Assured should seek a new credit rating

January 23, 2013

Moody’s released it’s long awaited opinion of Assured Guaranty’s creditworthiness on January 17th. Moody’s analysts were not feeling good about the subsidiary that insures the bonds of municipalities. They pushed the rating down three notches from Aa3 to A2. The Bond Buyer noted that “fundamental challenges inherent in the business model make a return to the Aa rating level unlikely.” Zap and you are dead.

Are private toll roads a losing idea?

January 19, 2013

President Obama and others have called to create a “national infrastructure bank” that would leverage the credit backing of the U.S. to fund more privatization of public assets – also known as public-private partnerships. In other words, a federal bank to fund the selling off public assets with loans or guarantees provided at low interest rates. But is control of public assets a successful business model for the investors? Actually, it seems to be a disaster. Let’s look back at private toll roads over the years.

The end of muniland interest-rate swaps for Pennsylvania?

January 18, 2013

Pennsylvania may have suffered more damage from municipalities using interest rate swaps than any other state in America. Many cities and school districts were sold these “hedging” instruments after former governor Ed Rendell pushed legislation allowing their use in 2003. The fallout for the state has been devastating.

Robert Khuzami: Master distracter

January 17, 2013

I blogged recently in support of Columbia Law professor John Coffee’s proposal for the SEC to hire outside expert attorneys to prosecute complex cases. He called the performance of the current SEC enforcement division lackluster, and wrote that it is “an overworked, underfunded agency that is subject to severe resource constraints.”

American cities are bloated with unfunded pension liabilities

January 16, 2013

There have been hundreds of articles written about how a number of U.S. states have unfunded pension liabilities. These massive shortfalls have been researched by numerous groups, and although they differ on the size of the shortfalls, they all agree that pension liabilities are creating a troublesome drag on many state budgets. The Pew Center on the States is one of the first groups to dig down and analyze the condition of city pension funds and the promises made for retiree health benefits. Their new study, A Widening Gap in Cities, reports a mixed picture.

Pennsylvania bets on $70 billion in cash flows

January 15, 2013

Over-selling California’s recovery

January 12, 2013

The Golden State, under the leadership of Governor Jerry Brown, has done a remarkable job of managing its finances through the worst economic period since the Great Depression. Because the state was the epicenter of the housing bust, its fiscal meltdown was one of the most severe in the nation. Although three California cities have declared bankruptcy (with others to possibly come) the state deserves a lot of credit for getting through a very rough period.

Pension reform: Litigate, negotiate or go bankrupt

January 11, 2013

Underfunded public pensions are an enormous problem that states, cities, school districts and other municipal entities will continue to wrestle with in 2013. Many public officials have already taken up the issue of reform, as their budgets are pressured by large required payments to public pension plans.

The big muniland tax exemption dud

January 10, 2013

Alarm bells are ringing across muniland because the discussion about capping the municipal bond tax exemption at 28 percent has surfaced again. Bloomberg reports:

Fitch Ratings to Governor Cuomo: Privatizing LIPA won’t work

January 9, 2013

The worst performing public service in the aftermath of Superstorm Sandy was the Long Island Power Authority. There are a lot of different estimates floating around, including 2.1 million of LIPA’s electricity customers were without power; some for up to 3 weeks. It was a public health disaster of epic proportions as households had to face late October and early November weather with no way to heat their homes or turn on the lights. The latest LIPA fiasco followed years of criticism of the organization.