NEW ON MUNINET FOR THE WEEK OF
June 17, 2019:
Tips for MuniNet Visitors
Interested in employment statistics?
Look at Data on State or Metro Area Unemployment Rates and Labor Force Statistics Trends (April 2019 BLS)
An Update on Comparisons of Key Economic and Debt Factors: The Good, the Bad, and the Ugly
By Jim Spiotto
This is Part 2 in a 4-part article series on the Post-Fiscal Crisis State and the next fiscal crisis considerations. The information and charts come from a presentation given at the Government Finance Research Center’s conference entitled “Ready or Not? Post-Fiscal Crisis/Next Fiscal Crisis” held on May 2-3, 2019 at the Federal Reserve Bank of Chicago.
To read part 1 click here.
Population growth of Midwest states and the U.S.:
The U.S. between 2000 and 2017 experienced population growth of 15.4% to 325.7 million. Only one Midwest state grew between 2000 and 2017 faster than the U.S. average of 15.4%, namely: North Dakota at 17.6% for obvious reason of energy production. Only four states in the Midwest grew over 10.0% between 2000 and 2017, namely: North Dakota (17.6%), South Dakota (14.9%), Minnesota (13.0%) and Nebraska (12.0%). Another five states in the Midwest grew between 5-10% during the period of 2000 and 2017, namely: Indiana (9.4%), Missouri (9.0%), Kansas (8.1%), Wisconsin (7.8%) and Iowa (7.3%). Three of the Midwest states grew less than 5.0% between 2000 and 2017, namely: Illinois (2.9%), Ohio (2.5%) and Michigan (1.0%). This is less than 20.0% of the U.S. average population growth rate for the period.
Other non-Midwest states grew faster than Midwest states such as Texas (40.5%), Utah (38.1%), Florida (31.2%) and Arizona (36.7%). Between 1990 and 2000, the U.S. population grew by 13.2% but no Midwest state equaled or exceeded that percentage of growth. The highest was Minnesota at 12.4% followed by Wisconsin at 9.6%, Indiana at 9.7%, Missouri at 9.3% and Illinois at 8.6%. With the exception of North Dakota and South Dakota, the Midwest states had negative net domestic migration where more people left the state than those who migrated to that Midwest state with Illinois, Kansas, Michigan and Wisconsin leading the way in loss in domestic migration. Illinois (-5.0%) was second only to New York (-5.25%) in negative domestic migration.
To Read The Entire Article, Click Here
Featured Bond: $231 Million Texas Children’s Hospital – Harris County Cultural Education Facilities Finance Corporation Hospital Revenue Bonds
Featured Bond – Week of June 17, 2019: Harris County Cultural Education Facilities Finance Corporation $231 Million in Hospital Revenue Bonds (Texas Children’s Hospital)
The Harris County Cultural Education Facilities Finance Corporation is issuing $231 Million in Hospital Revenue bonds for Texas Children’s Hospital. The bonds are broken into Series 2019A bonds of $151.7 million and Series 2019B bonds of $79.5 million. The bonds are being sold through negotiated sale with pricing during the week of June 17th.
Ratings are Aa2, AA, and AA from Moody’s, S&P, and Fitch, respectively.
About Texas Children’s Hospital & The Bonds
Texas Children’s, a Texas nonprofit corporation, is the largest pediatric integrated delivery system in the country. It’s been ranked #4 in the 2018-2019 U.S. News Best Children’s Hospitals rankings. The hospital has an academic affiliation with Baylor College of Medicine. The hospital operates in both Houston and Austin. Texas Children’s encompasses 40% of the Texas population.
To Read Full Article with Statistical Snapshot, Click Here
The Gathering Storm: Illinois & Chicago MSA’s Challenging Financial Developments Due To The Great Recession
By Jim Spiotto
This is Part 1 in a 4-part article series on the Post-Fiscal Crisis State and the next fiscal crisis considerations. The information and charts come from a presentation given at the Government Finance Research Center’s conference entitled “Ready or Not? Post-Fiscal Crisis/Next Fiscal Crisis” held on May 2-3, 2019 at the Federal Reserve Bank of Chicago.
Illinois and the Chicago MSA have faced some challenging financial developments due to the Great Recession, 2010 reduction in income tax rates and income, increased unfunded pension obligations and loss of manufacturing jobs among other reasons:
1. Illinois and Chicago Metropolitan Statistical Area (“MSA”) had a bittersweet economic climate since 2000.
Illinois was the 5th largest state by population and GDP, but negative population growth in 2017 of negative .26% compared to Pennsylvania positive .14% caused Illinois to drop to 6th largest state by population. Also, Illinois is only the 15th largest state by per capita GDP. Chicago MSA in 2015 is the 8th, 6th or 5th largest metropolitan area by GDP in the world (it was 4th in 2008). The larger GDP cities are Tokyo, New York, Los Angeles, London, Paris and Seoul. In the Midwest, Illinois has the highest GDP per capita but also the highest public debt per capita and the highest percentage of public debt to GDP.
The Not So Sweet and Bitter
From 1985 to 2000, Illinois and Chicago MSA were competitive with the increase in percentage of personal income and jobs compared to that for the U.S.A. average and the Los Angeles and New York City MSAs. After 2000, Illinois and Chicago MSA lagged in the percentage increase in personal income and jobs in comparison to the average for the U.S.A. and New York City and Los Angeles MSAs. This could be due to the adverse effects of NAFTA, China joining the World Trade Organization or the economic downturns of 2001 and 2008 and the combined loss of over 75% in value of the Dow from the beginning to the end of the 2001 and 2008 economic downturns.
Since 2000, Illinois’ increase in jobs was 17% slower than U.S.A. average. Illinois and Chicago MSA had 22-24% less GDP growth than U.S.A. average and higher unemployment rates. Due to a sunset of a tax increase in 2015, Illinois income tax collections were reduced by $4 billion in FY2016 compared to 2014. Illinois’ unpaid bills were estimated to be $7.8 billion by the end of FY2019 and may jump to $10.6 billion by the end of FY2020 according to the Civic Federation. Illinois’ five pension systems unfunded liabilities have increased over 650% since 1995 to about $133.7 billion by the end of FY2018. The Chicago Public Schools purportedly had no unfunded pension liabilities in 2000 and now have as of FY2014 over $9.4 billion unfunded pension liabilities.
To Read The Entire Article, 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:
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.
Jul 15, 2019 - July 16, 2019
Brookings Institution , Massachusetts Avenue Northwest
Aug 05, 2019 - August 8, 2019
Nashville , TN
Sep 19, 2019 - September 20, 2019
Gaylord Opryland Resort & Convention Center , Opryland Drive
Sep 23, 2019 - September 25, 2019
San Francisco , CA