Agenda - Council - 02/12/1980 - Laserfiche WebLink

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SPRINGSTED INCORPORATED PUBLIC FINANCE ADVISORS MARKET MUSINGS January, 1980 1979 commenced with the Bond Buyer Index at 6.58% and ended with a 7.23% BBI - only a 10% increase, which is less than the Inflation rate. The Iow index of the year was 6.08% on July 5 and the high was 7.38% on October 25 and November 22. The average was 6Jr0%. For 1978 the Iow was 5.58% and the high was 6.67% with an average of 6.02%. During the early part of 1979's upswing of interest rates, tax-exempts did not keep pace and it was a seller's (issuer's) market. But as the year progressed, tax-exempt rates came into line and may be expected to stay there for the next several months at least. One of the abnormalities of the year was the "flattening" of the yield curve as the spread between short and long-term rates decreased. In fact, as of October 25, rates for tax-exempts in the less than one year maturity range were higher than rates out to about seven years. One S-I client with a Moody's MIG-I rating for its one-year certificates did not receive an offer at bid- opening time within the statutory 7% limit but probably could have sold three-year obligations. Whither do we go? IKhomeini and Afghanistan have shattered our crystall ball! All things being normal, rates should improve, but then there is INFLATION! More certain than a forecast of rates is a foreseeable need for even more marketing ingenuity and sophistication. 'TIS THE SEASON Deciphering and analyzing Annual Financial Reports is one of the biggest challenges for those involved in the examination of municipal credits. From the vantage point of underwriters, rating agencies and financial advisors, such Financial Reports run the gamut from being exceptionally well done to suggesting that there must be some pages missing. At this time of year, most communities are beginning to put together data for fiscal year 1979, and it therefore may be appropriate to analyze the accounting/auditing process being used, and the form and substance of the final product. Because the Annual Report is so crucial for the analysis of a municipal credit in preparation for a bond sale, S-I is particularly sensitive to special aspects of the Report. This sensitivity is based upon what the rating agencies and underwriters tell us they expect of the Report. The following areas are critical to the worthiness of a Report to be used for a rating and to provide information necessary to bidders for municipal obligations. Timeliness - It may not be next to godliness, but it must be close. The most detailed and accurate financial report is of little value if it is not available until a year or more after the end of the fiscal year. If a financial report or audit consistently is completed more than six months after year-end, these questions should be asked: Is the lateness an internal problem? Have meetings with the accountant(s) been deferred all too often? Are department heads or other staff members submitting necessary information in a timely manner? Is a new computer system hindering more than helping, or is it being used a~ a scapegoat for most any problem? (We have yet to find a computer progammed to defend itself.) Is the problem an external one, with crucial data not promptly supplied by federal, state or county units or are the auditors always "slow"? 800 OsDorn Building, Saint Paul, Minnesota 55102~iii!ii!~) 222-4241