Municipals are a small part of the American Jobs Act

By Cate Long
September 15, 2011

President Obama held a ceremony on Monday in the Rose Garden, complete with a backdrop of teachers and law enforcement officers, to promote his American Jobs Act. The President has insisted that his proposal would be fully paid for by tax increases on the wealthy. What was less reported was that the $447 billion of proposed tax increases, Section 401 in the legislation (page 134), would not occur until 2013 and would stretch over 10 years. So under the President’s proposal there would need to be tax increases of approximately $47 billion a year from 2013 through 2023.

Obama proposals could shift municipal bond buyers

By Cate Long
September 13, 2011

Obama would pay for jobs bill with 2013 muniland tax changes

The White House released draft legislation yesterday for the $447 billion American Jobs Act of 2011 which outlined proposed changes in the tax code to offset its major component — the extension of the payroll-tax reduction. The President’s proposal would raise income taxes on the wealthy by limiting income that can be excluded from taxation, mainly by limiting this exclusion for interest earned on municipal bonds.

Must infrastructure spending shrink along with muniland?

By Cate Long
September 6, 2011

Paul Krugman at the New York Times has a good graph that shows a substantial withdrawal of government demand from the economy. He attributed this to the decline of federal government stimulus to state and local governments as the American Recovery and Reinvestment Act winds down. There is also another factor that is reducing government demand: state and local governments are issuing less debt, which in turn creates fewer building projects and construction jobs.

Local governments’ tough choices between payrolls or bond payments?

By Cate Long
September 1, 2011

Harrisburg walks the well worn path

The capitol city of Pennsylvania, Harrisburg, is functionally if not legally bankrupt. Yesterday the City council voted against the mayor’s rescue plan which would have brought them a small reprieve but would not have fixed their core financial issues. The city’s main problem is a grossly expensive incinerator project which has burdened the city with way too much debt. Their situation is similar to the sewer system woes of  Jefferson County, Alabama on about one tenth the scale. Like Jefferson County, anger about bondholders being prioritized ahead of the needs of citizens was on display at yesterday’s city council meeting. From Reuters:

California: the queen of borrowers

By Cate Long
August 30, 2011

California is the queen of U.S. states given her size, wealth and desirability. Her economy is the eighth largest in the world and, as of 2008, the gross state product (GSP) was about $1.85 trillion, or approximately 13 percent of the country’s gross domestic product (GDP). It makes sense that she is the largest municipal bond issuer given her population, geographic size and infrastructure needs. California dominates muniland on many levels.

The gusher of municipal bond information

By Cate Long
August 29, 2011

The municipal bond market is often thought of as complex and murky. This is understandable; after all, there are over 50,000 issuers of bonds and a million plus specific municipal-bond issues. It’s staggering to imagine so many different securities.

Where are muniland’s cross-over buyers?

By Cate Long
August 26, 2011

It’s an odd moment in muniland. There is an irregularity in the pricing of municipal bonds. Generally muni bonds have a lower yield than U.S. Treasuries because munis give investors a tax advantage. Investors use them to shield their investment income since coupon payments on municipal bonds from their state of residence are generally triple-tax-free — that is, they are not taxed at the local, state or federal level.

Harrisburg, PA next?

By Cate Long
August 25, 2011

Bankruptcy for Harrisburg finally?

The fiscal troubles plaguing Harrisburg, Pennsylvania have been well telegraphed in muniland. Reuters detailed the problems earlier this month:

Does a downgrade cost anything?

By Cate Long
August 19, 2011

The debt of the United States was downgraded by Standard & Poor’s several weeks ago, but the price of U.S. Treasuries have skyrocketed since then. This confuses many people because a baseline relationship in the fixed-income markets is that lower-rated, less-creditworthy bonds will be relatively cheap and investors will demand higher interest rates to compensate for additional risk.

New leadership for muniland’s regulator

By Cate Long
August 16, 2011

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: