Ahead of the Fiscal Curve: An innovative approach to bond disclosure that has become a national model
Robert B. Inzer
Treasurer/Clerk, Tallahassee, Florida
Two years ago, the federal Securities and Exchange Commission shook up the issuing side of the municipal bond market by passing a new and far-reaching rule. State and local governments that offer tax exempt bonds to the investing public are not only obligated to disclose pertinent information about themselves when they issue the bond, they must keep that information up to date until the bonds are retired--whether that's 10, 20 or even 30 years hence.
While jurisdictions around the country were abuzz with the difficulties of meeting the letter of the new "law," Tallahassee was not. The Florida capital had, under Treasurer Robert Inzer, pioneered ongoing disclosure four years before the SEC rule was written.
As Inzer explored an idea that had no regulatory pressure behind it, various financial and legal advisers let him know that the publication of such material could increase the city's liability--the information might be considered incomplete or misleading. Silence was considered the least risky strategy. But Inzer thought this made no sense: If investors needed information about the creditworthiness of a bond when it was initially offered for sale, they would certainly need updated information if they bought the bond on the secondary market.
The ongoing-disclosure document Inzer developed for Tallahassee provides the city's bondholders with an annual report that goes way beyond the usual financial data. Investors in water-sewer bonds, for instance, learn about the city's compliance with environmental protection regulations, the capacity level of the utility, the growth in customers, how competitive the rates are. "It is information that can have a major effect on a bond," Inzer says. "Very often these are early warning signs of things that will show up in the profitability of a system."
The annual disclosure report, which first began to appear in 1990, won an award for excellence from the Government Finance Officers Association. And as the SEC prepared its ongoing-disclosure rule, the Tallahassee approach was frequently mentioned by SEC Chairman Arthur Levitt as a model.
It wasn't the only instance in which Inzer pushed Tallahassee ahead of the curve. Well before cash management debacles lost hundreds of millions--even billions--of dollars in California's Orange County, Ohio's Cuyahoga County and a dozen or so other states and localities, Inzer had set up internal controls to assess the relative success (or failure) of investments made with Tallahassee's operating cash and established an advisory committee of citizens with experience in money management to review investment policy and returns. Had Orange County or Cuyahoga had a similar set of controls in place, neither could have lost so devastating an amount of money.
Inzer hasn't made headline news for his innovations nor, apart from the GFOA awards (the cash management program won one too), has he attracted public attention. Which is probably as it should be for a finance officer who is charged with making sure the fiscal systems and investments of government run so smoothly and cleanly that there's no need for media scrutiny.
That said, Inzer, who started his career 24 years ago as a city accountant and rose steadily to his present position--an office he's held since 1982--notes that over time he's learned that there's more to his job than just numbers. "When I first started out in government, I looked at everything in terms of dollars and cents," he recalls. "But I learned from Don Kleman, who was the city manager here for 20 years, that not all investments a government makes can be evaluated in terms of jobs created or how much the tax base will increase. Some investments are a vision of what a community can be."
— Penelope Lemov
Photo by Phil Sears