Muni sweeps: How the raters see muniland

June 1, 2011

Rating agency’s view on mass defaults

Given all the controversy about “mass defaults” for muniland, you might wonder what conclusions the rating agencies are drawing about the stability of municipal finances. Daniel Berger of Thomson Reuters Municipal Market Data, one of the market’s best municipal analysts, did a quick round-up of the agencies’ recent reviews of state debt loads, with a special emphasis on unfunded pension liabilities. Here are the CliffsNotes from Daniel’s report with links to the raters’ reports.

Standard & Poor’s: Outlook: U.S. State And Local Governments Must Navigate Turbulent Conditions To Maintain Credit Stability

S&P does not envision “any sort of notable increase in defaults among our rated issuers.”

Moody’s: Combining Debt and Pension Liabilities of U.S. States Enhances Comparability

This report concludes that the pressure some US states face to fund pensions for public employees could hurt their credit ratings.

Fitch: “Enhancing the Analysis of U.S. State and Local Government Pension Obligations

Fitch believes that the vast majority of governments will withstand the substantial pressures they face from their pension obligations… To the extent that there is negative rating action, it is more likely to be for local governments than for state governments, because labor costs represent a larger share of local governments’ budgets.

Local tax breaks are examined

All across America there are a lot of private parties drinking from the public trough. The line between “public good” and “private profit” has become pretty blurry. As muniland faces more brutal fiscal conditions, I think we will see more reporting like this excellent piece in The Seattle Times:

You probably didn’t know your taxes are subsidizing new one-bedroom apartments that rent for $1,295 in one of Seattle’s hot spots, Lower Queen Anne.

Under an obscure city program, the developer building the apartments across the street from Seattle Center will get a 12-year property-tax break of $5.9 million.

In return, Bruce Knoblock will set aside 55 of his 275 apartments — not for low-income tenants but for renters earning slightly less than Seattle’s median income.

In just the past three years, for-profit apartment developers, often building in vogue neighborhoods, have received nearly $100 million in tax breaks.

The flow reverses

The Sustainable Cities Collective asks, “Is it over for suburban corporate campuses?

[Eddie] Baeb’s article also points out that central city locations help recruiting efforts not only with young, urban professionals but also with workers throughout the region:  “For most people in greater Chicago, it’s easier to commute downtown than to a suburb on the other side of the metropolitan area.”

That, of course, is a textbook illustration of what transportation researchers call “regional (or “destination”) accessibility,” the single most powerful indicator among land-use factors of how far people will drive, on average, over the course of a year.  Central locations both facilitate transit access and reduce driving distances.

NJ’s Governor takes state helicopter to son’s game

Oh mercy! You can’t preach fiscal harshness to the people of your state then take a state-owned helicopter to your son’s baseball game:

Gov. Chris Christie arrived at his son’s baseball game this afternoon aboard a State Police helicopter.

Right before the lineup cards were being exchanged on the field, a noise from above distracted the spectators as the 55-foot long helicopter buzzed over trees in left field, circled the outfield and landed in an adjacent football field. Christie disembarked from the helicopter and got into a black car with tinted windows that drove him about a 100 yards to the baseball field.

No offense, Governor, but you really should try walking a little more. I’m sure your doctor would be in agreement on the positive health benefits of exercise. So next time skip the state car and walk the 100 yards. Patch, which is said to have broken the story first, has pictures.

Mini sweeps:

Bloomberg: To save, states try to merge tiny towns

Bond Buyer: District of Columbia in Turmoil Over Muni Tax Vote

Bloomberg:  California Bill Bids Online Retailers to Collect Sales Tax

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