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  #361  
Old 10-18-2016, 05:08 PM
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http://www.wsj.com/articles/cities-s...735713?tesla=y

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One thing many public-sector CFOs have in common with private-sector peers is that they have to answer to the Securities and Exchange Commission. The agency regulates municipal-bond sales, as well as corporate offerings, and can impose fines for violations.

While most corporations have the resources they need to monitor compliance, SEC disclosure rules pose a special challenge for cash-strapped states and cities, which are under pressure to do more with less. While disclosure rules are less stringent for municipalities than for companies, that doesn’t get them off the hook for even small lapses.

If a municipality is 30 days late in filing its budget with state and federal regulators, the SEC considers that a disclosure violation, even if the delay is unlikely to harm its bondholders.

The SEC is “really naive in their understanding of what municipalities are capable of,” said Jeffrey Esser, chief executive of the Government Finance Officers Association, which has about 18,000 members in the U.S. and Canada.

In August, the SEC reached settlements with 71 municipalities and other public entities across 45 states over alleged bond-disclosure violations. Many of the parties that settled had voluntarily reported their violations, such as failing to disclose a change in tax-revenue forecasts.

The town of Fairfield was among those that self-reported, a move that tends to win leniency. It settled with the SEC without admitting or denying wrongdoing or paying a monetary penalty.

.....
Despite such pressures, municipalities and related entities don’t get a free pass, Andrew Ceresney, director of the SEC’s enforcement division, said at a conference last week. They have a total of over $3.7 trillion in outstanding debt, spread across about 44,000 issuers, compared with the about 8,600 corporate issuers the SEC regulates, he said.

Mason Neely, finance chief of East Brunswick, N.J., voluntarily reported to the SEC that his town failed to let investors know that S&P Global Ratings dropped coverage of the town’s sewer bonds when it decided to pay them off early. He said that while he takes responsibility for not immediately informing bondholders, the violation was minor.

Another potential pitfall for public-sector CFOs is that their predecessors often leave them with decades worth of financial information they know little about. When their town or regulators want to investigate something, “Well, I didn’t know that” is a common refrain, said J.T. Klaus, a partner at Kansas law firm Triplett Woolf Garretson LLC.
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  #362  
Old 11-04-2016, 11:57 AM
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http://seekingalpha.com/article/4014...oring-muniland

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Five states were downgraded during the third quarter:

Alaska was downgraded by Moody's to Aa2 due to political instability, structural imbalance, outsized pension liabilities, and economic difficulties caused by low oil prices -basically, for all the reasons cited above!

Mississippi was changed by Fitch to AA from AA+ due to weaker than expected operating performance and, in this case, a change of methodology in Fitch's rating of states.

Kansas was downgraded by S&P to AA- due to structural budget pressures, drawdown of reserves, and deferral of pension contributions.

West Virginia was downgraded by Fitch to AA because of economic and fiscal challenges associated with the state's dependence on the coal industry, and Fitch continues to maintain a negative trend on the state's rating as a consequence of significant domestic and international momentum to reduce coal utilization.

Finally, Illinois was again downgraded by S&P to BBB on September 29thafter just having been downgraded by the agency in June. The downgrade reflects continued weak financial management and increased long-term and short-term pressures tied to declining pension funding levels. Illinois pensions are 41% funded, compared with an average funding level of 75% for the states, per a recent Pew Charitable Foundation brief.
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  #363  
Old 11-04-2016, 11:58 AM
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NEW MEXICO

https://www.moodys.com/research/Mood...--PR_903657977

Quote:
Rating Action: Moody's downgrades New Mexico's GO bonds to Aa1 from Aaa; outlook negative
Global Credit Research - 25 Oct 2016
New York, October 25, 2016 -- Summary Rating Rationale

Moody's Investors Service has downgraded the State of New Mexico's general obligation bonds to Aa1 from Aaa, affecting $327 million of outstanding debt. In conjunction with this action, we have also downgraded to Aa2 from Aa1 the state's Lease Appropriation Bonds (Fort Bayard Project) Series 2008, issued through Grant County, affecting $53 million of outstanding debt; and downgraded to Aa2 from Aa1 the ratings of the New Mexico School District Enhancement Program (post March 30, 2007) and the New Mexico School District Enhancement Program (pre March 30, 2007), affecting approximately $2.1 billion in enhanced school district debt. These ratings had been placed under review for possible downgrade on September 12. The outlook on these ratings is now negative.

