October Geo Scores, NYSTA’s Tappan Zee Not Too Transparent and Where Chan Suspects
the SEC will Focus Next

Categories: Commentary, Uncategorized |

November 3, 2014

This week we start with a review of our proprietary Geo Score and highlight some ups and downs as well as provide you a link to get the scores themselves.  We then focus on the limited disclosure around the NYSTA’s Tappan Zee bridge and conclude with a brief comment around where, based on Peter Chan’s view (yes, the MCDC guy), the SEC may focus its efforts next on the muni space.

Geo Scores Headline

This morning, we released the most recent DIVER Geo Scores for States, counties, and cities.  The DIVER Geo Score represents a relative score of the economic health of a U.S. State, county or city. Based on a scale of 0-10, with 10 being the best, this data is updated monthly and is calculated from multiple economic and demographic factors related to three primary data categories—employment, income and housing.

The DIVER Geo Scores are available here.

The group of top ten States is unchanged from last month with a few slight shifts in rankings.   Michigan slipped into the bottom ten, displacing West Virginia which improved slightly.

State DIVER Geo Score Strongest and Weakest


(October ‘14)

Source: DIVER Analytics-Data Access Module, DIVER Data Solutions

Comparing the current State-level DIVER Geo Scores to the year-over-year changes reveals leaders (Arizona, Indiana, Utah, Colorado, Hawaii) and laggards (Alabama, North Carolina, New Jersey, Maryland):

State Level DIVER Geo Scores

(current value vs. year over year change)

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Source: DIVER Analytics-Data Access Module, DIVER Data Solutions

Is New York State Thruway Hiding Material Information?

For several years, the New York State Thruway Authority has been coy with bondholders and the public regarding its financial plan for the Tappan Zee Bridge reconstruction.

The NYSTA has consistently refused to come clean regarding the amount by which tolls on the Tappan Zee (and perhaps on the rest of the system) will need to be raised to cover the costs of construction and debt repayment.

In September, Governor Cuomo attributed the lack of a public plan to uncertainty regarding the final cost of the bridge, as well as uncertainty regarding travel demand on the bridge.  Cuomo stated that the “general state of usage of the bridge” is not known yet.  Predicting traffic and toll response on a mature, essential facility like the Tappan Zee is relatively straightforward compared to greenfield projects, which are routinely financed in the municipal market.

The NYSTA was approved for a TIFIA loan as part of the financing package for the Tappan Zee.  It is likely TIFIA staff demanded both a total cost estimate and a plan for raising tolls before agreeing to the loan.  Documents related to the TIFIA loan application were released last week in response to a FOIA request.

The heavily redacted “Cash Flow Proforma” is comical.

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Source: Lohud-The Journal News

Not so amusing was the statement issued by Thruway Executive Director Thomas Madison:  “Any release of this preliminary financial information could harm the Thruway’s credit rating…”  This statement raises several questions:

  • Is the information being withheld material to assessing the credit quality of its bonds? (Madison seems to believe it is material and negative.)
  • Is the NYSTA withholding this information from the rating agencies?
  • How should credit rating agencies respond when an issuer makes a public statement that there is information available (but not disclosed), which could negatively impact rating?
  • Should the NYSTA now be expected to post the document to EMMA?

Secondary Market Crackdown – In Case You Missed It

On October 29, the Bond Buyer ran a story highlighting comments by Peter Chan, the former SEC lawyer credited with being behind the MCDC initiative.  Chan said he expects the SEC muni enforcement unit to focus on the secondary market as diligently as they have the new issue market with the focal points being transparency and pricing.

Chan stated, “I think there should be an expectation that the other shoe is going to drop with regard to the secondary market.”  He went on to note that the enforcement division has a specific interest in protecting retail investors and highlighted dealers duty to deal fairly.  As with the MCDC initiative, Chan said the “enforcement staff also will be looking to use the antifraud provisions” in federal securities laws.


Lessons learned from MCDC that may be applicable here:

  • You should be able to prove what you have done to comply – if it is not documented, did it happen? This refrain has been echoed quite a bit over the past six months.
  • Firms should have reasonable and good faith processes and make sure they are being adhered to (again, documentation is a really good idea)

This week, the Lumesis team will be in NYC and Washington, DC.

Have a great week,


Mike Craft
Managing Director, Credit, Lumesis, Inc.


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