The National Federation of Municipal Analysts is seeking feedback on draft recommended best practices in disclosure for toll road bonds after floating a new RBP more focused on operational government-owned toll roads.
NFMA released the draft RBP last week. It is the first toll road RBP the group has released since 2005, and this one is substantially different from the earlier document. It comes at a time that toll road operators are bouncing back from seeing traffic plummet due to stay-at-home orders and declines in commuting associated with the COVID-19 pandemic.
“We are happy to release the 2021 RBP as part of our ongoing effort to review and update, when appropriate, existing RBPs,” said Anne Ross, NFMA chair. “Given the challenges faced by toll road authorities, particularly in the past year, this paper represents an important effort to reflect changes in the sector, and the disclosure needed for the investing community to make reasoned judgments. We appreciate the work of all involved in the release of this draft and encourage feedback from others in the industry to provide feedback during the comment period for a truly collaborative end product.”
The RBP differs from the 2005 edition in that the earlier paper primarily focused on toll road financings, including recommended disclosures in the feasibility study and financial model, as well as during the construction period. The new document identifies 10 major categories of disclosure, and provides recommendations on what sort of information should be included in official statements, annual reports, and interim disclosures.
For example, the document suggests that ESG/risk management/resiliency disclosure need generally be disclosed only in official statements and annual reports, but that interim disclosures should include information about the impact of COVID-19 and other emergencies.
The draft RBP also includes a recommendation that toll road bond issuers and obligors provide more frequent disclosures, well above and beyond what’s included in the typical annual financial report.
“The NFMA strongly urges toll road systems with outstanding bonds to issue secondary market updates on a more frequent basis, as financial and operating information can grow stale and inaccurately represent an issuer’s profile,” the document states. “In general, interim financial disclosure is recommended on at least a quarterly basis, although a monthly basis is preferable for cash-flow statements.”
Toll roads suffered greatly due to the pandemic, as many workers stopped commuting. A recent report prepared by the International Bridge Tunnel and Turnpike Association cited traffic volume dips of 50% to 80%. The worst declines came in April 2020, when widespread stay-at-home orders prevented all but those deemed essential from traveling to work.
Recovery began the next month, but still hadn’t reached near pre-pandemic levels by the end of 2020, the time period which the IBTTA data covered.
The draft RBP is subject to revision based on comments the NFMA receives during the public comment period. NFMA requested that comments be submitted by Aug. 15. The NFMA has written RBPs and white papers on approximately 30 different sectors and topics in the municipal bond market, all of which are available on the group’s website.