At the same time, Moody's has affirmed the Aa1 rating with a stable outlook on the New Mexico Finance Authority's State Transportation Revenue Bonds (Senior Lien) and the Aa2 rating and stable outlook on its State Transportation Revenue Bonds (Subordinate Lien). This action reflects the strong legal separation between the pledged transportation revenues and the state's general fund, including a constitutional provision that prevents the legislature from reducing or diverting the pledged revenues as long as the bonds are outstanding.

The downgrade of the state's general obligation rating is driven by the depletion of general fund reserves following a very large and unanticipated shortfall in tax revenues for fiscal 2016 and 2017. Reserves are expected to equal only 1% of recurring revenues at the end of fiscal 2017, even after significant budget balancing actions taken by the legislature in a recent special session. With the reduction in reserves, the state's overall liquidity has also declined, but remains adequate. At the same time the rating incorporates a number of strengths, including the state's history of taking timely action to maintain budgetary balance and the expectation that it will act to rebuild reserves in the near future. Debt levels are moderate and have been declining. The state's GO bonds represent only a small portion of its net tax-supported debt and benefit from particularly strong security provisions. Pension liabilities, while notable, are comparable to the medians for US states. Balanced against these strengths are below-average wealth levels and financial reporting practices which, while improving, are weaker than typical for a US state.

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  #364  
Old 11-04-2016, 05:52 PM
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CALIFORNIA

http://www.sacbee.com/news/politics-...111932412.html

Quote:
Next week’s ballot carries not only a $9 billion state bond issue for schools, but about 200 local bond measures totaling more than $30 billion, also mostly for schools.

While voters are told that the bonds would finance much-needed capital spending, many are really a sneaky way of borrowing to pay for current operations.

School districts and other local governments often neglect maintenance of their facilities to meet demands for other spending, particularly pressure from unions for increases in pay and fringe benefits. Then, after the deferred maintenance results in deterioration that can no longer be ignored, officials draw up bond issues to make repairs that could have been avoided with proper maintenance.

In theory, elected boards of these local agencies are supposed to protect taxpayers from such mismanagement and duplicity, but in reality they are often complicit because they are politically beholden to unions.

The wording of bond ballot measures and “informational” mailings to voters make lavish improvement promises, but often conceal their true purpose. And the money to persuade voters to pass them typically comes from construction companies that see the potential for new contracts.

The state’s largest local bond measure, a $3.5 billion proposal by the Bay Area Rapid Transit District, is a classic example of the syndrome – but it’s not going unnoticed because of dogged digging by East Bay Times columnist and editorial writer Daniel Borenstein that has connected the dots.

Even though it already faced large operating deficits, the BART board agreed to a fat contract with its unions that added more red ink, then decided to ask voters for the bond issue, supposedly to improve its aging system.

Borenstein pointed out, however, that BART wouldn’t say exactly how it intended to spend the money and understated the property taxes needed to cover the new debt. He also did the complex arithmetic to demonstrate that a substantial part of the borrowed money would cover operating funds that had been diverted from maintenance into salaries and pensions, leading to the system’s deterioration.

Read more here: http://www.sacbee.com/news/politics-...#storylink=cpy
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  #365  
Old 11-08-2016, 02:15 PM
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Video on bond ballot measures
http://www.bondbuyer.com/video/muni-...1117619-1.html

pieces I pulled out:

$70 billion in bond referendums today across U.S.

California: $42 billion, with the largest being a $9 billion on school construction
In general, California has the biggest - 5 ballot propositions of over $1 billion

Texas: Austin $720 million
El Paso Independent School Disctrict: $669 million

Colorado: Denver Schools - $572 million
Jefferson County Schools - $535 million

Largest bond request since 2006
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  #366  
Old 11-23-2016, 02:34 PM
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http://www.latimes.com/business/la-f...118-story.html

Quote:
Why municipal bonds are in a nose dive since Trump's election

e market for tax-free municipal bonds, a favorite of many Californians seeking decent interest income, faces a rough road after Donald Trump's White House victory.

Bond prices have tumbled over the last two weeks, driving yields up. In part, the market fears that Trump and the GOP-controlled Congress will push tax reform measures that could make munis much less attractive to investors.

A worst-case scenario, now revived, is that Congress could start taxing muni bond interest.

Many analysts say the concerns are overblown. In particular, “the tax exemption is probably the last thing to be touched,” said Matt Fabian, a partner at research firm Municipal Market Analytics in Concord, Mass.

But he and other experts acknowledge that muni bonds might be facing prolonged turmoil because of uncertainty over Trump's plans.

