Melissa Buck is an advisor in UMB’s Public Finance Municipal Advisory Group serving governmental, quasi-governmental, and higher education organizations. Here, she answers some common questions about the team’s work and approach.
When did the phrase “municipal advisory” come into use?
Prior to 2009, we were “financial advisors” who worked with municipalities and other public entities. Then the financial regulatory reform bill codified the phrase “municipal advisory.” So, the term is relatively new, but the nature of our work hasn’t changed.
In a nutshell, what is that work?
We help our clients plan for the future, including how to best leverage existing resources. As part of that process, our goal is to help our clients achieve the lowest cost of capital possible while also ensuring the smooth execution of a financial transaction. Meaning, we can help quantify the benefits and costs of various bond structures and borrowing vehicles, act as a liaison between all parties on the bond issue, recommend the best method of sale, and identify and keep track of any market opportunities.
Most importantly, we sit on the same side of the table as the issuer, as fiduciaries, which means we are legally required to put interests of the client ahead of our own financial interests.
How do you approach capital cost efficiency for clients?
While governments and other quasi-municipal entities are not required to hire a municipal advisor, many do so to help manage risk, provide market insights, and to be their advocate. In short, we ensure all aspects of the bond issue favor the issuer (our client), including recommending structures that benefit the issuer foremost while also balancing investor preferences. Without any independent advice on what that balance should be, how would you know if you’re getting a good deal or not?
The other big way we help clients lower their capital costs is by knowing what is financeable, and what an underwriting firm’s capabilities and preferences are. By that I mean, will an underwriter be willing to hold some of a deal on its own books? Maybe, maybe not. Part of our job is to figure out who would be the best fit for the transaction or project and advise our clients accordingly. Our goal is the same as our clients’—we want the proposed infrastructure project benefits the community as much as possible and to do that, we strive to optimize each financing or consulting project.
In short, we help clients wade through options and provided the information necessary to ensure decisions are not made in a vacuum.
How does that fit into UMB Bank, n.a. Capital Market Division’s broader capital markets offerings?
I see municipal advisory as a natural complement to the other services UMB provides. Whatever your financial needs, we can help you. For example, if you’re at the inception stage of a capital project, we can help quantify each option, including how choosing that option may impact funding for other projects, and help identify funding sources to pay for that project.
Having a pricing desk that is in the market every day provides a leg up on other municipal advisory firms that don’t have that access. We have real-time data to look at, not just a look-back on what has happened in the market. This helps ensure clients are receiving the most up-to-date information on pricing trends with the goal of staying ahead of the curve.
What about any potential conflicts with UMB Financial Service’s broker-dealer and UMB Bank, n.a. Capital Market Division’s services?
UMB Financial Services, Inc. and UMB Bank, n.a. Capital Market Division never engage as both municipal advisory and underwriter on any public offering. It’s prohibited under federal law. And where a client uses UMB for other services, e.g. trustee, we have taken steps to mitigate any potential conflict of interest. As a fiduciary, our first obligation is to our client—always.
When do you typically get involved in a capital project?
Say a municipality wants to build a new police building or city hall. It needs to go to the voters to approve the funds. Far ahead of going to the voters, we’ve been involved, talking about what needs to happen, who are the players, what’s the general timeline, what are the pros and cons of each financing structure, and then finally what is the best way to approach voters.
In fact, one of the key benefits of working with a municipal advisor is evaluating a variety of financing options and provide recommendations on the best course of action, which an underwriter is not allowed to do under SEC rules unless it’s during a RFP process, if they’ve been engaged on a specific transaction, or if the municipality has an independent registered municipal advisor. Whether your financing ends up being through the public markets to an underwriter/broker-dealer or bank, or a direct placement to an investor, or you use of one of the state or federal programs, it is important to know your options and how those options impact your community.
Sounds like you should bring on a municipal advisor early in the process.
Yes, bringing on a municipal advisor early in the process helps a community make a well-informed decision on how to spend those finite resources you have been entrusted with. Through proper planning, education, community outreach and then execution, a municipal advisor will help you achieve the goals and/or needs in an effective and efficient manner.
Bringing on a municipal advisor is one of the key provisions of the Government Finance Officers Associations (GFOA) best practices when issuing debt. GFOA recommends that a municipal advisor be used in all debt transactions where the issuer does not have sufficient in-house expertise, which few municipalities do. So yes, brining on a municipal advisor early in the process will help protect your community from executing debt transactions that are not in your best interest – meaning, it helps ensure you don’t end up with bad deal.
Melissa Buck joins UMB Financial Services, Inc. (UMBFSI) as senior vice president in the Public Finance Municipal Advisory Group. Melissa will focus on UMB’s continued growth in the state of Colorado and the western United States. Melissa has almost 15 years of public finance experience and market intelligence in developing successful solutions for complex client challenges. She provides knowledge in funding municipal infrastructure, special district, utility and project finance, transportation, and public-private partnerships.
Learn more about how UMB Financial Services, Inc. municipal advisors can assist to help find a quality path forward during these complex conditions. Contact us to connect with a municipal advisory team member.
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