MuniLand

I’m very happy to present a guest post from Mr. Lee Feldman, the City Manager of Palm Bay, Florida. City Manager Feldman is a superstar of muniland transparency. Read how he and his team developed a fully open financial-reporting system to engage and empower the citizens of Palm Bay.  [UPDATE: On Tuesday, it was announced that Mr. Feldman would soon leave his position in Palm Bay to take over as city manager of Ft. Lauderdale, Florida.]

Open.PalmBayFlorida.org – Financial Transparency at the Public’s Fingertips

The City of Palm Bay, Florida, felt our neighbors deserved to have a simple way to see how their tax dollars were spent. In December 2009 the City created Open Palm Bay, an online interactive database that allows them to view and search the City’s financial information at any time.

The intuitive database enables anyone to follow their money right down to the penny. Palm Bay believes that this easy-to-use website is the first of its kind in Florida, setting the benchmark for financial transparency in local government.

The City proactively decided to create this website in anticipation of the passage of a proposed bill in the Florida state legislature. Although the legislation was ultimately not approved, Palm Bay officials thought the concept was a worthy initiative to pursue and they continued forward with the effort.

The information within the database is presented in three separate areas: expenditures, salaries and revenue. The site also provides easy access to the City’s Comprehensive Annual Financial Report (CAFR). All financial information is updated quarterly. Visitors to the site are given several different options to sort or filter the available information for online viewing, or they may export reports to several different file formats for offline viewing. The site includes a glossary of terms used in the financial data and a Frequently Asked Questions section.

House Committee launches ‘YourWitness’ program

From YouTube:

The [House] Financial Services Committee has launched a new program, Your Witness, which allows Americans to submit questions they want to ask a witness during a hearing. During an Oversight and Investigations Subcommittee hearing on the Stanford Financial Ponzi scheme, Rep. Randy Neugebauer asks the first question of Julie Preuitt.

From the House Financial Services Committee website:

@RandyNeugebauer asks question at a hearing using #YourWitness, our new program that allows Americans to get involved

California goes after it’s “wall of debt”

From the Bond Buyer:

[Governor] Brown released a revised budget Monday that dramatically reduces planned bond issuance as part of an effort to curb overall borrowing by the state that he termed the “wall of debt.”

The New York Times food writer, Mark Bittman, has written the loveliest piece about his visit to our nation’s most devastated urban area, Detroit. He says there are little seeds of hope and change growing there:

Imagine blocks that once boasted 30 houses, now with three; imagine hundreds of such blocks. Imagine the green space created by the city’s heartbreaking but intelligent policy of removing burnt-out or fallen-down houses.

Now look at the corner of one such street, where a young man who has used the city’s “adopt-a-lot” program (it costs nothing) to establish an orchard, a garden and a would-be community center on three lots, one with a standing house. (The land, like many of the gardens, belongs to the city and is “leased” for a year at a time. But no one seems especially concerned about the city repossessing.)

Mark Gongloff of the Wall Street Journal‘s Marketbeat blog wrote this today about Meredith Whitney:

Professional scary person Meredith Whitney took to the op-ed pages of The Wall Street Journal this morning to sprinkle some more of her fear dust on the muni-bond market:

Municipal bond holders will experience their own form of contract renegotiation in the form of debt restructurings at the local level. These are just the facts.

Investing in shared infrastructure

My favorite article this week is by William Alden of the Huffington Post. He brings out an element of the municipal bond market that I’ve long believed could be the future of muniland: the propensity of people to invest in projects and entities that they have a first-hand experience or a connection to.

War bonds, issued to pay for World War I and II, are a case in which investors moved their savings to particular investment products for emotional, social or patriotic reasons.

Alden highlights a new retail bond program I hadn’t heard of yet (emphasis mine):

Rocking the digital city

The New York City Mayor’s Office has published the “Road Map for the Digital City.” It’s an exciting vision of a city government connecting to and empowering its citizens.

From the executive summary:

New York City government engages over 25 million people a year through more than 200 digital channels including nyc.gov, mobile applications, and social media.

As a pioneer in Open Government, New York City government has unlocked thousands of public records, enabling technologists to build tools that help New Yorkers everyday, from finding parking spaces to listening to audio tours of Central Park.

This august gentleman is William Gibbs McAdoo, the Secretary of the Treasury in 1917 when Congress passed the Second Liberty Bond Act and set the first statutory limit on the public debt of the United States. Now the current Secretary of the Treasury, Timothy Geithner, is struggling with the Congress to raise the debt limit for the 11th time since 2001.

A debt limit applies to debt that is authorized but not yet issued. Debt limits are imposed for personal credit cards, home equity lines of credit, commercial loan covenants and the debt of public entities.

Here is data for the public debt of the state of California as of April 1, 2011:

A muniland expert alerted me that we passed a significant benchmark late last week. The benchmark, which market experts say is a key indicator, is the ratio between the yield for 10-year AAA municipal bonds and the yield for the 10-year U.S. Treasury note.  It hit a 12-month low of 82.35 last Thursday night.

Daniel Berger, Senior Market Strategist at Thomson Reuters MMD, tells me “the light primary market issuance in 2011 has not kept pace with bond redemptions. Muni buyers could be in a larger predicament and reach for muni bonds in June when redemptions jump to $27 billion if monthly average issuance continues to be less than $16 billion.”

Daniel is saying that there will be more money from bond redemptions chasing fewer newly-issued bonds. Prices will likely rise and yields will go down. This could cause a bigger market rally.

Happy Friday all!

Illinois passes landmark education reform

The Chicago Sun-Times reports that the Illinois state legislature has passed a substantial education reform bill. The legislation severely restrains the power of the teachers’ unions:

The measure continues to allow unions to strike in Chicago and the suburbs, but it imposes a requirement that school boards and unions take longer to negotiate and publicly disclose their bargaining positions before a strike can be launched.

In Chicago, no strikes could occur until as long as 120 days after the dispute goes to a special panel — and then, only if the Chicago Teachers Union has given a 10-day notice of a strike and has 75 percent of its bargaining unit members in agreement. Currently, a strike only requires a simple majority of everyone who votes.

Professor John Coffee of Columbia Law School, who is considered one of the foremost legal scholars in the securities area, discusses the effect of the conviction of Galleon Group co-founder Raj Rajaratnam on insider trading:

“People learn deterrence from actual vivid examples of people going to prison.  And that is what it takes in every generation to overcome the tremendous temptation to make tens of millions of dollars.”

What about the municipal market? Are there instances where dealers are receiving inside information and trading on it ahead of others?