Even if muni tax policies aren’t altered, some investors worry that Trump’s promise to rebuild U.S. infrastructure could flood the market with new bonds, devaluing older bonds. And overlaying all this is the expectation that the Federal Reserve will push interest rates higher if the economy continues to grow.

Investors’ selling of muni bonds after Trump’s victory has driven the market value of the securities down from record highs in the summer to the lowest levels in more than a year.

The share price of the iShares National Muni Bond exchange-traded fund, one of the most popular muni funds, has fallen from $114 in early July to $108.41 as of Friday, a loss of almost 5%.

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  #367  
Old 12-11-2016, 02:02 PM
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DALLAS, TEXAS

https://www.bloomberg.com/news/artic...esn-t-think-so

Quote:
Dallas Bankrupted by Pensions? The Bond-Market Doesn’t Think So

City’s G.O. bonds due 2025 closely tracking 10-year benchmark
Police and fire pension fund projected to go broke by 2030
Dallas’s police and fire pension system may be going broke, but you’d never know it by looking at the municipal-bond market. The city’s general obligations due in 2025 yield 2.63 percent, about 0.07 percentage point more than top-rated 10-year debt, the same as a year ago, according to data compiled by Bloomberg.

That’s despite Mayor Mike Rawlings telling a state board last month that the city’s $7 billion debt to the retirement fund has left it walking into “fan blades” that look like bankruptcy.

"There’s a lot of positive aspects absent of the pension issues that, given the right spreads and the right market context, would certainly make me look towards Dallas as a name to invest in," said Eric Kazatsky, municipal credit analyst at Janney Montgomery Scott. "The pension issue wouldn’t prohibit me from adding it to a portfolio."
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  #368  
Old 12-11-2016, 02:03 PM
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http://www.bondbuyer.com/news/market...1119499-1.html

Quote:
Why Some Investors Are Rethinking State GOs

PHOENIX – Investors should be rethinking what they think they know about states' general obligation debt after a turn for the worse in their credit, some analysts and portfolio managers said.

State credit ratings and outlooks took a beating in 2016, as the three largest rating agencies expressed concern about revenue loss, pension liabilities, and other difficult-to-solve problems that governments are wrestling with in many states. But while the rating agencies continue to consider the sector strong overall and large state GO deals continue to be very well-received by investors that had frequently been starved for supply, there is also a sense among some market participants that the landscape has shifted.

Since the beginning of the third quarter of 2016, Moody's Investors Service upgraded Hawaii to Aa1 from Aa2, but downgraded Alaska to Aa2 from Aa1 and New Mexico to Aa1 with a negative outlook from Aaa. The agency also took a negative review action on Mississippi. All told Moody's has negative outlooks on 11 states.

Since October, S&P Global Ratings has downgraded New Mexico, Illinois, and New Jersey. On Wednesday S&P cut its outlook to negative on a 10th state, Connecticut. Fitch Ratings has three states on negative outlook and a fourth on rating watch negative

While some credit struggles, such as those in Alaska, are very specifically tied to the sluggish energy industry, others are more systemic and affecting many states.

"A few states are struggling to balance their budgets for the current and/or next fiscal year, and some are drawing upon reserves to close budget gaps," Moody's said in a late October report. "State debt levels remain mostly static, while pension liabilities have begun to rise again due to poor investment returns."

Marilyn Cohen, chief executive officer at Los Angeles-based Envision Capital Management, said she believes the rules about state and locality GOs have changed from those she learned earlier in her career.

"There's been a big tectonic shift," Cohen said. "No longer are general obligation bonds the holy grail like we were taught."

Cohen said she believes that many states are going to see their debt ratings continue to slide if they do not alter their behaviors, and that years of deferring dealing with pension costs are going to catch up with more and more GO issuers.

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  #369  
Old 01-10-2017, 06:05 PM
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PROVIDENCE
RHODE ISLAND

http://newbostonpost.com/2017/01/08/...-on-the-brink/

Quote:
Providence On the Brink?


A combination of dwindling revenues and soaring costs has put Rhode Island’s capital city of Providence in such dire financial straits that some local businessmen think bankruptcy is the only way out.
Tax-exempt exempt hospitals and colleges — particularly Brown University — have cut deeply into the city’s tax base. State aid has declined. And the costs of road maintenance and educating more children with special needs continue to rise.
If Providence does nothing, it will face a $10 million deficit in 2019 — a gap equivalent to the salaries and benefits of almost a fourth of the city police force or a 4 percent property tax rate. By 2026, that deficit would balloon to $37 million, according to a report by the National Resource Network issued last year.
Perhaps looming largest are the unfunded pension liabilities for police officers, firemen, and other city workers, which total nearly $2 billion.

