EMMA: What governments DON’T want you to know about their loads of debt ...

What you will learn •  How to recognize a flaky deal for investors •  How borrowers get sweetheart deals •  How governments take risks that no lender

would •  How good ‘ole boys get good ‘ole deals •  How EMMA reveals financing failures

Texas is a leader in the nation’s municipal bond market.

Bond Factory

•  Tarrant County is one the largest issuers of conduit bonds in the nation and a leader in bond defaults.

Conduit bonds vs. Municipal bonds

•  Conduit bonds require approval of governments similar to municipal bonds.

•  Governments lend their tax-exempt status allowing borrowers to reduce project costs.

•  Important distinction: When a conduit bond fails, investors are left holding the bag.

•  Governments have no skin in the game.

Bond Factory

•  "County commissioners are grinding them out, churning them out like pancakes, like McDonald's hamburgers,“ said Richard Sandow, a Texas investment adviser who specializes in conduit and municipal bonds. "It's a bond factory that specializes in flaky deals."

“Ka-Ching!!!” – Big Profits to Be Made in Fees to Bond Advisers

"Every time there's a [bond] closing, it's 'ka-ching,'" said Jeff Bryant, a Fort Worth developer who has received millions in tax-exempt, county-financed conduit bonds.

Where the story begins ... Forbes’ 2008 most affluent American city: Southlake, Texas.

In 2009, a group of developers is granted a $35 million conduit bond to build an assisted-living center next to the city’s central Town Square of “New Urbanism” -- upscale condos, shops, movie theaters, restaurants, city hall and library.

The Bond Factory

•  Southlake residents pack council meetings to protest the project, saying it is not suitable or viable for the community. Some criticize city leaders for a lack of transparency.

Rumors, innuendo, accusations fly of cozy relationships between developers, bond

advisers and county commissioners.

The good ol’ boys club ...

Tarrant County commissioners are getting their advice from a former Southlake Mayor and his law firm. The mayor is also a business partner of developers who were granted the $35 million in bonds to build the project at Town Square.

Building A Spreadsheet

I built my spreadsheet using Electronic Municipal Market Data Access (EMMA). It provided bond amounts and other disclosures, such as rating information, which revealed millions of county-financed bond defaults over the last decade.

Tarrant conduit bonds supported

this troubled assisted-living community in Fort Worth

Westchester Plaza Assisted Living

What was discovered ... The bonds’ nonprofit borrowers describe “anarchy” at Westchester, one of the state’s largest centers for the elderly, disabled and mentally ill.

Residents lives are in jeopardy due to unsafe conditions, such as rapes, burglaries and other crimes. Some residents have overdosed or missed medications because of incompetent staff. The facility is filthy and disordered.

•  Faces of the victims of the county’s bond-conduit failures.

A Westchester resident who fears for her

safety and has complained of receiving the wrong medications from staff.

Westchester does not belong at Southlake Town Square ...

.... where mothers frolic with their happy-faced kiddos.

County commissioners try to dig themselves out of the hole of bad

publicity.

No Skin In The Game.

The Securities & Exchange Commission does not regulate conduit bonds. Nor do county governments vet the projects for viability. "We have no authority to do anything," County Commissioner Gary Fickes said. But he’s uncomfortable with the deals. For one, nonprofits don't have any skin in the game. If a project fails, they can walk away. "When you're doing this with no money in it, with no personal guarantees, that gives you a whole new outlook on borrowing money.”

Municipal bond dealers can’t do business with an issuer if they have contributed to the campaign of an official of such issuer. The purpose is to prevent fraudulent and manipulative acts and practices.

The county’s municipal bond adviser did not disclose to federal regulators campaign contributions to county

commissioners. While nothing illegal may have occurred, the political donations raised ethical questions.

In 2010, bid for $35 million in conduit bonds for the Town Square

project is withdrawn.

How to check on conduit-bond financing in your area?

Issuer’s Name Project Name and/or CUSIP

Continuing Disclosures

Material Event

Notices of Default Draw on Reserves

P&I Payment Bankruptcy

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What we covered EMMA can help us check the status of projects in our cities and counties.

Rounding up the number of failed projects and flaky deals can give us a good indication that the purported intent of owners and borrowers is NOT, as they say, “for the public good.”

Bond advisers stand to collect millions in fees in the deals.

Governments don’t care if the projects fail because they have no skin in the game. So the public is left in the dark about much of what goes on with the deals.

More resources

•  Short videos on how to: 1. Dissect an official statement 2. Look up material events (defaults) 3. Look up litigation At http://bit.ly/self-guided-training •  EMMA Education Center •  How to contact me: yberard@tx.rr.com

Thank you for your attention and

interest