Government Finance Officers Association wants stronger statement on equalizing municipal ratings

New York, June 17 - The Government Finance Officers Association rejected a drafted policy calling for equalization of municipal and corporate credit ratings saying that it wanted a stronger statement.

The GFOA executive board on Monday approved a public policy statement that supported a change in the ratings system.

The proposed statement, titled "Credit Rating Scales for Municipal Securities," calls for municipal and corporate bonds to be assigned credit ratings on a comparable basis but still with distinct investor information.

But at the association's annual business meeting, members decline to approve the policy statement, asking that "the policy position be stronger than drafted in support of a unified rating scale," according to a statement from the GFOA.

The original proposed statement noted that municipal bonds are usually rated lower than comparable corporate securities, even though the government backs municipal bonds.

The current ratings scales add additional cost for bond insurance and exclude some municipal bonds from eligibility as money market mutual fund investments.

Five other policy statements were approved by the association at the meeting, held this year in Ft. Lauderdale, Fla.

The three new statments cover: supporting legislation to allow the Federal Home Loan Banks to offer letters of credit to municipal bond issuers without jeopardizing the tax-exempt status of the bonds; supporting legislation to ban tax patents for municipal bond transactions; and supporting legislation to force online retailers and businesses to pay local and state taxes at the point of sale.

Members also backed two revisions to policy statements.

The policy on government retirement systems calls for allowing the plan's governing body to make investment decisions based on the most prudent investment strategy.

The association also voted to recommend that restrictions on the investment of public funds be avoided because they usually result in lower returns.

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