MuniLand

The Marlins’ new home, courtesy of taxpayers

Cate Long

Apr 4, 2012 17:57 EDT

Kevin Grey of Reuters wrote a delightful piece describing the opening of the the new home of the Miami Marlins. The stadium has all the touristy bells and whistles that you would expect from a state that brought us Walt Disney World, Universal Studios and Sea World:

When baseball’s Opening Day kicks off next week, the Miami Marlins will inaugurate a new $515 million ballpark built with all the trappings of South Florida – two enormous fish tanks, palm trees and a kitschy (of course) home run celebration display.

With all its fancy trappings, the Marlins’ new stadium could very well set the national standard for family-friendly sports destinations. But after the opening-day fireworks dissipate, it will become clear that the ballpark sets a low bar for public diligence and oversight and that it could result in an SEC sanction (or worse) for some local public officials.

Officials at the county and city level agreed to pay for 80 percent of the new stadium without holding a public referendum or examining the financial condition of the team. The Miami Herald reported as much last December (emphasis mine):

Long before the deal to build the Marlins a new ballpark in Little Havana was cemented with a county commission vote in March 2009, the deal was ridiculed as lopsided, with critics complaining that elected leaders kowtowed to a wealthy ballclub owner threatening to leave town. In the end, the Marlins got their way.

The 37,000-seat, retractable-roof stadium ended up being a top-heavy deal for the county, put on the hook for $347 million in construction bonds, a $35 million loan to the Marlins, and $12 million for incidentals such as road repairs. The city’s end of the deal is $94 million worth of parking garages, $13 million toward construction, and $12 million for other improvements.

The county will have to dish out more than $2 billion over 40 years to pay back the principal and interest on the bonds, which were sold under poor market conditions.

The ballclub – which receives virtually all revenues, from concessions to ticket sales for everything from ballgames to soccer matches to concerts – was required only to spend $120 million at the end of construction, on top of repaying the loan to the county in $2 million yearly installments that would serve as rent.

Attention public officials: Giving away hundreds of millions of dollars of taxpayer money to wealthy sports owners is not acting in the best interests of the public. According to Moody’s, Miami-Dade County has “ongoing depressed economic conditions.” Although the stadium is sure to provide many families with some good times, it is going to require a lot of other families to pay taxes to pay off its bonds.

Muniland’s most active states

Cate Long

Jan 10, 2012 10:41 EST

In the municipal bond market, one of the most insightful ways to examine a state is to look at how actively its bonds trade. Broker-dealers make money by trading, so naturally they go where the action is and commit market-making resources to those states. It’s generally true that the most populous states are the ones with the most traded bonds, but if we map the wealth of a state’s citizens to how often that state’s bonds trade, we get some interesting results. For example, New Jersey, which has only 2.8 percent of the national population but a high proportion of its wealthy citizens, might have the highest number of municipal bond owners as a percentage of state population.

The municipal bond market does not trade on an exchange but rather on “alternative trading systems” (ATS). These are systems where dealers post inventories of bonds to be aggregated. The largest of the retail ATS is Bonddesk, which does some excellent data analysis for both the municipal and corporate bond markets.

From Bonddesk’s December Transparency Report I pulled the data for these charts showing the seven most actively traded states’ bonds. Bonddesk uses “investor buys” data, which represents trades that end up in a retail investor’s account. In the bond markets there are often many trades between broker-dealers before the securities land in an investor’s account, so Bonddesk scrubs the data to show the real level of investor demand.

California is the largest state by wealth, population and municipal bond issuance. Although it represents about 12 percent of the U.S. population, it dominates with 30 percent of muniland trades. Even with its substantial demand, the state still has somewhat higher yields, as seen below. All seven states are rated AA, but Illinois and California trade with higher yields given their weaker fiscal position.

The forgotten American homeless

Cate Long

Nov 28, 2011 18:48 EST

CBS’s 60 Minutes showed a heartbreaking story last night that described several homeless families with children in Florida. The segment, entitled “Hard Times Generation: Families living in cars” (embedded above), detailed families living at the absolute edge of economic survival as they slept in their cars, in hotel rooms and with neighbors. In a deflating economy with few available jobs, they are the invisible underbelly. Big kudos to 60 Minutes for bringing their plight to our attention.

In 1933, a freshly inaugurated Franklin D. Roosevelt addressed a paralyzed nation with the following words:

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for.

By global standards, America is very rich, but we need to ask if our priorities are in the right place. In June 2011 the Florida Council on Homelessness issued their annual report to the governor and legislature. They reported (page 3):

Floridians face a short-term crisis today, and need our help now.

*49,117 school-aged children were identified as homeless in the 2009-2010 school year in our state; this indicates a 19% increase from 2008-2009.

*Florida has the third highest number of homeless persons by state in our country, with over 58,000 persons homeless on any given day

*12,240 military veterans were homeless in Florida in 2009, ranking Florida second in the country for the number of homeless veterans.

Generally, support for the homeless is funded at the local and state levels. These funds are distributed as grants to non-profit organizations who provide direct services. Funding has always lagged need, especially as the economy has continued to stagnate. The Florida Council on Homelessness reported that a total of $300 million was spent in 2010, with about $85 million of that coming from federal grants. But the state of Florida only allocated $8.4 million to staff the Department of Children and Families Homelessness program (page 22) and make pass-through grants to local organizations.

