Ten years ago, in the midst of the Great Recession, organizations representing local governments at the state and national level — the National Association of Counties, National League of Cities, Wisconsin Counties Association and League of Wisconsin Municipalities — advocated for the creation of a finance vehicle responsive to the economic development needs of local government. From this idea, the Public Finance Authority (PFA) was born.
As Matt Chase, CEO and Executive Director of the National Association of Counties, explained, “PFA exists to provide local government a meaningful market-driven solution in addressing this country’s economic challenges by fostering economic development at the local level and improving the overall quality of life in communities in Wisconsin and throughout the country.”
The need for a local government seat at the finance and economic development table is incredibly important today as our country again faces challenging times.
Since its inception, PFA has helped finance billions of dollars of public benefit projects such as healthcare centers, assisted living facilities, schools, and infrastructure projects, to name a few.
The economic activity generated as a result of PFA’s involvement has created thousands of construction and permanent jobs, contributed significantly to state and local tax base and, most importantly, provided local government a say as to what projects get off the ground in their backyard.
PFA has achieved these goals while charging minimal fees to the mostly private borrower participants seeking PFA’s assistance — about 22 cents for every $100 of public benefit bonds issued, with a portion of these revenues returned to advance local government causes across the country.
Giving local governments a voice and vote
As a creation of local government existing for the benefit of local government, it has been a cornerstone of PFA’s mission to ensure appropriate local approval is obtained for all capital improvement projects in which PFA is involved. This differs from most state conduit issuers that typically conduct all necessary public approvals within the confines of their state capitol without regard to project location or local community input.
PFA was designed to be a reliable alternative in the market with which project participants and local governments can choose to work because it’s right for them. Local elected officials know the best projects for their communities, and PFA provides them a voice and a vote in its projects.
The PFA Board of Directors is composed of people who have dedicated their lives to local economic development. They understand PFA’s mission and provide the necessary policy guidance and oversight of PFA’s operations, including PFA’s program manager, a registered municipal advisor. And unlike almost all other government agencies, not a dime of taxpayer funding supported PFA’s start-up or funds PFA’s operations.
Buyer beware of sensationalized reporting
Over the years, the PFA has unfortunately seen misleading information surface by a private research firm Municipal Market Analytics, Inc. (MMA) about PFA’s successes. A comprehensive review and analysis of the Municipal Securities Rulemaking Board’s EMMA filings relating to PFA projects shows that PFA is a reliable and steadfast market participant that finances projects that a community of finance professionals deem worthy. Ongoing efforts to portray PFA as otherwise are simply unfounded.
In fact, EMMA filings, which make up the MSRB’s online database of continuing disclosure filings, shows PFA projects are stable.
Following a thorough analysis of available EMMA filings, it is clear that PFA-financed projects account for less than 3% of the 700 plus total unique payment defaults posted to EMMA during the last three years.
This low default rate is not even close to the 10% MMA has claimed and was reported by Bloomberg and the Wall Street Journal. Moreover, borrower defaults, while less frequent in the municipal market than the corporate market, nonetheless occur for a variety of reasons wholly unrelated to the issuer. To attribute the circumstances of any particular default to PFA’s actions is unfair.
Like any other issuer, PFA exercises no control over the development or operation of any enterprise, but consistent with its mission PFA is incredibly dedicated to its projects and will actively work with stakeholders to lessen a default’s impact should one unfortunately occur.
Like other market participants, PFA is a regulated entity that relies upon finance professionals and investors to make determinations as to a particular project or borrower’s credit-worthiness.
A review of PFA’s entire body of work reveals an organization that should be celebrated for fulfilling its public benefit mission, not derided for its involvement with a handful of projects that encountered difficulties. Were it not for PFA, countless cancer patients may not have access to alternative proton therapy treatment facilities, thousands of children may not have access to new or improved schools, and low-income families may not be able to afford to live in the communities they wish to call home.
These are a small sample of the PFA public benefit project success stories that unfortunately fail to meet editorial standards as to what constitutes “headline news.”
Just getting started
For 10 years, PFA has assisted in financing public benefit projects that provide local economic development, produced state and local tax base, and otherwise filled a need where state or local issuing authorities may not be able to serve eligible borrowers.
PFA’s local public benefit mission provides local governments with a voice and a vote in these projects, and operates without a risk to taxpayers. Don’t believe the “click bait” stories that publish inaccurate payment default rates, all the while ignoring the facts surrounding PFA’s bond deals, as well as the jobs, economic development and public benefit it has helped create.
As our nation’s small businesses and nonprofit community begin to climb out of the economic havoc brought about by the COVID-19 pandemic, PFA will continue to provide an additional tool in local government economic development toolboxes. As local governments work to create jobs and opportunity, PFA stands ready to provide qualified projects serving a public benefit with access to the financial markets.
And as PFA fulfills its mission, local governments and the constituents they serve see tangible benefit.
PFA’s celebration is not just about the last decade of success, but an anticipation of the successes to come.
