Puerto Rico’s solvency may hang on a potentially unconstitutional corporate tax

February 2, 2014

Last June, I asked if the U.S. Treasury was bailing out Puerto Rico with an unusual interpretation of the federal tax code. This waiver or exemption allowed U.S. multinationals operating in Puerto Rico to credit taxes that were paid to Puerto Rico on their federal tax bill. The tax, referred to as Act 154, was passed by the Puerto Rico legislature in 2011. It brought in approximately $1.6 billion in 2011.

Muniland’s marijuana math

January 31, 2014

Source: ABC 7 News Denver

The sale of marijuana for recreational use was made legal in Colorado starting January 1, and it appears to be a big success. Product and tax revenue numbers are not yet available, but some have predicted that Colorado will bring in an estimated $40 million in tax revenue this year from marijuana sales. USA Today reported anticipated tax revenues of $1.9 billion in five years for Washington State, which legalized recreational use in November:

Chicago firemen pensions is a 90 year-old problem

January 29, 2014

Source: WBEZ.org

Chicago is drowning in unfunded pension liabilities. Last month, Illinois passed pension reform for state pensions, but did not take up Chicago’s pensions. Illinois governor Pat Quinn says the city’s pension will be taken up in the spring. Chicago’s pensions are deeply underfunded and have unique problems. The Chicago Tribune wrote:

The Brent Spence Bridge financing puzzle

January 29, 2014

The claim is often made that there are substantial savings for taxpayers when a public private partnership (P3) is used to build infrastructure. This claim is rarely backed with economic analysis. In fact, after a project like the Chicago parking meter deal is in place, it is often discovered that the project is bad economics for taxpayers.

An index maker’s view of muniland

January 27, 2014

J.R. Rieger, Vice President of Fixed Income Indices at S&P Dow Jones Indices, hosted a webinar about the data he uses to understand muniland and the performance of munis versus corporate bonds. Here is some of his team’s analysis.

Negative signals from Puerto Rico

January 27, 2014

The condition of Puerto Rico’s economy is a key concern for bond investors and rating agencies. Although its tax revenues have risen sharply as the government has increased various taxes, the economy has been contracting. From a recent Morningstar report:

The Senate’s latest twist: The American Infrastructure Fund

January 27, 2014

A bipartisan group of eleven U.S. Senators, led by Colorado Democrat Michael Bennet, has filed legislation to create the American Infrastructure Fund. Senate bill 1957 would:

Will Puerto Rico sell general obligation bonds?

January 23, 2014

The New York Times reported that Morgan Stanley is shopping a potential $2 billion general obligation bond deal for Puerto Rico. Bloomberg followed up with a story that had a few more details about the offering that Puerto Rico supposedly has not authorized. According to Bloomberg the possible deal terms are:

College football realignment spurs stadium upgrades

January 22, 2014

College football stadiums are undergoing upgrades and renovations. Wells Fargo senior analyst Randy Gerardes writes that this is a response to recent conference realignments and increased media revenues:

The Port Authority’s big debt sinkhole

January 21, 2014

Bloomberg has a story about The Port Authority of New York and New Jersey bringing a $1 billion taxable bond offering to market without citing the George Washington Bridge closure problem in the risk section. I think whatever involvement New Jersey Governor Chris Christie or his staff had in closing the bridge has no bearing on the ability of the Port Authority to repay these new bonds. Governors come and go, but this momentous pile of debt remains outstanding.