By Karen Pierog
(Reuters) – A growing number of American cities are choosing to fund essential services like public safety and garbage collection over making payments on their outstanding debt, as rising costs and falling revenue deplete their budgets.
So far, the bond defaults are not roiling the $3.7 trillion municipal market because insurance companies are stepping in to make payments to bond holders in some cases. But defaults on insured bonds are putting pressure on these insurers, which never fully recovered from the last decade’s financial crisis.
DETROIT (Reuters) – Plodding progress in dealing with Detroit’s crisis led Michigan Governor Rick Snyder on Tuesday to push for a consent agreement to save the city from a state takeover – an effort so far rejected by the city’s mayor.
The Republican governor said he made the move because a workable plan from city officials was not forthcoming.
DETROIT (Reuters) – Governor Rick Snyder continued his push for a consent agreement to save Detroit from the financial abyss, presenting city officials and a state-appointed review board with a draft on Tuesday.
The document would keep the mayor and city council in power but create a nine-member financial advisory board that would have considerable oversight of Detroit’s finances, including approval of its budget and debt structures.
SPRINGFIELD, Illinois (Reuters) – Illinois Governor Pat Quinn will call for cuts to escalating pension and Medicaid costs in his budget address on Wednesday to stop the two programs From devouring more of the cash-strapped state’s general funds budget, top officials in his office said on Tuesday.
The state’s fiscal 2013 pension payment will hit nearly $5.25 billion or 15 percent of projected revenue. That is more than three times the $1.7 billion the state budgeted in fiscal 2008, when pensions accounted for only 6 percent of revenue.
Feb 10 (Reuters) – Jefferson County, Alabama, avoided
a downgrade of its already low-rated sewer system debt after
principal and interest payments due Feb. 1 were made, Standard &
Poor’s Ratings Services said on Friday.
S&P affirmed the debt’s C rating with a negative outlook,
removed it from CreditWatch with negative implications and
warned the rating could still fall to D if a debt service
payment is missed. D is the rating agency’s lowest speculative
grade rating, signifying default.
Feb 7 (Reuters) – Ohio Governor John Kasich said
on Tuesday he is still looking to the Ohio Turnpike
for a way to raise money to fund highway projects without giving
up control of the toll road.
“I have not made a decision yet on what I want to do with
this turnpike,” the Republican governor said in his state of the
Feb 6 (Reuters) – There were more upgrades of U.S.
municipal credits than downgrades in 2011, although rating cuts
increased during the last two quarters of the year, Standard &
Poor’s Ratings Services said on Monday.
S&P said some muni sectors could draw more downgrades this
year, adding that financial management will be a key determinant
for rating direction.
DETROIT (Reuters) – Detroit Mayor Dave Bing gained momentum in his fight to convince state officials that the financially crippled city does not need a state takeover as he reached a tentative cost-cutting deal with about half the city’s 48 unions.
Bing, in a statement issued on Thursday, hailed the tentative agreement forged Wednesday night with AFSCME, the public-sector union, as “the first meaningful step in achieving the necessary concessions and structural changes to resolve the city’s financial crisis.” The deal, which is subject to ratification by union members, would impact about 3,200 workers, or a third of the city’s headcount.
By Karen Pierog
(Reuters) – Illinois Governor Pat Quinn on Wednesday said the state must make changes to its pension system and to Medicaid this year, while also insisting that spending cuts alone will not fix the state’s budget.
A financial watchdog group recently forecast that Illinois’ pile of unpaid bills will quadruple to $35 billion in five years, while Moody’s Investors Service cited inaction on pensions and unpaid bills last month when it cut the state’s credit rating to A2, the lowest rating level among the states it rates.
CHICAGO (Reuters) – Illinois could see its pile of overdue bills climb to an unprecedented $35 billion in five years if the state fails to rein in pension and other costs, a watchdog group said in a report released on Monday.
“Failure to address unsustainable trends in the state’s pension and Medicaid systems will only result in financial disaster for the state of Illinois,” said Laurence Msall, president of the Civic Federation, the financial government watchdog group that produced the report. Msall said the governor and General Assembly need to act now.