Washington, DC Update – December 2016

GFOA Files Comments on MSRB’s Strategic Plan

On November 10, GFOA and the leaders of the Committee on Governmental Debt Management, filed comments on the MSRB’s fiscal year 2017 Strategic Plan.

In our message we reiterated that while we have been pleased with the MSRB’s work on EMMA, especially the development of platforms and features that enhance an issuer’s ability to use EMMA with greater ease and consistency, as evidenced in our recent mutual work on improving the bank loan function, we would appreciate the MSRB continuing to reach out to GFOA about EMMA educational efforts and enhancements. Specifically, the GFOA provided recommendations that would:

  • Improve the EMMA user interface.
  • Make data correction/modification of EMMA input easier for issuers.
  • Allow for seamless flow of data between EMMA and other systems and sources.

We asked the MSRB to be aware of and commit attention to the needs of smaller governments, including cost impacts and educational efforts needed to ensure their robust use of EMMA.

Finally, GFOA commended the significant outreach and education efforts the MSRB has done for the issuer community and recognition of the wide range of online training resources that are publicly available to users of EMMA. Please click here to read GFOA’s comment letter in response to MSRB’s request for comments.


Lame Duck is the Perfect Time to Discuss Marketplace Fairness

Now that the general election has concluded, we enter the “lame duck” session, the session in which one Congress meets after its successor is elected but before the successor’s term begins. This is an especially important time for GFOA to continue to engage members of Congress, both old and new, of what is most important to us – a resolution to the challenge of the collection of online sales taxes.

As we reported in late August, the Chairman of the House Judiciary Committee, Representative Goodlatte (R-VA-6), released proposed legislation designed to address the remote collection of taxes on online purchases. Goodlatte’s proposal is an alternative to Rep. Chaffetz’ (R-UT-3) current introduced legislation, Remote Transactions Parity Act (HR 2775), which is presently waiting to be heard by the House Judiciary Committee. Chairman Goodlatte’s discussion draft has not yet been introduced officially for legislative consideration, and therefore provides us the opportunity to raise our priorities with the Chairman. GFOA continues to support HR 2775 because it would compel retailers to collect taxes on remote sales bases on the location of the consumer.

As we await official introduced legislation, possibly in the lame duck session, we are working closely with our colleagues at the National League of Cities, U.S. Conference of Mayors, National Association of Counties and National Governors Association, along with our partners in the retail community, to urge Chairman Goodlatte to consider compromise with the better solution, the Remote Transactions Parity Act (HR 2775). GFOA encourages direct outreach to your members of Congress to urge their support for HR 2775 using the resources in our Marketplace Fairness Act Resource Center. If you do reach out or hear back from your members of Congress, please let us know (Emily Brock − ebrock@gfoa.org).


Preservation of the Tax Exemption and GFOA Grassroots

Now that the general election has concluded, we enter the hectic and exciting time where the new administration lays out its key goals and partnerships that may be forged between the administration and Congress. While it is surprising that President-elect Trump has not made municipal bonds a centerpiece of his campaign message, we will be working with the new administration to ensure that any new types of infrastructure financing plans recognize the importance of the centuries-long partnership between the federal government and state and local governments, and that the tax-exemption remains intact.

This is an especially important time for GFOA members to engage their members of Congress on the importance of the preservation of this tax exemption on municipal bond interest and state and local deductibility.

Municipal bonds are the most important tool in the United States for financing infrastructure, as nearly 75% of all public infrastructure funding is derived from tax-exempt bonds. These financings are used by over 50,000 state and local governments and authorities to satisfy a variety of critical infrastructure needs. State and local governments issue approximately 11,600 bonds a year totaling roughly $300 billion per year. This has allowed state and local governments to finance more than $3.5 trillion in infrastructure investment over the last decade through the capital markets.

As various tax reform and infrastructure proposals are discussed, the GFOA will consider the impact any changes will have on critical infrastructure that residents in all states and local communities have come to depend on. Our country needs more infrastructure investment, not less, and states and local governments should not have to pass increased costs to their citizens because of federal decision making. As proposals are considered, please stay tuned to the GFOA’s newsletter. Reaching out to your members of Congress and articulating what the preservation of the tax exemption means to your jurisdiction is now more important than ever. Please feel free to access materials and to stay in touch during this hectic and exciting time via the FLC’s Federal Tax Exemption on Municipal Bond Interest Resource Center.


Debt 101 Resource Center

Governmental entities have been using debt for more than 200 years to fund public infrastructure such as government buildings, water distribution systems, schools, police stations, and many other projects that require significant capital investment. When a government issues debt, it receives an infusion of cash to build a project; in return, the government repays the bond purchasers over time, plus interest. The use of debt allows a government to complete a capital project with a repayment schedule that spreads the cost of that project over its useful life, and the bond purchaser receives a reasonably reliable source of investment income.

Before issuing debt, a government needs to consider many factors. Appropriate planning and understanding help provide the most favorable results to the issuer while avoiding unnecessary risks and negative consequences. Debt issuance requires working with a number of partners, each with a specific role. The debt issuance will result in a financing agreement that is legally binding, and it is critically important that government officials understand the basic terms of the agreement and what the agreement commits them to do.

To ensure that issuers have all the information they need, the GFOA’s Committee on Governmental Debt Management has created two new resources. Debt 101, Volume 1, provides a high-level outline of the debt issuing process and important considerations, and is intended to be a resource for the first-time or infrequent bond issuer. Debt 101, Volume 2, discusses what needs to happen after the issuance is completed.


