list for upcoming bond sales.