Moody’s flawed estimate on public pension liabilities

By Cate Long
June 28, 2013

As the debate continues over public pension funding levels, we have this headline from the Financial Times this week: “US States need $980 billion to fill pension gap, says Moody’s.” This is not exactly news. A number of studies, including ones from the Pew Trust and the Public Fund Survey, have identified a massive shortfall for public pension funds. In fact, the Pew Trust said that the shortfall in 2010 was $1.38 trillion, so perhaps we should be applauding state legislatures for improving the gap since then.

The high cost of borrowing for Illinois

By Cate Long
June 27, 2013

In a bond market massacre, liquid products win

By Cate Long
June 26, 2013

It comes as no surprise to those who understand markets that the less liquid a product is, the more its price will decline in a fast market rout. This has happened over the last few days in the municipal bond market.

Free speech or securities fraud?

By Cate Long
June 25, 2013

Mark Funkhouser, the director of the Governing Institute and a former mayor and auditor of Kansas City, took a few swings at the SEC for its securities fraud prosecution of Harrisburg, Pennsylvania. Funkhouser has three concerns with the SEC’s case.

Puerto Rico tweets about bankruptcy

By Cate Long
June 21, 2013

The twitter handle for Puerto Rico’s executive branch is @fortalezapr. Here are some of the tweets from Thursday:

When Detroit goes to bankruptcy court

By Cate Long
June 21, 2013

Google Maps

Detroit Emergency Manager Kevyn Orr predicts that the chances of Detroit entering bankruptcy are about 50/50. But if we consider what the major participants, bondholders, public employees and retirees are likely to do, it’s almost 100 percent certain that Mr. Orr will be entering the federal bankruptcy court house on West Fort Street in Detroit.

Is there such a thing as a ‘fair’ markup in muniland?

By Cate Long
June 20, 2013

It’s well known in muniland that retail investors, who buy smaller lots of bonds than institutional buyers, get hit with high markups. The rule is that dealers must deal “fairly” with investors. Translation: Markups to customers cannot exceed 5 percent. So if a dealer sells a bond worth $5,000, he may not charge the client more than a $250 markup. However, there is no regulatory requirement for the dealer to tell the client how much the bond has been marked up; just that it was marked up. Many believe these differences in bond prices are excessive, but no one has figured out a way to reduce or stop the practice.

A call for monitoring municipal heart beats

By Cate Long
June 18, 2013

New York State’s Comptroller Tom DiNapoli has published the results of his Fiscal Stress Monitoring System. Taxpayers in many communities have been identified as having moderate to significant stress. This is a clarion call to those communities to look more closely at their revenues and expenses before a crisis.

Is the U.S. Treasury bailing out Puerto Rico?

By Cate Long
June 17, 2013

Puerto Rico budget negotiations for fiscal 2014 are in the final stretch for the year’s July 1 start date. A massive $1.5 billion difference between spending and revenues must be closed. Discussion has included expanding the commonwealth’s sales tax to services and transactions between businesses. Local businesses fought hard against this proposal, and eventually, Governor Garcia Padilla switched focus. Reuters explains:

Detroit’s 10 cents-on-the-dollar meme

By Cate Long
June 14, 2013

Detroit’s emergency manager, Kevyn Orr, held his big creditor meeting today and presented his Proposal For Creditors Powerpoint (PDF) for how he would like to treat the city’s liabilities. The mainstream media is running with the story that Orr’s proposal will give creditors 10 cents on the dollar, but the proposal is far from having those terms.