76th Annual  Meeting
The U.S. Conference of Mayors
76th Annual Meeting
June 20-24, 2008



WHEREAS, the availability and cost of credit for municipalities has a corresponding impact on their ability to provide needed infrastructure and other projects to their residents; and

WHEREAS, bond rating agencies hold municipal bonds to an unnecessarily higher standard than corporate issuers; and

WHEREAS, this disparate treatment means that cities and other governmental entities are judged differently than private sector corporations with similar credit histories; and

WHEREAS, bond ratings should be based on the risk that the issuer will default and the investor will lose money, but ratings for local governments have little to do with risk; and

WHEREAS, for example, municipal bonds rated BAA by Moodys Investor Services Inc. have had a default rate of only 0.13 percent, while corporate bonds rated AAA by Moodys Investor Services Inc. have defaulted 0.52 percent, or four times that rate; and

WHEREAS, this differential treatment undermines the functioning of an efficient and transparent capital market and misleads investors by greatly inflating the risk of owning municipal bonds and costs taxpayers billions in increased interest costs and bond insurance premiums; and

WHEREAS the system used by bond rating agencies to grade municipal bonds has recently come under scrutiny by the House Committee on Financial Services, whose Chairman recently noted, “Municipal bonds are among the safest—second only to US Treasuries—in terms of losses to investors”,

NOW THEREFORE BE IT RESOLVED that the U.S, Conference of Mayors applauds the efforts of the Chairman of the House Financial Services Committee, to hold hearings on this issue and explore legislative remedies which would assist municipal bond issuers in this area; and

BE IT FURTHER RESOLVED that the U.S. Conference of Mayors looks forward to working with legislative leaders in the House and Senate, the Securities and Exchange Commission and the bond rating agencies to develop workable solutions to this problem.