MuniLand

A month ago Marianne Russ of Marketplace Money did this story about the residents of nearly bankrupt Stockton, California. Generally they are committed to their city, but many say they may move away regardless.

Good Links

New York Fed: Fiscal drag from the state and local sector?

Bloomberg: Tax growth slows for states and cities, U.S. Census says

The Atlantic: The 7 biggest cities to file for bankruptcy

Reason: What happened in Stockton?

Self-Evident: A defense of the tax exemption for municipal bonds

Bloomberg: No need for tax-exempt debt as colleges avoid IRS

WSJ: NY Thruway Authority easily sells bonds after ratings warning

Citizensvoice.com: Scranton mayor slashes wages of city workers

@Twitter Talk

RT @Slate: Finland, South Korea & Canada are really good at teaching science. Maybe we should copy some of their ideas? slate.me/Lguu8k

— Jane Roh (@Jane_Roh) June 28, 2012

27 of 51 biggest metro areas, city center grew faster than suburbs in 2011. Previous decade:only 5. on.wsj.com/NPsB5yvia@conordougherty

— David Wessel (@davidmwessel) June 28, 2012

Investors set to receive $142 billion in maturing and refunded bonds in the 3 months through July (historic amount) bloom.bg/MAlTPp

— Bond Girl (@munilass) June 28, 2012

Editorial: Harrisburg bankruptcy ban: Extending deadline would be a win for creditors, not residents bit.ly/M7T6V2

The Government Accounting Standards Board voted Monday to toughen pension reporting standards, a slight accounting change that has significant repercussions for muniland. Reuters’ Lisa Lambert reports how data that was formerly buried in the footnotes of financial statements will have to be made more prominent:

State and local governments will have to post their net pension liability – the difference between the projected benefit payments and the assets set aside to cover those payments – up front on financial statements, under the changes.

“The pension liability will appear on the face of the financial statements for the first time. That’s going to create the appearance of a weaker financial position,” said Robert H. Attmore, GASB chairman, who said the board intended to “peel back the veil so things are more transparent and there’s more information for policy makers.”

The number of millionaires ebbs and flows with the economic cycle (via the Tax Foundation).

Good Links

The Atlantic: America’s most important cities: 1978 versus 2010

Gov Tech: States seek Medicare data to keep fraudulent providers out of Medicaid

Reuters: Stockton, California to file for bankruptcy

WSJ: The Stockton bankruptcy: Should investors be worried?

NYT: High-income enclave in Georgia privatizes all services except fire and cops

Many local governments thrived on the increased revenues from property taxes on new homes through 2007. It’s been downhill ever since, creating a real drag on local budgets.

Good Links

Bloomberg: States lacking income tax get no boost in growth

WSJ: State and local fiscal burdens drag on economic recovery

Reuters: New rules may make public pensions appear weaker

Bloomberg: Public pensions face wider deficits under new rules

Bond Buyer: SEC approves new rules for muni-bond broker’s broker

Bond Buyer: Despite fears, many muni credits are stable to better

NYT: “Double-barreled” bonds

Post Standard: Mayor talks nonprofit Syracuse University into making payments for city services

@Twitter Talk

63% say US society fair and decent… 26% say unfair and discriminatory… tinyurl.com/7hobxap

Matt Taibbi, a contributing editor at Rolling Stone, talks to radio personality Don Imus about municipal bid-rigging.

Cheers to Matt Taibbi for “The Scam Wall Street Learned from the Mafia,” his detailed Rolling Stone article about a municipal bid-rigging scandal that has already resulted in fines totaling nearly $700 million as well as 15 convictions for antitrust violations and wire fraud. A muniland bombshell that first became public over five years ago, the scheme reached its culmination in May when three former executives at GE Capital, General Electric’s finance arm, were convicted on charges of colluding to rig the public bids on muni bonds.

Taibbi laid out the larger picture of the scandal with his characteristic flair:

America has lined up in support of Karen Huff Klein, a 68-year-old grandmother in Greece, New York, who was tormented by four teenagers while working as a bus monitor. Her ordeal was brought to the public’s attention with three postings on YouTube by CapitalTrigga that stated:

Note: I had nothing to do with this, I saw the video on Facebook and uploaded it here to show the world how messed up these kids are.

