The Port Authority’s big debt sinkhole

Bloomberg has a story about The Port Authority of New York and New Jersey bringing a $1 billion taxable bond offering to market without citing the George Washington Bridge closure problem in the risk section. I think whatever involvement New Jersey Governor Chris Christie or his staff had in closing the bridge has no bearing on the ability of the Port Authority to repay these new bonds. Governors come and go, but this momentous pile of debt remains outstanding.

Slate’s Matthew Yglesias piled onto Christie’s Port Authority caper with a piece about dismantling the Port Authority into smaller pieces and pushing it back to the states. Yglesias wrote (emphasis mine):

    Put the bridges and tunnels under the control of MTA Bridges and Tunnels, which runs the city’s other bridges and tunnels, and in exchange give New Jersey Transit a fixed share of toll revenue from the Hudson River crossings. Put the PATH train under the control of New Jersey Transit, which runs other commuter trains into Manhattan. Let the various airports all go their separate ways. They don’t need to be managed by a single entity. Give AirTrain JFK to the NYC Subway. Sell the random real-estate holdings [think World Trade Center].

There is a certain elegant logic to Ygelsias’ proposal, but it lacks any understanding of the debt and financial structure of the Port Authority.

Fitch rates the Port Authority’s $17.9 billion in outstanding consolidated bonds at ‘AA-’. In their rating announcement for the new $1 billion taxable deal, which will go to the construction of the World Trade Center site (WTC), Fitch discusses the financials for the Port Authority as a whole. Most Port Authority financial documents that I have seen have few details for the WTC project, but I found this from a report prepared by Navigant in September 2012 (page 63):

Muni sweeps: Hack for change

Hack for Change

Attention Muniland! Do you have an idea for a public web or mobile application? is sponsoring a Hack for Change on June 18th and 19th and is soliciting ideas for their programming competition. Here are some of the ideas that have already been posted:

    A reviews site that allows citizens to rate and evaluate city government services and departments A site that makes government data more accessible and actionable An app that lists all San Francisco city legislation and allows residents to vote on it An app that notifies police of suspicious activity

Submit your idea today!

Muni Web 2.0 stars

Government Technology reports on the winners of a wonderful competition to create the best municipal Web 2.0 and social media technologies:

Muni sweeps: Increasing the muni investor pool

It’s a glorious spring day in America and everything continues to bounce along. A little progress here and some fall back there. Oh and that unpleasant negative ratings watch on United States debt from Standard & Poor’s. Yeah that is not good. Welcome to a new week in muniland. The sun sets over a pond in Rogers, Arkansas, November 8, 2009. REUTERS/Lucy Nicholson

The sun sets over a pond in Rogers, Arkansas, November 8, 2009. REUTERS/Lucy Nicholson

Increasing the muni investor pool:

Marketwatch has an article which frames the proposed Wyden and Coates federal legislation for muni tax-exemption as having the effect of shrinking the investor pool.

Muni sweeps: Strike two for Larry Silverstein

WTC in December, 2010

WTC in December, 2010

The $1.275 billion offering to fund Larry Silverstein’s New York City’s World Trade Center Liberty Tower 4 was withdrawn yesterday for the second time.

Goldman Sachs withdrew the offering “due to market considerations”.

The deal was first postponed last December as the municipal market was roiled by talk of mass defaults. The bankruptcy talk caused many investors to exit the market and sent muni yields rising.

When yields spike up issuers tend to withdraw from the market and wait on the sidelines until conditions settle down. Think of a sailor who can wait in the harbor as a storm brews at sea.

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