SYLLABUS
University of Chicago Harris School of Public Policy Studies
Special Topics: The Fundamentals of Municipal Bonds
PPHA 32530
Fridays 9:00am to 12:00pm
April 5th to June 7th
Harris School
Location:
104 B Harris
INSTRUCTOR:
Michael D. Belsky
mbelsky@uchicago.edu
312-953-5449
Course Goals & Purpose
This class will be oriented to graduate students interested in how state and local
governments as well as not for profit hospitals, colleges and universities, and
cultural institutions finance capital projects including but not limited to: roads;
bridges; mass transit,; water sewer and electric systems; and public buildings,
through the issuance or sale of municipal bonds.
There are over $3.7 trillion in municipal bonds outstanding and on average over
$350 billion issued each year. This annual amount represents 10,000 separate
financings. This market is critical to investors and the 87,500 state and local
governments in the United States that need to meet the needs of their respective
citizens. There are 55,000 governments with debt outstanding.
Each week we will cover different aspects of tax exempt bonds and the various
processes used to raise money for governments and not for profits. The texts
listed below will be supplemented by rating agency reports, and topical articles
from industry publications and publicly available web sites. Some classes will
include guest speakers to illuminate a course subject and to point up career
opportunities.
The class will include a discussion how and where Master’s students in public
policy can pursue various career options in the municipal bond industry including:
working in a: budget or finance office of a government focusing on debt
management; at a rating agency; working as an analyst for a mutual fund,
insurance company or bank trust company; or working; or as an analyst for an
investment banking firm or government advisory firm. We will also discuss how
this entry level positions can lead to careers in investment banking for
government and portfolio management of tax exempt bonds.
Exams, Grading, Etc.
In addition to weekly reading there will be a midterm and final. The mid- term
will be an exam with multiple choice and essay questions. This will test your
comprehension of the materials covered to date.
The final will be a paper where you will write a rating agency report on a given
municipality. My hope is this will give you a work product that will help you in
obtaining employment should you decide to choose the municipal bond industry
as a career. Grading will be based on a weighted average of attendance, class
participation, the midterm and final.
Grade Distribution:
10% Attendance
15% In-Class Participation and discussion
35% Midterm
40% Final Project
Grade Ranges:
A……90-100
B…….80-89
C……70-79
D…..60-69
F……. <60
Attendance and Participation:
As the class is a once-weekly commitment, attendance is highly important to your
success in the class. Students will be graded for the quality and quantity of their
participation while attending class. Exceptions may be given but only in advance.
Professor:
Adjunct Professor Michael Belsky has been in the municipal bond industry for
over 25 years. Mr. Belsky worked at Fitch Ratings for 15 years where he served as
the Group Managing Director of the Public Finance Group consisting of over 100
analysts in every sector of municipal finance (e.g. utilities, cities, counties, states,
healthcare, and higher education); prior to that Mr. Belsky was an investment
banker and analyst at Mesirow Financial and The Northern Trust Bank. Professor
Belsky served as a City Councilman in Highland Park, IL from 1995 to 2003 and as
Mayor from 2003 to 2011. He also served as a member of the Governmental
Accounting Standards Board from 2008 to 2011. A national board which sets
accounting rules for State and Local Governments and he continues to work in the
municipal bond industry at New Vernon wealth Management.
Required Texts:
Doty, Robert. Bloomberg Visual Guide to Municipal Bonds. Bloomberg Press,
Wiley 2012. Available from Amazon for Kindle, I pad etc. or print.
Feldstein, Sylvan G.; Fabozzi, Frank J. The Handbook of Municipal Bonds, Wiley,
2008.
O’Hara Neil. The Fundamentals of Municipal Bonds. Sixth Edition, Wiley, 2012.
All of the above are from Amazon for Kindle, I pad etc. or print.
Other Reading: Selected articles and reports will be assigned as well, as indicated
below. These are included in your reading folders. Additional articles and reports
may be assigned and discussed based on timely topics.
Guest Speakers: As indicated below I will be scheduling a couple of guest
speakers that are industry practitioners.
Week 1: 4/5
1. Lecture: Overview of the Municipal Bond Market
2. Required Readings:
a. O’Hara, Chapter 1
b. Doty, Chapter 1
c. MSRB, 2012. Fact Book(Do not read entirely, just peruse the data
section)
d. The Bond Buyer, 2012. 2012 in Statistics, Annual Review(Do not
read in entirety, just peruse statistics)
Week 2: 4/12
1. Lecture: The Basics of Municipal Securities and Public Policy
2. Required Readings:
a. O’Hara, Chapter 2
b. Doty, Chapters 3, 4, 5
c. MSRB, 2012. Certain Types of Municipal Securities
d. Beth, Dougherty, 2012. Municipal Bonds: Understanding the
Fundamentals
Week 3: 4/19(Ivan Samstein, Chief Financial Officer, Cook County)
1. Lecture: The Issuers
2. Required Readings:
a. O’Hara, Chapter 3
b. Feldstein, Fabozzi, Chapter 1
C. Murray, Steve, 2007. 12 Habits of Highly Successful Finance Officers
d. Beglin, Julie, 2004. The Six Critical Components of Strong Municipal
Management
e.Prunty, Robin, 2010. Top 10 Management Characteristics of Highly
Rated Credits in U.S. Public Finance
Week 4: 4/26(midterm distributed 4/29)
1. Lecture: The Primary and Secondary Market
2. Required Readings:
a. O’Hara, Chapters 4 & 5
b. Feldstein, Fabozzi, Chapters 2,3,4
c. Howard, J. Competitive and Negotiated Bond Sales-Making The
Right Choice
Week 5: 5/3 CFO Forum (class cancelled- make up class 5/24- see below)
1. Lecture: Bond Pricing and Investing
2. Required Readings:
a. O’Hara, Chapters 6 & 8
b. Doty, Chapters 7&8
c. Feldstein, Fabozzi, Chapter 14 and 39
d. MSRB, 2012. Understanding Municipal Market Indices, Yield Curves
and Benchmarks
e. Black Rock, Investing in Municipal Bonds
Week 6: 5/10
8:45 to 10:30 am. William Blair and Company, 222 W Adams St, Chicago,
IL. Investment Bankers, Phil Gutman, Underwriting; Tom Greene; Trading;
Dave Abel; Public Finance.
10:45 am to 12:00 pm. Speer Financial, 1 North LaSalle Street, Suite 4100,
Chicago, IL. Financial Advisory Firm. Kevin Mc Kanna, President, et.al
Week 7: 5/17
Lecture: Credit Analysis- General Obligation Bonds
1. Required Readings:
a. O’Hara, Chapter 7
b. Feldstein, Fabozzi , Chapter 11, 48
c. Doty, Chapter 3(Review)
d.) Laskey, Amy 2011, Tax Supported Rating Criteria
e) Hackett, Kate 2012, U.S. Local Government General Obligation
Methodology
e) Lerma, Alexandra, 2009. Local Government National Medians
d. Perry, Eden, 2006. Debt Statement Analysis
Week 8: 5/23
1. Lecture: Credit Analysis Continued-Revenue Bonds
2. Required Readings:
a. Feldstein, Fabozzi, Chapter 59
b. Doty, Chapter 5
c. Scott, Doug 2012. Water and Sewer Revenue Bond Rating Criteria
d. Chapman, Theodore 2008 Key Water and Sewer Utility Credit Ratios
e. Oosterveld, Bart, 2005. The Role of Bond Covenants in Municipal
Finance Credit Analysis
Week 8: 5/24(Craig Henderson, President CW Henderson and Associatestentative)
1. Lecture: Bond Pricing and Investing
2. Required Readings:
a) O’Hara, Chapters 6 & 8
b) Doty, Chapters 7&8
c) Feldstein, Fabozzi, Chapter 14 and 39
d) MSRB, 2012. Understanding Municipal Market Indices, Yield
Curves and Benchmarks
e) Black Rock, Investing in Municipal Bonds
Week 9: 5/31
1. Lecture: Regulation and Municipal Bond Law
2. Required Readings:
a. O’Hara, Chapter 9
b. Doty, Chapters 9&11
c. Feldstein, Fabozzi, Chapters 7, 34, 22,23
Week 10: 6/7 Group Rating Agency Presentations
Contemporary Issues – Pensions, Bankruptcy, Tax Exemption, and Career
Opportunities (Will try to discuss and assign some readings if time permits in
each of the classes above)
a. Cohen, Natalie, 2010. Public Pension Primer
b. De Jong, Kristen, 2011. Municipal Bankruptcy: A Primer on Chapter9
c. Cohen, Natalie, 2011. Bankruptcy and Public Pensions: Debunking Some
Misconceptions
d. Cohen, Natalie, 2010. Unpacking the Headlines*
e. Schankel, Alan, Kozlick, 2012. The Threat to Tax Exemption
f. Standish, 2012. Under Fire: Tax Exemption of Municipal Bond Interest