“I don’t know how you pay it,” said Ken Block, a local businessman and former GOP candidate for governor.
Last month, Block co-wrote an op-ed in the Providence Journal with Alan Hassenfeld, the former chairman and chief executive officer of toy manufacturer Hasbro, calling for bankruptcy.
Block said the pension debts are hampering the economic recovery of the city. He points to acres of supposedly prime real estate in the middle of Providence that has been vacant for years after the relocation of Interstate 195. Although a new proposal for residential development has been aired, no deal has yet to be inked or ground broken. The potentially high taxes that will be needed to deal with the city’s pension obligations are deterring developers, according to Block.

......
Soon after Block and Hassenfeld’s proposal for bankruptcy went public, WPRI-TV reported that Providence’s new mayor, Jorge Elorza, had spoken with his counterpart in Detroit. Elorza concluded that bankruptcy was not for Providence.
“Bankruptcy is not an option,” Elorza told WPRI. “And the reason for that is bankruptcy is not a solution.”
There is also an important intangible factor to consider: the bad press that might result from having the state’s largest city go financially belly up.
But one former top state official says that’s not always the case. “If it’s planned well and done well, it doesn’t have to be negative,” said Gary Sasse, the former director of administration and revenue under Governor Don Carcieri, a Republican.
Providence has been on the brink before. In 2011 newly elected mayor Angel Taveras said the city was facing the fiscal equivalent of a “Category 5 hurricane” after a probe revealed that it faced a deficit of $110 million — a huge shortfall in what then was an annual budget of about $600 million. (Taveras did not seek re-election in 2014, instead mounting an unsuccessful bid for governor as a Democratic candidate. Elorza is his successor.)
For a time, it seemed as though the city had been able to weather the storm — through a combination of concessions from all three city labor unions, a slew of miscellaneous budget cuts, a tax hike, and contributions from the colleges in the city that are normally exempt from taxes.
But then the city again found itself on the ropes in 2012, when some of the anticipated savings did not materialize. The year ended with the city again narrowly avoiding running out of cash.
The city’s finances have remained on shaky footing since then, plagued by recurring reports of strained finances.
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  #370  
Old 01-11-2017, 05:28 PM
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CALIFORNIA

http://californiapolicycenter.org/ca...vernment-debt/

Quote:
Can California’s Economy Withstand $1.3 Trillion of Government Debt?
January 10, 2017/by Ed Ring
A just released study calculates the total state and local government debt in California as of June 30, 2015, at over $1.3 trillion. Authored by Marc Joffe and Bill Fletcher at the California Policy Center, this updates a similar exercise from three years ago that put the June 30, 2012 total at $1.1 trillion. As a percent of GDP, California’s state and local government debt has held steady at around 54 percent.

For a more detailed analysis of how these debt estimates were calculated, read the studies, but here’s a summary of what California’s governments owe as of 6/30/2015:

(1) Bonds and loans – state, cities, counties, school districts, community colleges, special districts, agencies and other authorities – $426 billion.

(2) Unfunded pension obligations (official estimate) – $258 billion.

(3) Other unfunded post-employment benefits, primarily for retiree health insurance – $148 billion.

This total, $832 billion, ignores the fact that these pension obligations are officially calculated based on a return on investment projection that currently hovers between 7.0% and 7.5%, depending on which pension system you consider. But CalPERS, the largest of California’s roughly 90 major state and local government worker pension funds, has already determined they will have to lower their rate of return projection to 6.5%, an action that when emulated by other pension systems will immediately raise the unfunded calculation from $258 billion to $390 billion.

Our estimate, which is uses the assumptions municipal credit analysts for Moody’s now use when evaluating the credit-worthiness of cities and counties, uses a rate of return projection of 4.4%. That rate is based on the Citigroup Pension Liability Index (CPLI), which is based on high grade corporate bond yields. This rate is far more “risk free” than 6.5%, much less 7.5%, and when you apply this rate to calculate the present value of the future pension obligations facing California’s state and local governments, the unfunded liability soars to $713 billion, bringing the total of bonds, OPEB and unfunded pensions to $1.29 trillion.

This $1.29 trillion does not include deferred maintenance and upgrades to California’s infrastructure, nor does it include California’s share of federal debt. More on that later.
The study:
http://californiapolicycenter.org/ca...-1-3-trillion/

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