Bond Accountability Commission 2 Recommendations Page 65
Recommendations: There is little need, given current facts and circumstances, for CMSD to be excessively concerned about the conditions in the municipal securities market. We suggest that planning assume a continuation of the gradual improvements of recent months. We recommend that CMSD examine closely with its Financial Advisors and Bond Counsel how CMSD will present itself to and seek to attract investors in direct subsidy QSCBs. The specific market for credit QSCBs is relatively thin and novel.69 The market conditions for credit QSCBs may evolve, but how fast and in what direction that will occur cannot be predicted. Accordingly, also CMSD should continue to monitor the market for credit QSCBs, it is unlikely that they will provide a better overall borrowing cost than, for example, direct subsidy QSCBs. Generally, given the increased importance of the retail market, in negotiated sales, we recommend that CMSD reach out actively to retail investors in order to broaden the market for CMSD’s securities. In credit QSCB offerings, however, retail investors are unlikely to be a significant factor because the tax credits incorporated into credit QSCBs are complex and uncertain for many individual investors. 70 In sharp contrast, it is
69
See Devitt, “Guggenheim Likes the Taste of QSCBs, Even Ones from Detroit” (Bond Buyer Online Dec. 31, 2009), regarding a single investor reported to have purchased roughly half of the QSCBs issued. See also n. 14.
70
Further, although the credits are to be amenable to “stripping” (separation) from the municipal securities with which the credits are sold initially, federal tax rules governing stripping are yet in