LIBOR Transition Impact on Municipal Borrowing

In 2017, the U.K. Financial Conduct Authority announced that it intends to stop compelling banks to submit London interbank offered rates (LIBOR) by the end of 2021. The Secured Overnight Financing Rate (SOFR), a new reference rate based on overnight loans collateralized by U.S. Treasuries, is the index expected to replace LIBOR on January 1, 2022.

Bloomberg news has reported that “approximately $44 billion of floating-rate municipal bonds and an unknown amount o floans and interest-rate swaps entered into by state local governments are tied to the U.S. dollar LIBOR. Many of these securities and contracts will continue long after 2021, when LIBOR is phased out.

What do local governments need to do in order to be prepared for the phase out of LIBOR? Municipalities will need to take inventory of their debt and investments which may be tied to LIBOR and hire lawyers and advisers to renew contracts and renegotiate them before January 1, 2022. The Alternative Reference Rates Committee, in partnership with GFOA, published a two-page guide to for municipal issuers. The purpose of the document is to give the reader a basic understanding of the LIBOR/SOFR transition and rationale as well as general considerations for municipal issuers over the next few years.

Digitizing Local Services

ICMA’s new blog post on digitizing local services includes examples from ICMA’s new policy white paper on blockchain technology. ICMA is working with NLC and GFOA on a February event that focuses on digital innovations in local government.

ICMA partners with several organizations in its policy advocacy work on behalf of our members and the local governments they represent. The executive directors and policy staff from the “Big 7” associations representing state and local governments: the National League of Cities, National Association of Counties, U.S Conference of Mayors, National Governors Association, National Conference of State Legislatures, and the Council of State Governments, and ICMA meet monthly to discuss legislative, judicial, and regulatory issues of importance to their members. ICMA also participates in coalitions with the Big 7 and other state and local government organizations to bring its professional management voice into national policy debates and problem-solving discussions with federal government leaders. ICMA is also a member of the State and Local Legal Center, which prepares amicus briefs representing the state and local government perspective in Supreme Court litigation.