Muni sweeps: Arbor Day

April 29, 2011

Among other things today is National Arbor Day.

It’s time to be thankful for our wonderful trees. Some municipalities make the preservation and addition of trees a centerpiece of town planning.

Consider planting a tree this weekend or donating to local group who is beautifying your community.

Stranded assets

There are 67 miles of toll roads in Orange County, California that drivers don’t seem to want to drive on much.

Unfortunately $2 billion dollars of municipal bonds were sold to finance these roads.

Transaction revenue (cars using the roads) peaked in 2007 and has dipped since then.

So now the San Joaquin Hills Transportation Corridor Agency which owns the roads is negotiating with bond holders, mainly municipal bond funds, to stretch out the maturity of the bonds to gain more time to pay them off. But no change in the interest rate on the bonds.

From the Bond Buyer:

Todd Spence, an analyst with Standard & Poor’s, said the debt restructuring is unsurprising and could potentially weaken the credit.

“Operating revenues have been less than debt service, so it is not a trend they could continue,” Spence said in a phone interview. “There are positives and negatives to what they have done.”

Spence said restructuring and changing maturities has some negative connotations but the end result is going to offer some relief in the early years. He added that the TCA will have to hire a toll consultant every year to maximize revenues as part of the new agreement, compared to doing so only when they missed the rate covenants.

Following the restructuring announcement, Standard & Poor’s put San Joaquin Hills’ BB-minus rating on negative credit watch.

Muni pros are feeling ok

It’s really hard to convey how much poor sentiment Meredith Whitney has created among muniland professionals.

Basically everyone I talk to wonders what is really in her famous 600 page muni report that kicked off a market meltdown. And no one really knows. Things are tough but not nearing collapse.

RBC Capital Markets decided to take a survey at a recent muniland event to gauge industry sentiment. They found:

Municipal finance professionals remain fairly optimistic about the prospects for state and local government revenues to return to pre-crisis levels in the near term, with just over half (51 percent) expecting revenues to normalize in the next two to three years.

This is further supported by 63 percent of respondents who believe state and local government officials are taking the steps necessary to address their budget issues.

“We see government officials making the difficult decisions necessary to address strained budgets and believe that the state of the industry will continue to normalize over time,” said Chris Hamel, head of Municipal Finance for RBC Capital Markets.
Stabilization is a sentiment supported by the 77 percent of respondents who expect market demand to be sufficient when issuance normalizes.

Muniland pros may be just talking their book but yields on muni bonds currently seem to support their view. We’ll keep watching and look forward to the next RBC sentiment survey.

Less prison for California

From Bloomberg:

California Governor Jerry Brown scuttled plans to build a $356 million new death row at San Quentin prison that some lawmakers derided as a “Cadillac” because of its cost.

Brown said it would be “unconscionable” to go ahead with the complex north of San Francisco, planned since 2003, when the state is cutting jobs and services to bridge a deficit.

Transparency wins

Here is a fantastic effort from Palm Bay, Florida  making all financial information of the city and municipal pension funds available for review. Kudos!

Mini sweeps:

Ipreo: Muni deal calendar of week ending May 2, 2011

Reuters: State pension fund assets down $643.1 billion in 2009

SBFinance: Pension underfunding problem solved

Plant Money: Studies: Rich Don’t Flee High-Tax States

Marketwatch: ETFs, mutual fund fees top SEC priorities

Bond Buyer: House Hearing Will Cover Transparency of Pension Plans

New York State Governor: Governor Cuomo Requests Audit of Long Island Power Authority

Reuters: For next 60 days — and for $25,000 — Pa. city renames self

One comment

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Gas prices have something (a lot) to do with ‘discretionary’ expenses: heim/index.aspx

According to unleaded starts @ $4.09 in Anaheim.

Mebbe Orange County can raise a muni issue to build a streetcar system.

Great blog, btw!

Posted by econundertow | Report as abusive