Public Schools Scramble To Absorb Hurricane Maria Evacuees, Hoping Money Will Follow

“For the most part, it’s a net positive for the states that are receiving Puerto Ricans. It will add to the economic growth where they’re residing,” said Matt Fabian, partner at Municipal Market Analytics. “They’ll buy things and pay rent and taxes, get jobs, which all add to the local economy.”

In addition, many Puerto Ricans have the ability to seamlessly slide into the economy: they already have citizenship and many are bilingual.

https://www.forbes.com/sites/debtwire/2018/07/03/public-schools-scramble-to-absorb-hurricane-maria-evacuees-hoping-money-will-follow/#1ff57deb73ae

Politically driven cancellation of Maine deal may cost the state next time

Municipal Market Analytics partner Matt Fabian said a governor not allowing a previously priced bond transaction to proceed just for closing is “not typical” and that the circumstances behind the cancellation may impact Maine’s future borrowing capabilities.

“If it’s just a mistake, then mistakes happen and there wouldn’t likely be any credit harm,” said Fabian. “But if it’s concerted effort to hurt the deal then bonds will have to come cheaper to make it up to investors.”

https://www.bondbuyer.com/news/maine-governor-kills-two-go-bond-deals-after-they-are-priced

Rise in single-rated municipal bonds spurs investor concerns

A trend toward single-rated municipal bonds has accelerated this year, raising concern among investors who were accustomed to two or three rating agency opinions to support their purchasing decisions.

Single-rating transactions represent about a quarter of new sales by par value so far this year, a 17.5% increase from the rate in all of 2017, according to a report this month from independent research firm Municipal Market Analytics.

https://www.bondbuyer.com/news/rise-in-single-rated-municipal-bonds-spurs-investor-concerns?feed=0000015b-11b9-dcff-abff-f9fd85f60000

The Week in Public Finance: For an Increasing Number of Governments, One Credit Rating Is Plenty

For years, governments paid for the extra cost of getting multiple credit ratings when they sold bonds, mainly to appease the investors who bought them. But now, more and more governments are forgoing multiple ratings in favor of just one -- and 2018 is shaping up to be the biggest year yet for the trend.

Through the first five months of this year, 25 percent of bond sales have involved just one credit rating, according to data analyzed by the research firm Municipal Market Analytics. That’s far higher than the 13 percent rate a decade ago and the 20 percent average over the past few years.

Lisa Washburn, a managing partner at Municipal Market Analytics, says she expects the trend to continue, especially since issuances with just one rating don’t appear to be penalized with higher interest rates.

http://www.governing.com/topics/finance/gov-finance-roundup-government-one-credit-rating-trend.html

Illinois Proposal to Let Treasurer Buy Unpaid Bills Likened to a 'Shell Game'

CHICAGO -- One analyst says legislation to empower the Illinois state treasurer to provide state funds to buy up overdue bill vouchers could add to future fiscal problems.

"When governments start to think creatively about debt structure and repayment, we get a bit nervous," Lisa Washburn, a managing director at Municipal Market Analytics, wrote in the firm's weekly outlook commentary. "Any short-term fiscal relief from the legislation (if passed) is likely to be outweighed by the longer-term consequences of failing to substantively address the state's financial challenges."

Backers say the legislation will lower the state's interest costs and speed up bill payments to vendors in need of what they are owed.

But another buyside analyst said the vouchers are for a bad investment for the state.

According to Washburn, "the transaction could optically lower the state's headline-producing bill backlog" and "could reduce interest costs," but longer term "it also could be the start of a shell game that saddles the treasurer with less liquid, politically charged investments, defers real progress on addressing the bill-backlog, and could amplify Illinois' fiscal woes if its finances continue to deteriorate

https://www.highbeam.com/doc/1G1-540845717.html

How the financial crisis changed the muni market

CORONADO, CALIF. – The 2008 financial crisis wrought radical changes in the municipal market, but those changes may not have prepared the market for its next challenge, analysts said Thursday.

The legacy of the calamitous financial meltdown of 10 years ago was the subject of a panel discussion at the National Federation of Municipal Analysts’ annual conference. The wide-ranging conversation touched on the changes in market conditions, the technological advancements in the industry, and the regulatory changes born from the reaction to the crisis. Tom Doe, president of Municipal Market Analytics, said that although the marketplace has access to far...

https://www.bondbuyer.com/news/the-legacy-of-the-financial-crisis-in-the-muni-market

Cannibalization of Georgia City Means Credit Risks for Other Municipalities

Neither bill apportions Stockbridge's outstanding, unrated debt, which would leave a smaller Stockbridge to pay all of the debt service if Eagle's Landing residents vote to incorporate as a new city.

Diverting half of Stockbridge's tax base without allocating the debt presents a "dangerous risk" for bondholders investing in general obligation bonds issued by Georgia's local governments, Matt Fabian, a partner at Municipal Market Analytics, said in Monday's Weekly Outlook.

