Texas Freeze Strands Municipalities With Sky-High Power Tabs

While municipal-bond holders have been paying more attention to climate change in recent years, the Texas freeze is the latest in a series of disasters that have forced investors to rethink the way they evaluate bond portfolios that hold securities that don’t mature for decades.

“The Texas freeze revealed issues that probably most people never thought of,” said Chris Hamel, a senior fellow at Municipal Market Analytics and former head of municipal finance at RBC Capital Markets.

https://www.bloomberg.com/news/articles/2021-04-16/texas-freeze-strands-municipalities-with-sky-high-power-tabs

Climate Change and Municipals

Q&A with Dr. Chris Hartshorn - Cheif Commerical Office at risQ

https://cdn.magloft.com/publication-13046/hpub/38208/3089cee1-fe70-4b82-a584-d3a6e1ecbbbf/index.html#/111947

Volcker Alliance Releases Truth and Integrity in State Budgeting Report

The Volcker Alliance partnered with public finance institutes and schools within The City University of New York, Florida International University, Georgia State University, University of Illinois Springfield, University of Illinois at Chicago, University of Kentucky, University of Utah, and University of California, Berkeley, as well as with Barrett and Greene Inc. and Municipal Market Analytics, to carry out this study and produce the report.

https://www.prweb.com/releases/volcker_alliance_releases_truth_and_integrity_in_state_budgeting_report/prweb17835528.htm

Build America Bonds may stage a comeback in Biden's infrastructure plan

U.S. Transportation Secretary Pete Buttigieg told CNBC late last week that BABs show “promise.”

“Democrats have been trying to relaunch BABs since BABs expired,” said Matt Fabian, a partner at Municipal Market Analytics, adding that Congress was likely to leverage bond-related ideas like BABs that were already discussed or included in past legislation.

Katie Kramer, vice president of the Council of Development Finance Agencies, said BABs’ reinstatement was part of a big infrastructure bill the House passed last summer and that House Ways and Means Committee Chairman Richard Neal “is very fond of that particular tool.”

https://www.reuters.com/article/usa-biden-infrastructure-bonds-idUSL1N2LR1UZ

Illinois primary market penalties shrink to levels of bygone era

The state said it had received strong enough order interest in the pre-marketing wire distributed Monday that it decided to accelerate the sale which drew “more than 700 orders from more than 130 different investors, including respected names that have not invested in the state for a decade,” the state’s Director of Capital Markets Paul Chatalas said in a statement.

Given the state’s vulnerability to headlines, “pricing ahead of the next headline” if orders have lined up is a wise move, said Matt Fabian, partner at Municipal Market Analytics. The supply calendar is also on the rise and that can impact interest.

A confluence of factors helped the sale, from the return of inflows and demand for higher-yielding paper to the state’s improving tax projections and a looming infusion of $7.5 billion from the $1.9 trillion American Rescue Plan signed by President Biden last week.

https://www.bondbuyer.com/news/illinois-primary-market-penalties-shrink-to-bygone-era

States Expected Covid-19 to Bring Widespread Tax Shortfalls. It Didn't Happen.

n March 2020, the municipal market ground to an unprecedented halt as investors spooked by the pandemic's impact on state and local governments pulled out at rock bottom prices. Even gold-plated borrowers had trouble finding buyers. But prices bounced back quickly after an unprecedented pledge to buy up municipal debt, and borrowing grew cheaper than it was in 2019.

Public officials refinanced outstanding bonds and used credit to pay the bills. At least a quarter of state and local government bond issues of $100 million or more between August and December were aimed at filling budget gaps, according to a study from The Pew Charitable Trusts and Municipal Market Analytics. The issuance included about $4 billion in coronavirus emergency bonds from the state of New Jersey.

https://www.marketscreener.com/news/latest/States-Expected-Covid-19-to-Bring-Widespread-Tax-Shortfalls-It-Didn-t-Happen--32649148/

A Big Change is Coming for the Muni Market

According to a study by an industry body “Over the last decade, customer purchases of fixed-rate, tax-exempt municipal securities of $100,000 or less decreased by 46%, the MSRB found. Meanwhile, institutional-sized purchases of over $1 million increased 46% in the same time period”. “Most of the large retail managers have moved clients from traditional, transactional, retail accounts into discretionary platforms like SMAs … The firm itself then makes the allocation decisions and is, therefore, less responsible for making sure that the client understands their investment decision”, said Matt Fabian, partner at Municipal Market Analytics.

https://www.nasdaq.com/articles/a-big-change-is-coming-for-the-muni-market-2021-02-25

Philadelphia relies on a commuter tax to balance its budget. What does that mean in a work-from-home world?

