Thumbs down on infrastructure bank
Thumbs down on President Obama’s infrastructure bank
The Bond Buyer is reporting that U.S. transporation groups have given the thumbs down to President Obama’s proposed infrastructure bank. The core repayment mechanism for loans guaranteed by the proposed bank would be user fees and tolls. This contrasts to the current methods, which involve state and local governments borrowing in the municipal market to fund projects or the federal government collecting gasoline taxes to fund highway infrastructure. Given the growing opposition globally to the privatization of public assets, the core purpose of the infrastructure bank is bound to create more unease among public players and citizens. From the Bond Buyer:
American Trucking Associations president Bill Graves was skeptical.
“We’ve long advocated that roads and bridges should be paid for primarily by their users, through the most direct taxes possible: fuel taxes,” he said. “Allowing private capital to take their cut as part of an infrastructure bank, or by taxing other sectors to pay for roads and bridges, takes us further away from this core principle.”
Direct grants to state and local govts most popular part of Obama’s jobs bill
President Obama is struggling to get traction for his jobs bill. From Bloomberg:
A majority of Americans don’t believe President Barack Obama’s $447 billion jobs plan will help lower the unemployment rate, skepticism he must overcome as he presses Congress for action and positions himself for re-election.
By a margin of 51 percent to 40 percent, Americans doubt the package of tax cuts and spending proposals intended to jumpstart job creation that Obama submitted to Congress this week will bring down the 9.1 percent jobless rate. That sentiment undermines one of the core arguments the president is making on the job act’s behalf in a nationwide campaign to build public support.
But there is enthusiasm for direct grants to state and local governments.
The plan’s call for approximately $35 billion in direct aid to state and local governments to stem layoffs of educators and emergency personnel is favored by 71 percent of Americans compared to 27 percent who oppose it. While the proposal was the most popular in the poll, it is also the least likely to pass Congress because Republicans have expressed opposition to new spending.
Huge demand for California municipal notes
From Dow Jones (emphasis mine):
California had no trouble selling $5.4 billion in short-term debt Wednesday, as the muni market’s biggest borrower finished the deal a day ahead of schedule.
The state received around $3.6 billion in orders from individual investors Tuesday and Wednesday, a person familiar with the deal said. Demand was so strong for the offering that California opted to move up an order period for institutional buyers to Wednesday from Thursday, after taking orders from individual investors Tuesday and Wednesday.
Preliminary yields on the revenue-anticipation notes, which mature in May 2012 and June 2012, were 0.38% and 0.42%, respectively, for institutional investors, a term sheet showed.
Those terms are more than a full percentage point lower in yield than when California last sold RANs in November 2010.
The Muniland Absurdity of the Year award goes to the small town of Collingswood, New Jersey for their guarantee of municipal bonds to fund a luxury condominium project that is incomplete and unsold. Moody’s recently gave the town a six-notch downgrade due to concern about the city’s exposure to the weak housing market. From the Courier Post:
Then the market crashed, which nearly stopped construction on the luxury condominium complex. Phase II of the project is under way, though the lowered number of units will now be leased with the option to buy. In addition, Collingswood plans to issue $4.5 million in bond anticipation notes, or BANs, to purchase vacant condos, which it then plans to lease out for revenue.
“It’s very unusual for a municipality to undertake the kind of risk they have taken on in terms of exposure to the real estate market,” said Moody’s analyst Josellyn Yousef, an author of the downgrade report.
+ Good Links +
Reuters Blogs: Why Obama’s school rehab plan may flop
Bankrate.com: Tax-free munis could be capped