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The leading voice for excellence in public finance

Thought Leadership Thursday

Public Finance: 10 Things I’ve Learned

Rachael Eubanks

Thought Leadership Thursday Article

Public Finance: 10 Things I've Learned
August 13, 2020
State Treasurer
Dear Colleagues,

In the year and a half I have been active in NAST, I have found we all have truly unique and fascinating paths that have led us to our current offices. My route has been no less circuitous. Prior to being appointed State Treasurer in January 2019, I spent nearly three years as an energy and telecommunications utility regulatory commissioner and before that I was in public finance. I spent 13 years as an underwriter and financial/municipal advisor serving a variety of public sector clients, including the State of Michigan where I now serve as Treasurer. For any of us who worked in that industry during the financial crisis and Great Recession, the lessons learned, while painful at the time, have been invaluable as we face another crisis. Crises are of course stressful by nature, and they also serve as an opportunity to reimagine how things work and bring a creative mindset to benefit the millions we serve at the time they need us most.

For the TMTS virtual conference, I was asked what 10 of those lessons were that I learned from my career in public finance, and once I sat down to think about them I found I had many more than 10 things I learned the hard way. However, the 10 most generally relevant for all those who participate in public finance were:

1. You may be required to abide by the most obscure bond document provision or covenant some day. Working on a bond issue usually means hours of reviewing documents. Debates will arise from what seems to be the most insignificant and complicated component, and it can be tempting to move on because "it will never happen." Well, those provisions are designed to be triggered in the hardest of time and can have significant implications when it’s most difficult to deal with them. Always assume all will happen.

2. Relationships are of the highest importance and this is a small universe. Public finance is a relationship business and as with all relationships the Golden Rule applies. Treat everyone as you would want to be treated. I have found newcomers in that world are rare and individuals change roles and organizations frequently. One day that junior banker could be in charge of whether or not you get hired and they will remember how you treated them.

3. Market participants, e.g., underwriters, counsel, investors, rating agencies, etc., have very long memories. It’s incredible what dealing with large investments and organizational risk will do for the memory. Hiccups will have long lasting consequences and diminish the confidence other participants have in your organization.

4. You will never regret selecting a simple option or solution. That’s not to say there’s not a time and place for a complex solution, however, simplicity has a value that should be considered among other economic factors, even if it’s not the most exciting option.

5. Don't "rinse and repeat." The relative value or cost of instruments vary greatly over time. If you’ve made the same exact decision 10 times in a row, have you stepped back to consider why that is, and have you taken the time to go through the selection process again to determine whether it’s as appealing as it was the first time?

6. Good markets don’t last forever. Neither do bad markets. Go/no-go decisions are always hard and it’s tempting to assume the market at some point in the future will be the same as they are now. The one thing you can count on is the market will be different and that could work for or against you. It’s also easy to panic when the markets are in disarray and seem like they will stay like that forever, but it’s just part of their cyclicality.

7. A master document can always be refreshed or updated. Once you’ve seen the same document a number of times, it can be easy to skim over portions of it, but when undertaking a refunding or restructuring it’s an opportunity to modernize to capture the latest features available that may not have been invented when the document was originally drafted.

8. When in doubt, disclose it. (But make sure it’s public information.) Consult with counsel as to what is appropriate for disclosure in new instances, but erring on the side of more rather than less at a minimum builds your relationship with investors and could help if a material event impacts your financial picture down the road.

9. For vendor community – your recommendations must be based on what’s best for the client, not you. I don’t just mean recommending an option because it would mean a higher fee, although I certainly do mean that. Clients have a different set of considerations than you do as a vendor. Staff demands, policies, politics, complexity, sophistication and many other factors play into their reality, not just a basis point here or there.

10. Find the joy in the every day. I used to carry a lot of stress due to the high dollars and stakes involved in public finance, but I received very good advice to "just have a little fun with it." My perception of my work changed immediately and I became a better professional once I found the joy in bringing my passion for this work and authentic self to the table.

For a longer list of hard-earned lessons, I’m happy to be a resource, but make sure to lean on the professionals you trust for their hard earned experience (that your taxpayers are paying for after all). The world of public finance is highly specialized and it can take time to develop a comfort level for the decisions treasurers have to make right out of the gate. Just try to have a little fun with it along the way.

Rachael Eubanks
State Treasurer
State of Michigan
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