California’s housing crisis hit local government revenues

May 6, 2014


California’s real estate market experienced some wild swings that pushed housing prices up faster than anywhere in the nation before plummeting in response to the financial crisis. Local government revenues rode the same boom-bust cycle.

‘Social impact bonds are well-intended, but they bloat bureaucracies’

May 5, 2014

When I first heard about “social impact bonds,” where private investors loan money to pay for social services and then are paid “success fees” for behavioral improvements, I thought they were overly complex and unnecessary. If social programs are not effective, just change them. It is inefficient to inject another layer of bureaucracy and oversight that social impact bonds seem to require.

The push and pull over Puerto Rico’s budget

May 1, 2014

Shrinking muniland

April 29, 2014

Muniland continues to shrink, except for one small corner, seen in the fourth chart below. The charts are from SIFMA’s US Municipal Credit Report, First Quarter 2014:

A macro view of Puerto Rico

April 29, 2014

Puerto Rico Governor Alejandro García Padilla will present his budget tonight. He has promised that it will be balanced, it will not require layoffs of government employees and it will not provide subsidies to Puerto Rico public corporations like PREPA (the Puerto Rico Electric Power Authority) or the highway authority.

Questions over $350 million in Detroit’s pensions

April 28, 2014

Detroit’s emergency manager Kevyn Orr took a victory lap of sorts at a bankruptcy conference in Washington, D.C. The Bond Buyer reported:

Puerto Rico’s electricity monopoly is worth half its debt

April 25, 2014

There is a reason that the uninsured revenue bonds of Puerto Rico’s electricity monopoly, known as “Prepa,” have been trading around 60 cents on the dollar. The utility is only worth about half of its 6.9 billion of long-term debt. Caribbean Business reports:

China takes another step toward municipal borrowing

April 24, 2014

Last January, when I made my predictions for 2014, I wrote:

The biggest muniland story this year will be the development of the Chinese municipal bond market. It’s not often that you get to watch a government launch a bond market. And China’s will be massive. From the South China Morning Post:

The fragile tax structure in Puerto Rico

April 23, 2014

The Puerto Rico government set a high hurdle for itself last year when it ramped up its 2014 tax revenue projection to $9.5 billion from the $8.3 billion collected in 2013. It did this by expanding the tax base for the sales and use tax (SUT) by approximately 26 percent, increasing corporate income tax rates and reversing reductions planned for the corporate excise tax (Act 154) paid by multinationals operating on the island.

Pennsylvania should rethink tax on natural gas

April 22, 2014

In 2012 I wrote about the foolishness of Pennsylvania adopting an “impact fee” for companies drilling for natural gas in the Marcellus shale formation while it was being debated in the Pennsylvania General Assembly. Energy-producing states generally charge producers a “severance tax,” which is levied on the physical production of a well.