New leadership for muniland’s regulator

Cate Long

Aug 16, 2011 15:25 EDT

New chair for muniland’s regulator

New leadership has been announced at the Municipal Securities Rulemaking Board, muniland’s primary regulator. Alan Polsky of Dougherty & Co., the incoming MSRB chairman, has spent much of his career working towards increased transparency in the muni secondary market where bonds trade after issuance. This is great news. From the Bond Buyer:

Alan D. Polsky, senior vice president of Minneapolis-based Dougherty & Co. LLC and former chair of the National Federation of Municipal Analysts, will be the next chairman of the Municipal Securities Rulemaking Board beginning Oct. 1, according to market sources.

Polsky spent a great deal of time trying to improve secondary market disclosure when he chaired the NFMA in 2001. During that year, the NFMA issued several “best practice” disclosure documents recommending how issuers, borrowers, and other market participants could improve disclosure in various sectors of the market. Polsky also was a member of the Muni Council, a group of about 20 muni market group representatives dedicated to improving secondary market disclosure. The group was responsible for the creation of the Central Post Office facility which temporarily served as a one-stop place for issuers to file their disclosure documents.

Joint Economic Committee

I wasn’t aware of this great resource on the economic conditions of the states and nation from the Joint Economic Committee of the U.S. Congress. The site offers an especially good section on metrics like unemployment levels, earnings and housing stats, and much more. As an example here is a JEC report on Colorado.

USA Today also has an excellent graphic showing job-growth forecasts by state.

State unemployment funds still underwater

Muni sweeps: How much job creation?

Cate Long

May 27, 2011 11:01 EDT

Job creation or program pass-through?

The Congressional Budget Office has published a new report entitled “Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from January 2011 Through March 2011.” It makes some large claims about how many jobs stimulus funds have created:

Various recipients of ARRA funds (most recipients of grants and loans, contractors, and subcontractors) are required to report, after the end of each calendar quarter, the number of jobs funded through ARRA. The law also requires CBO to comment on those reported numbers.

During the first quarter of 2011, recipients reported, ARRA funded more than 571,000 full-time-equivalent (FTE) jobs.

The CBO figure of 571,000 full-time-equivalent (FTE) jobs is slightly higher than the total non-farm jobs reported by the Bureau of Labor Statistics of 524,000 (see above chart). Something doesn’t add up!

Note how California distributed their Recovery Act funds. Many of the dollars were just “passed through” to support Medicaid and unemployment insurance in California. I’m not sure how to account for job creation for passing through funds.

‘Enormous Buying Opportunity’

Who were buying the municipal bonds that sold off in the winter panic? Mainly smart investment advisers. Heartland.org has an interview with one of them — Rick Ashburn, chief investment officer for Creekside Partners LLC, in Lafayette, California:

Open Palm Bay UPDATED

Cate Long

May 20, 2011 16:47 EDT

I’m very happy to present a guest post from Mr. Lee Feldman, the City Manager of Palm Bay, Florida. City Manager Feldman is a superstar of muniland transparency. Read how he and his team developed a fully open financial-reporting system to engage and empower the citizens of Palm Bay.  [UPDATE: On Tuesday, it was announced that Mr. Feldman would soon leave his position in Palm Bay to take over as city manager of Ft. Lauderdale, Florida.]

Open.PalmBayFlorida.org – Financial Transparency at the Public’s Fingertips

The City of Palm Bay, Florida, felt our neighbors deserved to have a simple way to see how their tax dollars were spent. In December 2009 the City created Open Palm Bay, an online interactive database that allows them to view and search the City’s financial information at any time.

The intuitive database enables anyone to follow their money right down to the penny. Palm Bay believes that this easy-to-use website is the first of its kind in Florida, setting the benchmark for financial transparency in local government.

The City proactively decided to create this website in anticipation of the passage of a proposed bill in the Florida state legislature. Although the legislation was ultimately not approved, Palm Bay officials thought the concept was a worthy initiative to pursue and they continued forward with the effort.

The information within the database is presented in three separate areas: expenditures, salaries and revenue. The site also provides easy access to the City’s Comprehensive Annual Financial Report (CAFR). All financial information is updated quarterly. Visitors to the site are given several different options to sort or filter the available information for online viewing, or they may export reports to several different file formats for offline viewing. The site includes a glossary of terms used in the financial data and a Frequently Asked Questions section.

Let’s give Meredith some credit

Cate Long

May 6, 2011 09:28 EDT

Everybody beats up on Meredith Whitney for her muniland panic call.

Yesterday she doubled down on her prediction of “hundreds of billions of dollars’ worth” of municipal-bond defaults.

Whitney was speaking on a panel, Reading the Tea Leaves: What Lies Ahead for Financial Markets?, at the Milken Global Conference.

I want to give Whitney some credit.

Whitney has a very good macro view of the U.S. economy. At the Milken conference she said that housing has contracted for four consecutive years. States have spent at a 30% higher CAGR rate than consumers.

She says that 12% of the U.S. GDP comes from state and local government expenditures.

Muni sweeps: Arbor Day

Cate Long

Apr 29, 2011 09:43 EDT

Among other things today is National Arbor Day.

It’s time to be thankful for our wonderful trees. Some municipalities make the preservation and addition of trees a centerpiece of town planning.

Consider planting a tree this weekend or donating to local group who is beautifying your community.

Stranded assets

There are 67 miles of toll roads in Orange County, California that drivers don’t seem to want to drive on much.

Unfortunately $2 billion dollars of municipal bonds were sold to finance these roads.

Transaction revenue (cars using the roads) peaked in 2007 and has dipped since then.