Irresponsible debt practices
Politicians start telling the truth
In response to Moody’s placing the state’s Aaa credit rating on review, Tennessee’s News Channel 5 filed this story and video, two very good examples of a state government reacting to a possible downgrade. In the video, municipal bond expert and Metro Councilmember Emily Evans says:
There is no getting away from the fact that we have engaged in debt practices that have been irresponsible and we are going to pay a price and we need to pony up and pay it.
Our massive debt load is a large issue overhanging America and a big bump in the road to economic recovery. Facing the facts and telling the truth are necessary to start the process of getting fiscal houses in order.
Further: Bond Buyer: Debt Fight Sparking Muni Fears
State tax-collection data looks good
From the Rockefeller Institute’s latest report:
Total state tax collections as well as collections from two major sources — taxes on sales and personal income — showed growth for the fifth consecutive quarter, following five straight quarters of decline. Overall state tax revenues in the first quarter of 2011 increased by 9.3 percent from the same quarter of the previous year.
Also from the Tax Foundation: Monday Map: State and Local Sales Tax Rates, 2011
Minnesota gets it done finally
It’s not perfect but it’s finished. Reuters reports:
The Minnesota legislature approved on Wednesday in a marathon special session all the budget bills needed to end a state government shutdown that has lasted nearly three weeks.
Called to a special session on Tuesday afternoon, the state House and Senate approved all 12 bills put to it, including mammoth health and human services and education bills that were approved in the early hours of Wednesday morning.
Further: Citizens for Tax Justice: Wall Street Journal Begins Rewrite of Minnesota History
Harrisburg says no to Pennsylvania
This is a rather surprising story. Muniland has been aware of Harrisburg’s troubles for a long time, and its situation is still a long way from being over. From Bloomberg (emphasis mine):
Harrisburg’s City Council rejected a fiscal recovery plan for Pennsylvania’s capital, risking the loss of state aid and the municipality’s ability to pay bondholders and workers.
The council yesterday voted 4-3 against the blueprint proposed by state consultants. The plan would have required the sale of city assets, a wage freeze and changing workers’ contracts to help pay debt related to a troubled incinerator project. The city owes five times its general-fund budget.
The rejection was a first for the state’s distressed-city program, known as Act 47, which Harrisburg entered in December. The municipality of 49,500 hasn’t found a way to shoulder the debt burden after two years of seeking a solution. It almost defaulted on a general-obligation bond last year and is projected to run out of cash by the end of September.
“I don’t think bondholders will ever be comfortable with the city again in terms of lending us money,” said Gloria Martin-Roberts, the council president, in an interview in the City Hall chamber. “The council made a big mistake tonight.”
Further: AP: Harrisburg mayor urges council’s OK on state plan
@MikeStanton1891: “@JimPethokoukis I’d think a rater’s top priority should be getting it right, not worrying about whose feathers they ruffle.”
@MillerTabak: “we expect the first wave of municipal bond supply to go reasonably well – its usually the constant pounding of “waves” that buckle the “bid”"
@Muni_Mkt_Advis: “Through July 15 YTD first time defaulters have $1.35Bn outstanding v $2.02Bn in 2010; 64 issuers this year v 74 last”
@MillerTabak: “as D.C. continues to negotiate on the debt limit one thing is certain: the rating agencies are “in the room”"
@MillerTabak: “markets these days are trading on sound bites – we suggest you watch the whole movie first before reacting emotionally with your portfolio”
Follow me at @cate_long and muni issues at #muniland
Council of State Governments: CSG Releases Special Capitol Research Policy Series Based on 2011 Book of the States Data
Janney Capital Markets: Municipal Bond Market Notes
U.S. News and World Report: What Happened to the Muni Bond Blowup?
Bronte Capital: Why Meredith Whitney’s concerns do not matter
Washington’s Blog: Sign of the Times: San Francisco Court System “Essentially Out of Business”
Government Technology: Solar Map Shows NYC’s Solar Energy Potential
Government Technology: New App Connects Social Media Users with Municipal Services