Keygent LLC Answers What is a Municipal Advisor & What is Their Role?

Issuing municipal debt is a cornerstone for California school and community college districts to finance the construction and modernization of their school facilities. The process of planning and issuing municipal bonds can be challenging for districts. In the ever-changing financial landscape, who can they turn to help them navigate the intricate process of issuing municipal bonds? That is when a municipal advisor, such as Tony Hsieh of Keygent LLC, may be called upon. Tony Hsieh sat down with us to provide insight into the role municipal advisors play in helping districts successfully plan and issue their municipal debt.

First and foremost, what is a municipal advisor? A municipal advisor, sometimes called a financial advisor, is a financial professional who provides advice to municipalities, such as school or community college districts, on the issuance of municipal financial instruments. Municipal advisors are required to act as a fiduciary, meaning that they must act in their client’s best interests. Municipal advisors assist municipalities in making informed financial decisions and navigating the complexities of the municipal finance landscape.

What is the role of a municipal advisor when it comes to advising California school and community college districts? Tony Hsieh of Keygent LLC explains, “Municipal advisors can help guide California school and community college districts during the planning, issuing, and monitoring of their municipal bonds. They are consultants that districts can utilize to assist with the issuance of their municipal debt and the overall success of their general obligation bond programs.”

The need for a municipal advisor by California school and community college districts can begin as early as the planning phase of their general obligation bond program. Once districts have identified their project needs, municipal advisors can provide comprehensive analysis to help create a bond program that achieves their desired funding amount, while taking into consideration factors such as district assessed value, projected tax rates, and the timing of municipal bond issuances to meet project needs. Municipal advisors work collaboratively with districts to ensure that their general obligation bond programs are tailored to meet their financial needs, while remaining fiscally responsible to their taxpayers.

During the issuance phase of municipal debt, municipal advisors play a vital role in the structuring and timing of debt issuances. Advisors work closely with districts to structure their debt in a way that aligns with their project needs. Municipal advisors will carefully weigh factors such as the use of current interest and capital appreciation bonds, debt amortization, and financing term to ensure that California school and community college districts maintain financial flexibility for future bond issuances. Tony Hsieh of Keygent LLC noted, “Timing is crucial in the issuance of California and community college municipal bonds, and municipal advisors play a central role in planning the timing and structuring of the municipal debt.” Municipal advisors assess market conditions, interest rates, and other relevant factors to determine the opportune moment to enter the market. The goal of an advisor is to help districts make informed decisions that maximize the benefits of their municipal bond issuances.

Municipal advisors also conduct comprehensive market analyses to navigate the ever-changing interest rate environment. This includes monitoring market conditions, interest rate trends, and investor demand. With this information, advisors assist school and community college districts during the sale of their municipal bonds by negotiating interest rates with the district’s underwriter to achieve a lower overall cost of borrowing when possible.

The role of a municipal advisor extends beyond the initial issuance of municipal bonds. Advisors provide ongoing support, by monitoring market conditions for potential refinancing opportunities to save district taxpayers money. Municipal advisors also continually provide districts with comprehensive analyses to update their bond programs to reflect changes in assessed value or interest rates. Their commitment to continuous support helps districts navigate challenges and optimize financial strategies throughout the life of their bond programs.

In the challenging world of California municipal debt issuance, municipal advisors stand as allies, guiding school and community college districts through the complexities of financial markets. Their multifaceted roles, from financial planning and guidance to market analysis, contribute to districts achieving a successful general obligation program. As stewards of fiscal responsibility, municipal advisors play a pivotal part in shaping the financial future of California’s school and community college districts, ensuring that they can provide quality education to their students.

Tony Hsieh is a municipal advisor and one of the founders of Keygent LLC. Keygent LLC is based in El Segundo, California and provides municipal advisory and dissemination agent services for California school and community college districts.