CHICAGO — Wisconsin posted a help wanted notice this week for the job of director of the capital finance office as the longtime standard bearer of state debt management, Frank Hoadley, prepares to retire.
Hoadley, 67, left investment banking 25 years ago to take the job and never looked back, serving under four governors from both parties — from the start of Tommy Thompson’s tenure in 1987 followed by Scott McCallum, Jim Doyle and Scott Walker, who took office last year.
Hoadley’s name and influence cuts a wide swath across the public finance field, from the bankers who courted him for work on the state’s negotiated sales to regulators and raters whose policies he would openly chide if he believed they ran afoul of issuer and market interests.
The Municipal Forum of New York in 2008 gave its lifetime achievement award to Hoadley.
“I am requesting permission to take [accrued] vacation and sabbatical time and I will be retiring at some point at the end of the year or early next year,” Hoadley said Wednesday. His sabbatical, however, is expected to start as soon as Aug. 1.
First, Hoadley will accompany Walker — who last month survived a historic recall election — next week on a trip to New York City to meet with the rating agencies. Wisconsin recently wrapped up a series of new-money and refunding general obligation, transportation and clean-water debt transactions.
Hoadley has long championed strong issuer disclosure, especially in the face of regulatory intervention, and the use of plain language in financial documents while being outspoken on some burdensome regulations. He favors the use of competitive sales for so-called plain-vanilla transactions and negotiated sales for more complex refundings and revenue deals.
“Frank has been a lion in the industry, just a great spokesman and representative for issuers,” said Ben Watkins, Florida’s director of bond finance and long time cohort of Hoadley’s on the Government Finance Officers Association’s Debt Committee. “He’s my go-to guy when I have questions about hard issues. I call Frank.”
The capital finance director is a civil servant position based in the state capital in Madison. It is not subject to political whim.
The director reports to the state budget director — a position held by Brian Hayes — who in turn reports to Department of Administration Secretary Mike Huebsch. They both serve at the pleasure of the governor.
Applications for the position are due by Aug. 13. The job offers an annual salary of between $59,405 and $122,523, depending on experience, and a two-year trial period is required.
The position’s duties include overseeing the disclosure, sale and management of all state general obligation and revenue obligation bonds, notes, loans and operating notes, as well as appropriation-backed obligations.
In addition, the director recommends state debt policy and legislation for consideration and provides guidance to other state officials on national credit and debt studies and legislation.
“This is highly responsible, complex work involving marketing and sale of multi-million dollar bond transactions,” the notice reads. “Work is performed independently.” A thorough background check will be conducted on the finalist prior to an offer of employment.
The job offers “excellent benefits.” The notice doesn’t note that Walker increased the cost of those benefits by pushing through reforms last year that raised employee pension and health care premium payments.
The reforms achieved long-term budgetary savings and will help put the state on the path to sharply reduce its structural spending gap.
Hoadley’s successor will inherit a position overseeing debt in a state firmly planted in the mid-double-A range with a stable outlook. About $337 million of debt restructuring helped eliminate a $3 billion shortfall in the budget adopted last year, one of the few one-shots.
The dairy state has in recent years undertaken similar “scoop and toss” transactions — as Hoadley calls them — for budget relief by pushing off near-term debt payments.
Wisconsin carries about $7.5 billion of outstanding GOs and its double-A ratings were affirmed this spring ahead of a $212 million sale. The rating reflects a moderate debt level with a fully funded pension system, a broad and diverse economy, progress on its structural imbalance and minimal reserves, Fitch Ratings wrote.
Moody’s Investors Service said other factors in the state’s favor include an improving liquidity position, timely financial reporting and robust disclosure, though it is challenged by the ongoing structural imbalance.
Walker’s $66 billion 2012-2013 budget sharply reduced the use of non-recurring revenues favored by his Republican and Democratic predecessors.
Aside from the debt restructuring, Walker primarily eliminated the red ink with cuts. It put the state on a more solid financial footing, though critics counter the improvement has come at the expense of local governments, school districts and public employees.
Wisconsin’s transportation bonds and clean-water debt also carry double-A ratings.
Hoadley’s debt management staff includes David Erdman, assistant capital finance director. He joined the office in October 1994 from the state’s Department of Natural Resources where he was a loan specialist with the clean water program. He was elevated to the assistant’s position two years ago after Larry Dallia’s retirement.
The office hired Brad Elmer last December to fill Erdman’s former position of capital finance officer. Michael Wolff serves as finance programs administrator. He joined the office in 1989 from the Wisconsin Housing and Economic Development Authority, where he worked on economic development loans.
The state is frequent issuer, selling 55 GO issues valued at $9.6 billion over the last decade, including $564 million so far this year and $1.5 billion last year, according to Thomson Reuters.
It has sold 44 revenue-backed issues totaling $7.8 billion over the last decade, including $634 million so far this year. The state has also offered $275 million of GO notes in two deals and $4.2 billion of non- GO notes in 25 deals over the last decade.
Hoadley held a public finance banking position at Boettcher & Co. and had worked as a financial adviser before moving over to the issuer side.
During his tenure at the state, he introduced extendible municipal commercial paper to the market. It allows an issuer to forgo liquidity support because in the event of a failed remarketing, the maturity is automatically extended.
Wisconsin’s largest transactions under Hoadley included a $1.6 billion tobacco deal in 2002 and then a $1.5 billion appropriation-backed issue in early 2009 to refund the tobacco bonds. It was the largest deal to brought to market after the turmoil sparked by the financial crisis following Lehman Brothers’ September 2008 bankruptcy filing.
The state’s $1.8 billion taxable appropriation-backed sale in 2004 helped shore up its pension system. The state wiped out its unfunded pension liability and cleared out its liability under a program that compensates retiring employees for their unused sick days.
Wisconsin is the only state with pension that is 100% funded, according to the Pew Center on the States.
As a longtime member of the GFOA’s’s debt committee, Hoadley has influenced recommended practices for pension disclosure, regulatory policies, the use of negotiated versus competitive sales, relationships with financial advisers, raters and underwriters, and post-compliance issues.
Hoadley served a term as head of the committee in 2007.
At the GFOA’s annual meeting in Chicago last month, he remained in his usual irascible form. During a session on the changing credit-rating environment, he put rating agencies on the defensive when he raised concerns over agencies asking municipal bond issuers to sign indemnity agreements releasing them from liabilities resulting from ratings. Analysts denied they require such contracts.
Hoadley went on to say the analysts that issuers work with seem to frequently rotate out of their jobs. He lamented that there seems to be a separation between the “business of providing ratings versus the analysis,” and it “seems like the two sides of the firm are not talking to each other.”
“Frank is someone who has not only been a tremendous asset to the GFOA during his tenure as chair and member of the debt committee, but an asset to the entire market. He will be professionally and personally missed by many,” said Susan Gaffney, director of GFOA’s federal liaison center. “We remain hopeful that he will continue his interest in our world and will not spend all of his days mowing grass, shoveling snow and eating custard in Wisconsin.”