The public response has been deafening. YouTube is filling up with responses to the original bullying videos, and these reactions are nearly universal in condemnation of the teens. Meanwhile, an independent site that was originally established to raise $5,000 for a vacation for the victim has already raised over $533,000. More than 24,000 people want to make the situation right for Klein and have donated to the fund. America is pouring out its heart to this woman. Although public employees are increasingly being vilified in this country, Americans are rallying to the support of one who has been so egregiously wronged.

Federal Reserve reported public #pension assets ↑ to $3.1 trillion as of 3/31/12 — highest point since 08 market drop twitter.com/PensionDialog/…

— Pension Dialog (@PensionDialog) June 21, 2012

Good Links

Reuters: Public pensions to give “clearer picture” of finances

Reuters: Moody’s downgrades $64 billion of U.S. muni debt

Reuters: U.S. high-yield muni buyers lose safeguards

AP: Auditor: Total Illinois deficit nears $44 billion

Illinois Policy Institute: $203 billion and counting: Total debt for state and local retirement benefits in Illinois

The Republic: Glendale, Arizona considers pledging city hall and police station as collateral for sports-related debt

Interest-rate risk is the major challenge for fixed-income investors, especially in this period of exceptionally low interest rates. To help walk readers through the issue, I welcome this post from Douglas J. Peebles and Wayne Godlin, AllianceBernstein’s chief investment officer and head of Fixed Income and senior portfolio manager of Fixed Income, respectively.

Don’t Be Caught Long: Strategies to Curb Interest-Rate Risk in the Municipal Market

Today, a municipal portfolio full of bonds with maturities in the 20-to-30-year range is exposed to the high risk of rising interest rates. Now may be the right time to shorten your duration and lower your credit quality.

City Controller Alan Butkovitz released an audit of Philadelphia’s Video Surveillance program that found the city spent $13.9 million for surveillance cameras but that only 102 of the 216 installed cameras were functioning properly. This has resulted in a cost to the city of $136,000 per operating camera. ”The cost is exceedingly alarming, and outright excessive – especially when $13.9 million is equivalent to the cost of putting 200 new police recruits on our streets,” said Butkovitz.

Good Links

USA Today: State, local spending remains at a restrained level

WSJ: Food-stamp fiasco

Rolling Stone: The scam Wall Street learned from the mafia

Bond Buyer: Variable and auction-rate securities dwindle

Bloomberg: Impoverished city learns about the risks of subsidizing soccer

WPRI.com: Long: Woonsocket “is in a death spiral” that’s not ALEC’s fault

Reuters: Grim prospects for Stockton, California as bankruptcy looms

Bloomberg: Stockton slide to bankruptcy measured in more funerals

@Twitter Talk

Fed data: household debt still approx 115% of disposable income (2011 data); deleveraging to continue for years; consumers not consuming

The latest item atop Congress’s list of stuff to haggle over is the transportation bill, legislation the Washington Post calls the “best bet for passage of a major jobs bill this year.” The threat of the expiration of authority to spend money from the Highway Trust Fund at the end of the month is motivating House and Senate leaders to reach a compromise in the coming days. Although there are certainly investments to be made in our transportation infrastructure that would contribute to America’s economic competitiveness, it’s a shame that our energy infrastructure has received such scant attention from lawmakers.

The national electrical grid is as important for economic growth, if not more so, than the national highway system or the privately owned router system that supports the Internet. As part of the American Recovery and Reinvestment Act, the Department of Energy funded several demonstration programs for increasing electrical system integration and reducing peak loads on the electrical grid. These efforts are commonly known as the “smart grid,” and this is where Congress needs to turn its attention.

Fort Collins, Colorado was chosen for a public-private smart grid project supported with DOE funding. Called FortZED, the project integrates five public and private institutions into a web that shares excess electrical generation during peak load periods. Some facilities, like the University of Colorado campus, have enormous backup diesel generators that can be powered up to add electricity to the system during times of peak demand. A local brewery and city facility have large solar-cell arrays that can also feed electricity back into the system.