NEW ON MUNINET FOR THE WEEK OF
April 22, 2019:
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Look at Newly Updated Data on State or Metro Area Unemployment Rates and Labor Force Statistics Trends
Tollroads Show Strongest Growth in Total Revenue Growth
Tollroads Edge Hospitals for the Municipal Bond Credit Sector Revenue Honors
Tollroad and Hospital Sectors easily led all other municipal bond credit sectors when it came to annual total revenue growth over the recent five year period spanning 2012 through 2017.
Tollroads saw a median increase of 30.4%, barely edging out hospitals (systems and independent obligors), which grew by 29.8%.
The slowest growing sector belonged to the wholesale electric sector, which only saw a five year bump of 4.3%. The wholesale electric group, also frequently referred to as public power authority joint action agencies, has been showing positive margins as their missions are often limited to the large generating power plants that they financed.
The credit sector summary analysis comparing the growth in total revenues to total expenses from 2012 to 2017 was compiled by Merritt Research Services, LLC using audited reports from approximately 10,000 municipal bond borrowers.
The Tollroad sector was the clear leader among the major municipal credit sectors. Its total revenue pace was about double that of its total expenses during the period from 2012 to 2017. The strong revenue growth experienced by the sector doesn’t mean that every municipal bond tollroad borrower raised more than it took in every year; but, the vast majority has been doing that lately. For Fiscal Year 2017, 75% of all tollroads reporting a five year trend showed positive net income.
Featured Bond: $240 Million University of Connecticut General Obligation Bonds
Featured Bond – Week of April 22, 2019: The University of Connecticut $240 Million in General Obligation Bonds
The University of Connecticut is scheduled to issue $240 Million in General Obligation Bonds. The Bonds are authorized pursuant of the University of Connecticut 2000 Act. The Act establishes that the University can borrow money in its own name on behalf of the State in order to fund a special capital improvement program known as the “UConn 2000 Infrastructure Program”.
The Bonds are negotiated and have a current pricing date of April 24. Moody’s rates the Bonds A1, and S&P assigns a rating of A+.
About the UConn 2000 Infrastructure Project & the Purpose of the Bonds
The UConn 2000 Infrastructure Program, or UConn 2000 for short, is established by the University of Connecticut 2000 Act to modernize, rehabilitate, and expand the University grounds. The Act, originally adopted in 1995, provides for a 23-year capital budget program that occurs in three phases. The estimated total cost is $4,619,300,000.
For the full article with a statistical snapshot of financial measures, click here.
The First Circuit Court of Appeals Ruling on ‘Assured’ Should be Reheard or Reversed; Recent Ruling Sends a Harsh Message to Municipal Bond Market
Why the Municipal Bond Market Expects Pledged Special Revenues to be Timely Paid to Bondholders in a Chapter 9 Proceeding. And, Why the First Circuit’s Assured Ruling in Puerto Rico’s PROMESA Title III Proceeding Should Be Reheard or Reconsidered on Appeal.
by James Spiotto
On March 26, 2019, The United States First Circuit Court of Appeals ruled on the Appeal from the Title III adjustment of debt proceeding for the Commonwealth of Puerto Rico. The First Circuit affirmed the ruling of the District Court dismissing the Amended Complaint of Assured Guaranty Corporation (“Assured”) and held that special revenues pledged to revenue bondholders are only exempt from the automatic stay (preventing creditor enforcement action for payments to bondholders) if the municipality voluntarily pays the special revenues to the bondholders, and that such timely payments are not mandatory in Title III or purportedly a Chapter 9 proceeding.
MuniNet previously has described the well-established justification of timely payments of special revenues pledged to bondholders in Title III and Chapter 9 proceedings and why the district court rulings should have been reversed in an article last year. (Link “Puerto Rico’s Assured Decision Should Be Reconsidered or Reversed” February 5, 2018, James E. Spiotto.)
The First Circuit in ruling on this appeal saw no reason to write at length justifying this ruling, which was contrary to all prior case law precedent by courts hearing Chapter 9 cases, the recognized commentaries on special revenues and the legislative history for the 1988 Amendments to the Federal Bankruptcy Code 11 U.S.C. § 101 et seq. (“Bankruptcy Code”) which added Sections 902, 922(d), 927 and 928, among other provisions, into the Bankruptcy Code. These sections were interpreted by the First Circuit in its opinion.
- The First Circuit in Its Opinion Attempted to Reason to Answer the Following Questions:
Worried About Public Pensions? Counties Often Have Lower Burdens
Counties Often Underappreciated Despite Generally Improving Fund Balances and Lower Debt and Pension Liabilities
By Richard A. Ciccarone
County governments are generally a good place to start your search for governments with positive financial conditions as well as lower pension and debt liabilities. Since the Great Recession and Credit Crisis, counties have shown improving general fund balances, lower debt and better pension funding ratios. These strengths often get overlooked by public finance critics as well as anxious municipal bond investors that are rightfully concerned about the potential retirement burdens impacting many states and cities.
General Fund Balance Trend
One of the best measures to assess operating reserves is to take a look at the general fund balance in comparison to annual expenditures. For fiscal year 2017, the median general fund balance to expenditures was 38.9% based on a sample of 1,107 U.S. counties by Merritt Research Services, LLC, an independent municipal bond data and research company. As shown in the table below, the total fund balance ratio is about 10% higher in 2017 than it was in 2009. based on Comprehensive Annual Financial Report audits collected by Merritt Research.
Available Fund Balance
The portion of the fund balances that is available for future spending and reserves is defined by the Governmental Accounting Standards Board as the assigned or unassigned fund balance. The assigned designation refers to balances that are legally designated by statute, resolution or indenture while the unassigned refers to the portion that is totally uncommitted. Converted into a narrower fund balance ratio, this figure is also running on a positive high note.
Most counties have a comfortable margin, providing them with reserves and room to maneuver as evidenced by ….
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Manchester Grand Hyatt , Market Place
May 07, 2019 - May 10, 2019
Belmond Charleston Place , Charleston
May 19, 2019 - May 22, 2019
Los Angeles Convention Center ,
Jun 05, 2019 - June 5, 2019
909 North Michigan Avenue , Chicago