When a Missouri community misses a financial reporting deadline, the damage doesn’t show up at City Hall.
It shows up in a retiree’s brokerage account.
Most people never think about the mechanics behind municipal bonds. They simply know these investments have long been considered safe, stable, and dependable sources of income. But there is a growing risk in Missouri’s municipal market that deserves attention — one that can quietly erode the value of investments held by everyday families, as well as pension funds, banks, and insurance companies.
A recent report from State Auditor Scott Fitzpatrick highlights the issue. Of 424 political subdivisions required to file annual financial reports by Dec. 31, 2025, 80 failed to file on time.
To many, that may sound like an administrative problem. In the municipal bond market, it can trigger a financial shock.
For more than 30 years before becoming Missouri’s Securities Commissioner, I worked in the securities industry, spending the bulk of my career trading municipal bonds. I’ve seen firsthand how markets react when transparency disappears.
Investors rely on timely financial information to evaluate risk. When financial reports are delayed long enough, credit rating agencies may withdraw their ratings — not necessarily because the issuer is in financial trouble, but because there isn’t enough current information to support the rating.
Once a bond becomes non-rated, the market treats it VERY differently.
Liquidity declines. Many buyers step away. Prices fall. What was once an investment-grade municipal security can begin trading more like a “junk bond.”
The losses are real — and they fall on the people who already own the bonds.
Those investors are often the very people who chose municipal bonds for safety: retirees, small business owners, and families seeking stable income. At the same time, institutional investors such as mutual funds and pension systems, face internal limits on non-rated holdings. When ratings are withdrawn, they may be forced to sell, putting additional downward pressure on prices.
Ironically, the issuer may feel little immediate impact. Of course, entities that do not submit their financial statements on time accrue a $500 per day fine until they file the required information – some entities have ongoing fines, some accrue separate files for each year that isn’t submitted timely.
The true cost shows up later — when the municipality returns to the capital markets and investors demand higher interest rates to compensate for perceived disclosure risk. In other words, delayed transparency today can lead to higher borrowing costs for taxpayers tomorrow.
This is not a widespread crisis, and many Missouri political subdivisions consistently meet their reporting obligations. However, the Auditor’s report makes clear that the problem is significant enough to warrant attention — and, more importantly, a solution.
As Missouri’s Securities Commissioner, I believe strongly in market-based reforms that protect investors while encouraging responsible behavior.
That’s why I am proposing a straightforward policy for the Missouri General Assembly to consider.
If a political subdivision fails to file required financial statements in a timely manner and that failure results in the withdrawal of a credit rating by a nationally recognized rating organization, investors should receive notice and be given 90 days to put their bonds back to the issuer.
The repurchase price would be the greater of par or a market-based price reflecting a modest spread — for example, minus 50 basis points — to a recognized municipal benchmark such as the Municipal Market Data scale.
This approach would:
- Protect retail investors from sudden losses caused by disclosure failures.
- Reinforce market discipline without adding layers of regulation or bureaucracy.
- Create a powerful financial incentive for timely and transparent reporting — benefiting both investors AND taxpayers.
Missouri communities depend on investor confidence to finance essential infrastructure, public education, and economic development, to name a few. That confidence rests on one simple expectation: timely, reliable financial information.
From my decades on a municipal bond trading desk, I can say this with certainty — markets punish uncertainty.
Strong disclosure lowers borrowing costs. Weak or delayed disclosure raises them.
Most local officials understand this and work diligently to meet their obligations. This proposal is not about criticism — it’s about aligning incentives so that when transparency breaks down, the risk isn’t borne solely by savers.
Good public policy should anticipate problems before they become crises.
Missouri’s municipal market is fundamentally strong. By strengthening investor protections and reinforcing the importance of timely disclosure, we can keep it that way — protecting families, supporting institutional investors, and helping communities borrow at the lowest possible cost.
Transparency builds trust…in government and in markets.