Some public finance analysts think now is as good a time as any to rethink revenue structures that have been around for decades, in some cases.

“A lot of what needs to happen is an adjusting of the pre-pandemic tax structure to a reckoning of the post-pandemic reality, but this is a challenging time,” said Matt Fabian, a partner with Municipal Market Analytics. “We often think about what’s happening now in terms of a regular economic recession, with benchmarks for recovery. But this is more of an evolution. We don’t know what we’re going to recover to.”

Philadelphia has been gradually reducing its reliance on the wage tax for years, Waxman noted. She and other officials are all too aware that taxing workers can be a negative for employers considering setting up shop there, even as the city has tried to market itself as a less-expensive version of New York or Washington.

https://www.marketwatch.com/story/philadelphia-relies-on-a-commuter-tax-to-balance-its-budget-what-does-that-mean-in-a-work-from-home-world-11613678398

Bloomberg: 36 Senior Living Muni Debt Issues Fell Into Default Last Year

Three-dozen municipal debt issues for senior living communities fell into default in 2020, and five more borrowers have failed to make payments this year.

That’s according to an analysis published last week by Bloomberg. A previous analysis, done by Municipal Market Analytics in Aug. 2020, showed 23 retirement communities had reported first-time defaults on municipal bonds as of that date. The previous high was 22 defaults in a single year, recorded in 2016.

https://seniorhousingnews.com/2021/02/08/bloomberg-36-senior-living-muni-debt-issues-fell-into-default-last-year/

Record Muni-Bond Sales Surge Fueled by Borrowing for Budget Gaps

As states and cities braced for pandemic-related shutdowns to batter tax collections, many turned to the municipal-bond market to soften the hit, contributing to a record-setting surge in debt sales last year.

According to an analysis by Municipal Market Analytics, at least one quarter of state and local government debt sales over $100 million included some element of deficit financing in the second half of 2020.

https://www.bloomberg.com/news/articles/2021-02-03/record-muni-bond-sales-surge-fueled-by-borrowing-for-budget-gaps

State and Local Governments Relied on Debt for Budgetary Help In 2020

Matt Fabian is a partner and Lisa Washburn is chief credit officer and managing director with Municipal Market Analytics (MMA), a research and consulting firm that specializes in the U.S. municipal bond market. Founded in 1995, the company—which has worked with The Pew Charitable Trusts to support Pew’s research on state fiscal health—helps investment firms, banks, and financial advisers navigate the nearly $4 trillion market. This interview with Fabian and Washburn has been edited for clarity and length.

https://www.pewtrusts.org/en/research-and-analysis/articles/2021/01/28/state-and-local-governments-relied-on-debt-for-budgetary-help-in-2020

IShares Muni Bond ETF hits 10-month high amid strong tax-free demand

CHICAGO, Jan 25 (Reuters) - The iShares National Muni Bond exchange-traded fund (ETF) rose on Monday to its highest level since March 2020 as heavy demand for tax-free debt sold by U.S. states, cities, schools and other issuers outstrips sluggish supply.

The largest muni ETF eclipsed its August high to close up 0.21% at 117.34 on Monday. The last time it was at this level was March 9, when it reached 118.15 in intraday trading before plunging as low as 100.03 on March 19 as fears of the economic fallout from the burgeoning coronavirus pandemic caused a selling frenzy in the municipal bond market.

The muni market stabilized after the Federal Reserve stepped in with emergency measures to backstop the market.

"The demand to buy muni bonds is absolutely swamping the supply of them," said Matt Fabian, a partner at Municipal Market Analytics.

The need by investors to reinvest cash from principal and interest payments on existing bonds, a likely rise in taxes, and expectations that the ongoing pandemic will depress debt issuance for new projects are fueling demand for tax-exempt munis and muni ETFs, he said.

https://finance.yahoo.com/news/ishares-muni-bond-etf-hits-215441531.html

It's Chapter 22, and more restructuring, for a Chicago-area senior home

The senior living sector saw 29 first-time defaults in 2020, up from 12 in 2019, 13 in 2018 and 10 in 2017 and about $2.3 billion of senior living sector bonds remain default-impaired, according to data from Municipal Market Analytics.

“That's a function of the pandemic and how horribly it has impacted” the sector, said MMA partner Matt Fabian.

The sector is prone to repeat bankruptcies, especially when, as appears to be the case for Park Place, “the borrower was being too optimistic” in the first one, Fabian said.

https://eresearch.fidelity.com/eresearch/markets_sectors/news/story.jhtml?storyid=202101051410SM______BNDBUYER_00000176-d39d-d92a-af7e-f3fd82040001_110.1

Heading Into 2021, State and Local Budget Gloom Lingers

At the local level, it could be well into 2021 or later before the damage the virus has caused to budgets becomes clear. There are also questions about the lasting marks for some local economies—for instance, if downtown offices will lose tenants if remote work continues or if businesses like restaurants and venues, hobbled by the pandemic, will be able to rebound. 

