Number
090410
Version
ORIGINAL
Reference
Sponsor
ALD. DAVIS
Title
Resolution relating to the City of Milwaukee joining the National League of Cities in support of the creation of a federally-supported mutual bond insurance company.
Analysis
The current economic crisis has resulted in the downgrades of municipal bond insurance companies. The National League of Cities (NLC) has proposed that, in order to return stability to the municipal bond market, the federal government provide $5 billion in capital for the creation of the “Issuers Mutual Bond Assurance Company,” which will be owned by state and local governments as well as state and local government agency municipal bond issuers. This new company will endeavor to replace the 15 commercial municipal bond insurers that were downgraded in 2008 and 2009. Under this resolution, the City of Milwaukee joins the National League of Cities in urging Congress and the Administration to provide the financial support necessary to provide a strong capital base for a new bond insurance company.
Body
Whereas, The municipal bond market has been devastated by the downgrades of every single municipal bond insurance company resulting in many small, infrequent, and lower-rated issuers of municipal bonds no longer having access to the market or only at rates that are significantly higher than they were prior to the downgrades of the bond insurers; and
Whereas, The economic crisis has put state and local governments across the country under great fiscal stress, and this stress imperils essential government services that taxpayers, rate payers and their families rely on and governments’ ability to pay for them such that prudent steps must be taken to alleviate the cost burdens of state and local governments including the cost of tax-exempt borrowing; and
Whereas, There continue to be market conditions that threaten the continuing viability of existing insurers and the ability of new insurers to succeed in the market; and
Whereas, Alternative sources of credit enhancement, letters and lines of credit, from banks and other providers are insufficient to meet borrowers’ needs, are only available at very high rates or may only be available to issuers who are able to link depository relationships with these credit facility providers; and
Whereas, It is in the national interest to restore market access at lower borrowing costs for municipal issuers to support the financing of billions of dollars of infrastructure and other essential governmental projects that will create jobs and support national economic growth; and
Whereas, The National League of Cities has proposed an alternative insurance mechanism, a mutual bond insurance company, which is a business structure that has proven to be successful, stable and policy-holder focused and provides greater service and lower cost to the purchasers of insurance; and
Whereas, The National League of Cities seeks $5 billion in financing from the federal government to provide the capital necessary for creating the first-ever mutual bond insurance company, Issuers Mutual Bond Assurance Company, that will help return stability to the municipal market, reduce borrowing costs, stimulate job creation and contribute to the nation’s economic recovery; now, therefore, be it
Resolved, By the Common Council of the City Of Milwaukee, that the City of Milwaukee joins the National League of Cities in urging Congress and the Administration to provide the financial support necessary to provide a strong capital base for a new bond insurance company that will be mutually owned by state and local government bond issuers and will serve the public by providing market access for these issuers and reducing the cost of borrowing for essential governmental projects.
Requestor
Drafter
LRB09312-1
JWC
7/20/2009