"In a more conservatively spread bond market, borrowing for all Georgia local governments would rise sharply," said Fabian.

https://www.highbeam.com/doc/1G1-538788651.html

Stockbridge’s Bond Rating Hinges On Eagle’s Landing Creation

The city of Stockbridge’s bond rating could be negatively affected by the Eagle’s Landing legislation.

The legislation, signed last week by Gov. Nathan Deal, will let voters decide on creating the new city of Eagle’s Landing. Part of its land would come from Stockbridge.

As a result, Stockbridge would also lose millions in tax revenue. It would still be responsible for all its debt, which, according to Moody’s Investment Service, would bring down its bond rating.

Lisa Washburn, with research firm Municipal Market Analytics, says that sets a bad precedent for other cities.

“It introduces a level of risk to a municipal security pledge that was not thought to be there in the past,” Washburn says.

She said it could make it more expensive for cities to borrow money.

“It can be detrimental to bond holders, in which case, they’ll either demand a higher interest rate, so they’ll want to get compensated because there’s a greater risk there,” Washburn says, “or they may not want to take on that risk at all.”

https://www.wabe.org/stockbridges-bond-rating-hinges-on-eagles-landing-creation/

Puerto Rico Bonds Rally as Rival Creditors Float Settlement

The island’s government and general-obligation bondholders have been allied against Cofina bondholders, who say sales-tax revenue should be used to repay them before it’s spent for other purposes. The commonwealth and the general-obligation owners want U.S. District Court Judge Laura Taylor Swain to throw out a law that transfers the sales taxes to a governmental agency, known as Cofina, whose only responsibility is to use the cash to pay its bondholders.

"Any kind of progress toward resolutions should translate into prices in some way," said Matt Fabian, a partner at Municipal Market Analytics Inc. "It at least gives a theoretical anchor at which bond prices can trade."

https://www.msn.com/en-us/money/markets/puerto-rico-bonds-rally-as-rival-creditors-float-settlement/ar-AAxgwMB

A city in Virginia stands behind its unwillingness to repay bonds

Buena Vista’s “selective payment default on its $9.2 million ACA-wrapped lease-revenue bonds is perhaps a worst-in-class example of erosion in issuer willingness to pay bondholders,” municipal analyst Matt Fabian, a partner at Municipal Market Analytics, said in his March 5 Weekly Outlook column.

“Buena Vista’s default can no longer be blamed on weak local budget or economic conditions,” Fabian said. “Rather, the city is currently choosing neither to pay nor negotiate with bondholders because the pledged appropriation security permits this to occur.”

The decision sets the stage for an unnecessary confrontation with lenders, he added.

https://www.bondbuyer.com/news/buena-vista-va-faces-appeal-of-ruling-on-defaulted-golf-course-bonds?feed=0000015b-11b9-dcff-abff-f9fd85f60000

California’s Governor Race Has Bond Investors Worried

Should Cox advance, he’d likely face a serious challenge going against Newsom or Villaraigosa in the general election, considering that 45 percent of California’s voters are registered Democrats and only 25 percent are Republicans. The other likely pairing is Newsom versus Villaraigosa, and both have yet to show the same level of fiscal discipline as Brown, said Matt Fabian, a partner with research firm Municipal Market Analytics.

“Investors in California have to assume that credit quality could erode,” he said.

https://www.bloomberg.com/news/articles/2018-05-07/bond-managers-losing-california-s-brown-fret-over-who-comes-next

Michigan relinquishes Detroit oversight, allowing city to forge its fiscal path

The end to Michigan's direct oversight of Detroit's finances is a milestone in the city's recovery from bankruptcy, giving it autonomy to manage fiscal fortunes that remain pressured by debt, pension, and economic development challenges.

With the city having met the requirement of posting three balanced budgets, the state's Detroit Financial Review Commission unanimously voted Monday to waive active oversight of the city.  Lisa Washburn, an analyst at Municipal Market Analytics, said Detroit has yet to test its resilience.

https://www.bondbuyer.com/news/michigan-relinquishes-detroit-oversight-allowing-city-to-forge-its-fiscal-path

Muni Bond Markups: Soon No Longer a Secret for Some Trades

The revelation could accelerate a shift toward mutual funds and other fee-based accounts by individual investors who own about $1.6 trillion, or 40 percent, of the outstanding municipal securities, more than any other group. That’s because the fees they charge will look cheap compared with what it costs for individuals to trade on their own.

“Why pay a point to buy bonds when you can pay a few basis points a year to a mutual-fund provider and you get diversification and you don’t have to worry about a singular credit risk that comes with munis,” said Matt Fabian, a managing director at Municipal Market Analytics.

The new regulation from the Municipal Securities Rulemaking Board is the result of a push to inject more transparency into the state and local market, a haven for individuals seeking a safe source of tax-exempt income.

https://www.thinkadvisor.com/2018/04/23/muni-bond-markups-soon-no-longer-a-secret-for-some/?slreturn=20180728125205

Surge in Oregon schools' deferred interest bonds sets off alarms

A spike in Oregon school districts’ reliance on capital appreciation bonds to fund expansion is stirring a debate among debt analysts.

