Statement by Dormitory Authority Executive Director David Brown in Support of Harmonizing Bond Ratings

I fully support California Treasurer Bill Lockyer’s call to unify the rating of municipal and corporate bonds.

There is no reason that tax-exempt municipal bonds, with their historically low rate of default, should be rated more conservatively than corporate bonds. Such artificially low ratings result in steeper borrowing fees for state and municipal governments, which ultimately cost taxpayers billions.

Creating a unified evaluation system will increase transparency, will more accurately reflect the underlying strength of municipal bonds, and will generate more equitable costs for issuers based on a more precise assessment of risk.

The Dormitory Authority is historically one of the largest issuers of tax-exempt municipal debt in the nation. We currently have some $35 billion in outstanding bonds. We have issued more than $80 billion in bonds in our 64-year history and have never suffered a bond default.

I join Treasurer Lockyer in looking forward to the day when the current rating system in replaced by a unified approach that equitably assesses the credit-worthiness of corporate and municipal bonds.