Cities Look to Shed Ratings While Taking on More Debt (WSJ)

One-fourth of municipal borrowing is given a single grade, leaving smaller investors with less information

Municipal officials and advisers said fewer ratings help cities trim expenses and save time when they borrow money for everything from school construction to sewer repairs. Bond issuers typically pay rating firms to issue a report. But some analysts said opting for one grade from a single firm puts smaller investors at a disadvantage as less information circulates through the $3.8 trillion municipal market.

Cities and counties across the U.S. don’t have enough assets on hand to pay for all future obligations to their workers, but how deep this deficit looks depends on what those cities expect to earn on their investments. Moody’s and Fitch impose their own calculations of pension liabilities while S&P relies more on government-provided projections.

https://www.wsj.com/articles/u-s-cities-look-to-shed-ratings-while-taking-on-more-debt-11545220801?emailToken=1239745afe85907d0a0cd37d45fb394a9kCzCKQqZrETuxQ3brfqFQV+LcoNoysWeIP10rA475rt38ip5zzWZmqRcQDJhfb1Zr99boR3luKhM3l9h+cNprCtjnC6po6nMz2eJQH8IFFHz87SdBBYbtCnDY0xPi8X&reflink=article_email_share

Author: Christopher K. Merker, Ph.D., CFA

Christopher K. Merker, PhD, CFA, is a director with Robert W. Baird & Co. Merker holds a PhD in Investment Governance and Fiduciary Effectiveness from Marquette University. He is a past president of the CFA Society Milwaukee and a current board member. An adjunct professor of finance at Marquette University, where he teaches the investment course, Sustainable Finance, he is also executive director of Fund Governance Analytics, LLC, a provider of governance research and diagnostic tools for issuers, asset owners and institutional investors. He publishes the blog, Sustainable Finance, which covers current topics around sustainability in investing (www.sustainablefinanceblog.org)