Reuters reports on recent data from the U.S. Census Bureau that shows how tax revenues are improving:
State and local governments brought in record first-quarter revenues this year, according to a Census Bureau report released on Tuesday that offered a sign their budget crises may be abating.
Total state and local revenues for the first quarter reached $321 billion, a 4.7 percent rise from the first quarter of 2010 and the highest level on records going back to 1988. It marked “the sixth consecutive quarter of positive year-over-year growth,” the Census said.
Revenues fell from $381 billion in the fourth quarter. Typically, the fourth quarter shows the highest state and local tax revenues of the year.
States’ revenues alone totaled $179 billion, a separate Census report showed. That was 9 percent above the first quarter of 2010 and 13 percent above the first quarter of 2009, when state revenues hit their lowest point in the recession.
More public funding for privately-owned projects?
On Monday I wrote about a proposed Los Angeles stadium project in which the developer had just stiffed the California teachers’ pension fund and now wants public funding to build a stadium. The city is facing a $350 million budget shortfall. Services are being cut. Here is the next installment of the stadium story from Bloomberg:
AEG Worldwide, responding to Los Angeles officials, cut the amount of municipal bonds it wants the city to issue to build a convention center addition and make way for a proposed $1 billion football stadium.
AEG, the Los Angeles-based owner of the Staples Center arena, will ask the city to issue bonds in “the high $200 millions” instead of the $350 million first sought, Chief Executive Officer Tim Leiweke said at a town hall meeting yesterday. AEG would pay for and control two adjacent parking garages it previously wanted the city to finance.
The original $350 million bond proposal, intended to finance the parking structures and convention center addition, was projected to cost Los Angeles about $25 million in annual debt service, Miguel Santana, the city’s administrative officer, said in June 17 letter to Councilman Bill Rosendahl.
California brings it home
California is taking a first step to shedding its reputation for fiscal sloppiness, adopting an on-time budget for the first time in years.
If a compromise is something that no one likes, California has achieved one: Governor Jerry Brown, both political parties and even investors have plenty to complain about in the spending plan.
But the bottom line is the Golden State’s government has a budget with smaller holes than usual in place before its fiscal year starts on Friday. An important bonus is that the state economy is improving — especially for the rich who pay its main source of revenue, personal income taxes.
Bloomberg: California Budget Hinges on $4B New Revenue
Tighter reins on derivatives dealers
In light of tremendous losses from derivatives at several municipalities, the new financial reform law, Dodd-Frank, requires regulators to create new rules for this area. Specifically, a bright line has to be drawn between broker/dealers acting as “advisors” to public entities and then changing hats and handling the same transactions. Or to put it more simply, slick Wall Street bankers cannot act as “counselors” to less knowledgeable public officials and then take the other side of the trade. See the conflict?
The Securities and Exchange Commission will be proposing their rules today. From Reuters (emphasis mine):
[Dodd-Frank] also imposes special requirements on dealers who act as either counterparties or advisers to “special entities,” including municipalities, endowments and pension plans, who may be less sophisticated and at greater risk.
Dealers who advise these types of clients are required by the law to act in their clients’ best interests. Dealers who act as counterparties to the trades, meanwhile, have to make sure the special entities have an independent representative to act in their best interest.
Center on Budget and Policy Priorities: Poorest States Facing Cut in Federal Welfare Funding
Federal Reserve Bank of Boston: Municipal Aid Evaluation and Reform
Transportation Nation: Check Out Minneapolis’ Bike Repair Vending Machines
Wall Street Journal: Meredith Whitney: Beware July 1