Elevating Transparency: Analyzing the District of Columbia’s Latest Report to the Industry

November 19, 2018

You’ve heard both me and our industry articulate the value of muni issuers taking their complete credit story directly to investors. In a nearly $4 trillion market with hundreds of weekly sales, it’s continuously critical for muni issuers to separate themselves from the crowd in order to gain investors’ attention and earn the best possible price on their bond sales.

Investors, after all, buy bonds. They can choose, or choose not, to invest in an ample inventory of sales every week, all year. Their selection criteria are usually a mix of their own priorities and credit requirements, market conditions, and the issuer’s level of transparency. It is especially with investor transparency that issuers can distinguish themselves.

An issuer who understands and takes advantage of this is Washington, D.C. A few weeks ago, D.C. published its 2018 Long-Range Capital Financial Plan Report. While D.C. is a BondLink client, I’m not sharing this with you to advertise for the District. D.C.’s report is its own organic initiative, and I wanted to highlight the report’s industry significance, benefits generated, and some related best practices that other issuers can easily adopt.

The report itself provides an ongoing and comprehensive status report for all projects. Both policy makers and investors need this information to assess risk and make decisions. We certainly see this in infrastructure projects, which is a critical government responsibility and major focus for both civil servants and investors.

Project funding requests don’t exist on their own; they are part of a larger financial picture that must be evaluated on the whole. D.C. knows this. It has also paired its annual report with a proprietary Capital Asset Replacement Scheduling System (CARSS), providing a one-stop view of all projects and the District’s overall capital asset health.

Delivering these reports (and the processes required to create them) is a strategic commitment. It’s not an incremental resource everyone will produce, and that’s always an opportunity.

While D.C. has created what’s best for the District and its taxpayers, the insights other issuers can draw from this lie in answering one question: “In what new ways or areas can I be creatively transparent?” This often brings its own rewards, here are some of D.C.’s positive results:

  • 100% of all District assets inventoried and viewable (started at 14% when the report was first published in 2016)
  • $2.3 billion in approved funding for Washington Metropolitan Area Transit Authority (WMATA) over 10 years
  • $5.7 billion of unfunded capital needs identified and reduced to a new total of $3.3 billion through integrated planning
  • All capital needs identified and funded through FY 2028 (this includes deferred maintenance, increased pay-as-you-go cash, plus additional borrowing capacity to refinance existing debt and remain on-hand for further economy growth support)
  • An upgrade in the District’s bond rating by all three agencies, including Aaa by Moody’s

Public corporations spend a lot of effort and money on their annual reports to investors. This is partly to comply with financial regulation and mostly because they know it helps them gain an edge with investors when it’s executed well.

D.C.’s report is a good example for how all issuers can take the effort and money they spend on disclosure and rating agency meetings, repackage and innovate with it, and bring something new and useful to their community, government, citizens and investors. From the benefits achieved, I expect this will be a continuing trend and our muni industry will be better for it.

Colin MacNaught

BondLink CEO & Co-Founder