“We don’t even know how bad things are at the local level,” said Matt Fabian, a partner at Municipal Market Analytics. He noted that local government audits to put this year’s financial strain into perspective generally have not been released yet.

But there are signs that localities are under financial pressure. Fabian said he expects heavy activity into 2021 with local deficit financing and transactions known as “scoop and toss”—an often frowned upon refinancing practice. Near-term deficit borrowing could mean some localities end up extending their fiscal pain out two or three years.

https://www.route-fifty.com/finance/2020/12/state-local-government-budgets-coronavirus/171073/

MTA Maxed Out Its Fed Credit Line. So Now What?

Absent a huge injection of federal funds, the MTA’s options are limited. The agency had more than $45.5 billion of debt as of Nov. 4, even before last week’s borrowing from the Fed’s facility, and its forecast is for a $16.2 billion deficit through 2024. As I wrote in June, the MTA is legally barred from filing for bankruptcy, and the state has pledged not to change the law as long as any transportation revenue bonds are outstanding.

For those who might be wondering, it’s also almost certainly not possible for the MTA to simply walk away from its $3.35 billion in notes sold to the MLF and have the Fed and Treasury foot the bill without triggering a cascading effect on its entire debt structure, according to Matt Fabian at Municipal Market Analytics. As Richard Ravitch, a former MTA chairman, told me in September, the agency is entirely at the mercy of Washington lawmakers to strike a fiscal aid deal.

https://www.bnnbloomberg.ca/mta-maxed-out-its-fed-credit-line-so-now-what-1.1536126

Rent-A-Muni Issuer Scored Market Access for Bond Now at 11 Cents

This has pushed up the number of defaults even in the municipal-bond market, a haven marketed overwhelmingly toward Americans seeking safe and steady returns. There have been 70 so far this year, the most since 2012, according to Municipal Market Analytics.

https://www.bloombergquint.com/business/rent-a-muni-issuer-scored-market-access-for-bond-now-at-11-cents

New Jersey’s American Dream Mall is still waiting to fully open

When the mall reopened for business Oct. 1, Lisa Washburn, an analyst for Municipal Market Analytics, took a research trip to see what the first back-to-business day looked like. The crowds were sparse, she said, and many stores had more workers than customers. (She bought $14 worth of gummy bears at the IT’SUGAR candy store.)

The development sits on state land and was able to obtain tax-free debt financing through a series of bonds that could carry risks to investors.

Washburn said there was very little transparency into the mall’s finances for bond investors to look at so it was difficult to obtain an accurate picture of its situation.

“The disclosure is very poor,” she said.

https://www.moneycontrol.com/news/world/new-jerseys-american-dream-mall-is-still-waiting-to-fully-open-6162311.html

Instant View: Mnuchin Asks Fed to Return Money for Emergency Lending

"Investors have banked on the MLF (Municipal Liquidity Facility) being a reliable, emergency lender to our (municipal bond) market’s core borrowers. It has taken the idea of a payment default or catastrophic budget problem off the table. Without the MLF, the market won’t collapse, but it will lack some resilience if its tested by a selloff or more pronounced credit fears."

https://money.usnews.com/investing/news/articles/2020-11-19/instant-view-mnuchin-asks-fed-to-return-money-for-emergency-lending

US states face biggest cash crisis since the Great Depression

Over the past six months, there have been 51 first-time bond payment defaults, according to Municipal Market Analytics data. It’s the highest level over that time frame since 2012, when a string of borrowers still reeling from the last recession ran out of money to pay their debts.

While none of the recent defaults have involved state credits, some local governments are facing repayment strains. The airport authority of Rock Island County, Ill., for example, disclosed in August that it hasn’t been able to collect enough in airline ticket fees to maintain the level of cash it promised bondholders it would set aside. The authority filled in the gap with other funds, such as parking lot revenues, and may consider delaying capital projects, its executive director said.

https://www.foxbusiness.com/markets/us-states-face-biggest-cash-crisis-since-the-great-depression

Analysis: Empty dorms put squeeze on colleges to bail out billions in debt

Nine student housing projects have become impaired in 2020, the most since 2009, according to Municipal Market Analytics, which tracks actions by municipal borrowers like defaults, reserve withdrawals and technical defaults.

https://www.crainscleveland.com/education/analysis-empty-dorms-put-squeeze-colleges-bail-out-billions-debt