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From the personnel shifts among various firms following Citi’s exit from the muni business to the evolution of the buy-side, including the massive growth of separately managed accounts, as well as major regulatory changes, 2024 brought substantial changes to the public finance landscape.
Below are some of the top read articles produced by The Bond Buyer for the year.
Andrew Harrer/Bloomberg
Outlook: Issuers face tax enforcement challenges in new year
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The final size of the Internal Revenue Service’s $80 billion budget boost remained in question but as the agency backfilled missing personnel, issuers were expecting the coming year to include a heavy dose of IRS audit activity.
“My understanding is that there are a lot of agents in training,” said Rich Moore, a tax partner at Orrick, Herrington & Sutcliffe. “While volume has picked up from the pace over the past half-decade or so, it feels more like a return to normal audit levels than a big step-up. A big step-up may be coming soon.”
Putting more teeth into the enforcement side was dependent on a disputed budget increase funded by the Inflation Reduction Act. The extra money became a political football during the debt ceiling negotiations between the White House and Congress.
Fitch puts WMATA on negative watch
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Fitch Ratings warned that a downgrade was possible for the Washington Metropolitan Area Transportation Authority, which was facing massive service cuts without fresh support from its local and state partners.
The agency was “at an inflection point where federal funds have been running dry and collectively the funding partners will need to make a decision on what type of system they want to service the region,” said Fitch analyst Michael Rinaldi.
The ratings agency, which put WMATA on negative outlook in May 2020, pegs the agency’s issuer default rating at AA-minus, and its senior-lien dedicated revenue bonds a notch higher at AA.
The issuer default rating was
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Raymond James hires 10 former Citi public finance employees
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Raymond James hired 10 former Citi employees, including six senior bankers, in an expansion effort that established a public finance office in Seattle for the firm, created a dedicated public power practice, grew its West Coast footprint and enhanced the firm’s housing finance group.
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Gavin Murrey, an executive vice president and head of public finance at Raymond James, said he began speaking with the people he hired from Citi about moving over in December 2023.
Bloomberg News
Morgan Stanley hires former Citi bankers to lead key public finance groups
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Morgan Stanley hired four former
Three of the new hires were named heads in key public sector and structured finance businesses.
Alex Zaman is Morgan Stanley’s new head of surface transportation and urban development, Lori Small has been hired as head of airports, and Shai Markowicz is head of social infrastructure. Imani Boggan also joined the firm.
Bloomberg News
Shifting investor demands spark explosive growth of SMAs
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The tremendous growth of separately managed accounts in the municipal market has been spurred on by higher yields, lower fees, the desire for deeper customization along with
Some participants on the Street estimate that SMAs hold as much as $1.5 trillion of munis while others peg it closer to $1 trillion to $1.3 trillion.
Regardless of the total — and it is difficult to quantify it because of how they are reported — it is exponentially higher than the $100 billion that was estimated before the financial crisis.
Bloomberg News
SEC charges 12 municipal advisors for recordkeeping failures
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In a sweeping move, the Securities and Exchange Commission charged 12 municipal advisor firms with failing to maintain and preserve certain electronic communications, collecting civil penalties ranging from $40,000 to $324,000 for a total of $1.3 million.
That was the latest in the commission’s two-year pursuit of “off-channel” communications in the finance sector, this time coming down on MAs after charging groups of broker-dealers, investment advisors and credit rating agencies.
The firms charged were Acacia Financial Group, Caine Mitter and Associates, cFX Inc., CSG Advisors, Kaufman Hall & Associates (together with Ponder & Company), Montague DeRose & Associates, PFM Financial Advisors, Phoenix Advisors, Public Resources Advisory Group, Specialized Public Finance and Zions Public Finance.
David Paul Morris/Bloomberg
Defaults are rising on highly leveraged workforce housing debt
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One tool aimed at helping to solve California’s notorious affordable housing crisis appeared to be headed for a crisis of its own.
Defaults were rising on highly leveraged unrated workforce housing bonds, primarily issued over the last few years in California to purchase apartment buildings, when interest rates were near zero.
Six out of roughly 45 projects entered Municipal Market Analytics, Inc.’s default and impairment database for drawing on reserves funded with bond proceeds, said Lisa Washburn, MMA’s chief credit officer and managing director.
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Premium bond sale stirs controversy in Vermont
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The use of premium bonds has ignited a dispute between Vermont’s most populous city and the state auditor.
The state auditor found that the city of Burlington issued more debt than it was approved for under the state’s tax increment financing law and made more than $1 million worth of accounting errors.
The city’s Downtown Tax Increment Financing district, by selling premium bonds, issued $4.6 million more of debt than it was approved for, according to an
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HilltopSecurities hires six former UBS professionals as part of expansion plan
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HilltopSecurities
“We remain committed to adding professionals nationwide to our public finance business who offer a full product solution set to their clients,” said Brad Winges, president of HilltopSecurities. “This is the first group of many hires that we plan on making over the next 12 to 18 months as we remain focused on expanding upon our existing leading position in municipal banking.”
Hilltop, which ranked 18th in the top underwriters of 2023, underwriting $3.813 billion in 184 deals, per LSEG data, hired Michele Vobach as senior managing director and head of healthcare to be based in Dallas.
Hacker compromises $29M Michigan township competitive deal closing
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A “sophisticated” cyber security attack compromised the closing of a recent Michigan township competitive deal to finance a Civic Center project, according to township officials.
White Lake Charter Township, Michigan, sold $29 million of limited tax general obligation bonds, Series 2024B, to Baird on Oct. 31. On the Nov. 21 closing date, the township learned it “has been the victim of a sophisticated cybersecurity attack, which compromised a financial transaction related to a new issue of infrastructure bonds,”
“This matter is now under active investigation by federal authorities and impacted financial institutions, who are coordinating with the White Lake Township Police Department,” Keller said.