Black Caucus Chair’s Message to GFOA Membership

Thursday, December 8, 2016

Good afternoon. I would like to extend a sincere thank you to the Multicultural Coalition Taskforce, all those who participated in the Multicultural Coalition survey, and all those who attended the annual meeting at the GFOA Black Caucus in Toronto. Higher than normal attendance and lively participation contributed to a healthy conversation about expanding the scope and mission of the Black Caucus.

The Executive Board of the Black Caucus met on October 15, 2016, to discuss the results of the survey. Based on the focused efforts of the Multicultural Coalition Taskforce, the results of the Multicultural Coalition survey, and the feedback received during the general meeting, the executive leadership of the Black Caucus determined that the organization should continue in its current form. It will do so with keen focus on its original mission, which is to “diligently support the aspirations and achievements of African-American public finance officers; to pursue professional development opportunities for our members; and to sponsor projects to assist African-Americans seeking careers in government finance.”

That said, the Black Caucus membership remains inclusive to all! Our forum provides fellowship for sharing thoughts, ideas, and initiatives that advance all those public finance officers who identify as underrepresented. We want you to join the conversation!

We also received very positive feedback from the survey specific to mission attainment. We plan to deliver on this. For example, the Black Caucus Board will embark on a revitalized mentorship program, periodic information sharing through the GFOA newsletter, and collaboration with other organizations such as the National Forum for Black Public Administrators. All of these initiatives have the goal of enhancing the profession of public finance and encouraging more minority and student involvement.

Again, thanks to all for your input and direction. We are looking forward to the challenges and successes of a new year and always reaching to attain the mission of the GFOA’s Black Caucus with you.

Lunda Asmani, CPFO, Black Caucus Chair

Director of Management and Budgets, City of Norwalk, Connecticut


Department of Labor’s Overtime Rule Delayed

On November 22, 2016, a Texas U.S. District Court judge issued a nationwide temporary injunction blocking the U.S. Department of Labor (DOL) from implementing new overtime pay rules scheduled to take effect December 1, 2016. Twenty-one states joined business groups filing suit in the eastern district of Texas to stop the DOL from implementing the rules, which they say would substantially increase employment costs.

On May 18, 2016, the DOL issued the final version of its overtime pay rule, which would extend “exempt” overtime pay regulations from $23,660 per year to $50,440 per year, a salary threshold that would be updated every year in the Federal Register. The rule would nearly double the threshold for exemption from overtime pay for professional employees, also referred to as “white collar” employees, from $23,660 ($455 per week) to $47,476 ($913 per week). The overtime eligibility rate would also be adjusted every three years. As a result, more state and local government employees who are currently classified as exempt could be eligible for overtime pay, extending indefinitely.

The Texas court issued the temporary injunction because of the DOL’s attempt to increase salaries without consideration of an employee's duties. The litigation and potential appeals process could drag into 2017, when president-elect Donald Trump could take action to rescind the overtime pay rule or instruct the DOL not to defend it. This rule is one of several that the incoming Trump administration has said it will roll back. In addition, the 114th Congress has already taken action to delay implementation of the overtime pay rule.

On March 13, 2014, President Obama signed a presidential memorandum directing the DOL to modernize and streamline existing overtime regulations. The memorandum directs the DOL to propose specific regulations defining which workers are protected by the Fair Labor Standards Act governing “white collar” exemption from overtime pay for executive, administrative, and professional employees.


New Best Practices Address Cash Flow Analysis, Investment Party

The GFOA Executive Board approved two new best practices and updates to four existing best practices at the September 2016 meeting. These documents provide recommendations to government finance officers in the areas of treasury and investment management, and retirement administration and benefits administration.

Cash Flow Analysis. This new best practice recommends six essential elements of a cash flow analysis, an important tool to inform management decision making. GFOA recommends that state and local governments perform ongoing cash flow analysis to ensure sufficient cash liquidity to meet disbursement requirements while also limiting idle cash.

Investment Policy. This new best practice recommends reviewing and, if necessary, updating the investment policy annually. The document includes statements on eight key points, noting that an investment policy enhances the quality of decision making and demonstrates a commitment to the fiduciary care of public funds, making an investment policy the most important element in a public funds investment program. GFOA recommends that all public entities establish a comprehensive written investment policy, adopted by the governing body.

Hybrid Retirement Plan Design. This best practice was revised to reflect the continuing evolution of hybrid plan designs. GFOA recommends design elements for hybrid plans or plans that combine hybrid features with defined benefit or defined contribution plans.

Establishing and Administering an OPEB Trust. This best practice was revised to align with language related to the January 2016 best practice, Sustainable Funding Practices for Defined Benefit Pensions and Other Postemployment Benefits. It includes a new recommendation that governments commit to funding promised benefits based on regular actuarial valuations, with a target funded ratio of 100 percent or more. GFOA also recommends creating a qualified trust fund to prefund OPEB obligations.

OPEB Governance and Administration. This revision aligns the best practice with the Sustainable Funding Practices for Defined Benefit Pensions and Other Postemployment Benefits. That best practice, from January 2016, recommends conducting an audit of actuarial valuations to review the appropriateness of the actuarial methods, assumptions, and their application. The updated language in the OPEB Governance and Administration best practice addresses employers that issue periodic studies, experience studies, and periodic actuarial audits. GFOA recommends that sponsoring entities provide a clear, well-documented governance structure to guide governing bodies and plan administrators.

Educating Employees About the Adequacy of Retirement Benefits. As part of GFOA’s effort to consolidate and develop more comprehensive best practices, this updated document addresses elements of a sound educational program as well as guidance for employers and retirement systems that procure external providers of financial education and advice. GFOA recommends that public-sector employers and plan administrators inform and educate employees about future retirement income and the variables that may affect future retirement income, depending on the income source.