Since early 2017, Oregon school districts have floated the greatest par value of tax-exempt CABs at almost 50% of the $1.1 billion total in primary market issuance for schools, according to an April 2 report from Municipal Market Analytics.

Speculative borrowing structures such as CABs can strain credit quality if property value growth assumptions do not materialize, wrote Lisa Washburn, an MMA managing director and the report’s author. 

https://www.bondbuyer.com/news/oregon-schools-cab-surge-sets-off-alarms

New Jersey bill seeks P3 expansion

Municipal Market Analytics analyst Lisa Washburn said that availability payments don’t help with funding challenges for infrastructure projects, because governmental entities still have to make the payments just as they would with debt service. While expanding P3s would have some benefit to New Jersey, she said, they probably wouldn't make a major dent in the state’s fiscal challenges.

“If you look across the country there hasn’t been a large number of P3s relative to traditional municipal financing,” said Washburn. “If they were so much more effective, you would see them used a lot more.”

Oroho and Sweeney's plan to spearhead the P3 bill comes with New Jersey still hamstrung by revenue shortfalls. The proposal also arrives in the midst of President Trump's push to place more funding responsibilities for infrastructure projects on the private sector and with state and local governments.

https://eresearch.fidelity.com/eresearch/markets_sectors/news/story.jhtml?storyid=201804131904SM______BNDBUYER_00000162-bb5d-dc54-a76f-bbfdc981_110.1

Puerto Rico GO bond hits five-month high

Maria was cataclysmic for Puerto Rico, cutting electricity to all 3.4 million residents. On the six-month anniversary, tens of thousands remained without power, thousands of homes remained in disrepair, and many businesses remain closed, even as debt prices began to recover.

Other analysts put little stock in the rise in the bond price. "Puerto Rico bonds are almost strictly held by optimists," said Matt Fabian, of Municipal Market Analytics, adding that the Puerto Rico bond market is "illiquid and strange" and that investor recovery prospects "are still grim."

To be sure, hurricane recovery is far from the only driver of creditor repayments. Litigation is a factor as well, particularly a fight between the Puerto Rican central government and its sales tax authority, COFINA, which itself owes $18 billion of debt.

http://www.financetime.org/puerto-rico-go-bond-hits-five-month-high

State's Largest Pension Funds Returns In Excess Of 16% In 2017 - Pension Assets Grow By $4.2 Billion, Post Highest Calendar Year-End Value

Earlier this year, Governor Malloy suggested a

restructuring of payments into the TRF. Treasurer Nappier challenged that plan because it would constitute a technical default under a bond covenant -something that the State has never before done. She said, "Once that line is crossed, the rating agencies may take a dim view of our promises, the consequences of which we will face for a generation. In fact, a recent report from Municipal Market Analytics confirms that any violation would be a 'clear credit negative'."

http://www.publicnow.com/view/941113FA19FF87A8ADC0E4D8BF3811260215F8F5

Tax Law Complicates ‘Smart City’ Financing Plans

The tax law “raises borrowing costs for state and local governments in a couple ways,” Fabian said. For one, the overhaul “undermines the demand from corporations” for tax-exempt income. “By capping the deduction for state and local taxes, it makes it more difficult for state and local governments to raise taxes to pay for infrastructure.”

https://www.bna.com/tax-law-complicates-n57982090054/

New Jersey budget proposal seeks taxes to boost programs, lift budget

Municipal Market Analytics analyst Lisa Washburn said Murphy is facing political resistance to the millionaire’s tax. Senate President Steve Sweeney, D-Gloucester, proposed an alternative to Murphy’s plan last week that would impose a 3% surcharge on corporations earning more than $1 million in net income to help increase school funding through $657 million of new revenue.

“Governor Murphy faces several obstacles in raising incremental and new revenues to fund rising legacy costs and his priorities that include increased education and infrastructure spending,” said Washburn. “His desired millionaire’s tax lacks full support…in large part because of the negative impact of tax reform on the SALT deduction.”

https://eresearch.fidelity.com/eresearch/markets_sectors/news/story.jhtml?storyid=201803131901SM______BNDBUYER_00000162-20eb-d4ab-aff7-38efe477_110.1

Connecticut Won't Default on Pension Bonds, Budget Director Says

Connecticut Treasurer Denise Nappier warned that Malloy’s proposal to stretch out payments on the teachers’ pension’s unfunded liability beyond 2032 to sidestep a potential $5 billion payment increase would trigger a technical default. Municipal Market Analytics, an independent research firm, said last week that such a breach would be a “clear credit negative" and investors should demand higher yields on Connecticut bonds to compensate for the risk.

https://www.bloomberg.com/news/articles/2018-03-13/connecticut-won-t-default-on-pension-bonds-budget-director-says