By: admincw On: février 10, 2014 In: Non classé Comments: 0

canada goose What we’ve learned from municipal distress

canada goose coats Is the municipal bond market on the verge of collapse? You might think so, given the blaring headlines about a few big cheap canada goose uk disasters in the last year. But the truth is that poor uk canada goose outlet decision making, not systemic issues, has caused the most serious problems.

Canada Goose sale Jefferson County, Alabama, and Vallejo, California, filed for Chapter canada goose store 9 bankruptcy protection. Receivers were appointed for Central canada goose Falls, Rhode Island, Canada Goose Online and canada goose uk shop Harrisburg, Pennsylvania. And most recently, Detroit agreed with the State of Michigan on a uk canada goose shared fiscal oversight process to avoid bankruptcy.

canada goose clearance There is no question that state and local governments are facing financial hardship as a result of the weak economic recovery and its impact on tax receipts. But this is not the first time Canada Goose Outlet local governments have been challenged or have defaulted on their debt or filed for bankruptcy protection.

Canada Goose Jackets In the 37 years since New York City brush with default in 1975, there have been a slew of other bankruptcies, defaults and near defaults. Prominent among canada goose factory sale them were cases involving the Washington Public Power Supply System (WPPSS); Cleveland, Ohio; Bridgeport, Connecticut; Yonkers, New York; Erie County, New York; and Canada Goose Coats On Sale Orange County, California. All of them also grabbed headlines in their day.

canada goose deals Here are some lessons we learned from them:

buy canada goose jacket cheap Every year some municipal buy canada goose jacket bonds default. The overwhelming majority are in subsectors that are canada goose uk outlet more corporate canada goose uk black friday in character than most municipals, such as industrial development, hospital revenue, senior living, or real estate based bonds. On occasion, even more traditional tax backed or municipal utility revenue bonds default. A more common threat to bondholder value is credit deterioration; many municipal bonds are downgraded for reasons less serious than outright default. Downgrades can drive down bond prices, so research into credit trends is important.

canada goose coats on sale Nevertheless, the municipal bond market particularly the debt issued by state and local governments for traditional projects like schools, roads, water and sewer systems, and publicly owned utilities has an excellent history canada goose black friday sale of safety. Over the last 20 years, the annual default rate never exceeded the 0.25 percent of bonds outstanding that occurred in 2008 canada goose clearance and 2009. While we expect the default rate to rise in the near term, we don expect the increase to be significant.

canada goose black friday sale Central Falls, Rhode Island, filed canada goose coats on sale for Chapter 9 bankruptcy last fall but has continued to meet its debt service payments. A municipality can default on a bond without filing a bankruptcy, and a bankruptcy doesn automatically result in defaults. Municipal canada goose clearance sale bankruptcies remain rare; their goal is to give municipalities facing huge financial problems a mechanism to work out their problems. Taking this step is neither a guarantee of debt repayment nor an automatic default the outcome depends on the municipality specific circumstances.

canadian goose jacket Municipalities canadian goose jacket provide essential services and can pack up and disappear the way a corporation can. But poor budgeting, weak revenues and poor control over expenses can lead to insufficient revenues and insufficient liquidity to pay all required expenses, including buy canada goose jacket cheap debt service. For the Canada Goose online municipal analyst, paying attention to cash positions and balance sheets is crucial.

Canada Goose online In an effort to Canada Goose sale win big, the occasional local official has invested local funds in inappropriately risky financial products. The Orange County, California, bankruptcy in 1994 showed the fiscal havoc that officials can wreak when they lose focus on capital preservation.

buy canada goose jacket The recent troubles for Harrisburg, Pennsylvania, and Jefferson County, Alabama, show what can happen when a canada goose outlet store municipality undertakes a project that is too large in scope and not well conceived or implemented. Harrisburg guaranteed the debt of a trash incinerator; Jefferson County undertook the extensive upgrade of a sewer system. WPPSS provides the municipal market most notorious example of project overreach. Its failed effort to build five nuclear power generating plants simultaneously would have made it cheap Canada Goose infamous even without its acronym, which investors pronounced

canada goose clearance sale Municipalities cannot simply expect to raise taxes or rates to repay debt. At some point, doing so becomes economically or politically unfeasible.

canada goose store One of the complicating factors about the municipal market is that local governments operate within state constitutional and statutory provisions. Some states are much more proactive Canada Goose Parka than others in responding to local government distress. When Orange County filed for bankruptcy in 2004, California did little to support it. The same was true when Vallejo filed for bankruptcy in 2009. But New York State has been much more involved in solving the problems of its distressed local governments. Learning from New York City experience in the 1970s, the state has in several cases created boards to help bring local budgets back into canada goose coats balance. Michigan and Pennsylvania, too, have been closely involved in local financial turnarounds. Rhode Island has recently started down a similar path.

cheap Canada Goose Overall, the municipal bond market is large and complicated, with more than 40,000 municipal issuers and over $3.7 trillion in debt outstanding. The overwhelming majority of these issuers will continue to make the decisions needed to balance their budgets and honor their contractual commitments. Canada Goose Jackets But as we have seen in the past, there will always be outliers whose poor decisions threaten their financial health.

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