Tag: Fidelity Fixed Income

Providence is ready to roll the dice on a pension bond

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202105211039SM______BNDBUYER_00000179-8608-ddb0-adf9-ff4cb4b00001_110.1

Excerpt:

Red flags waved as Providence Mayor Jorge Elorza proposed issuing $704 million in pension obligation bonds to deal with a pestering unfunded liability problem in Rhode Island’s capital city.

The amount exceeds the city’s annual operating budget. Bond markets often frown on such borrowing and sentiment among state officials who must sign off is uncertain. Skeptics also call the city’s fiscal management track record shaky, while memories linger of a fiasco in Woonsocket, which tried a similar move nearly 20 years ago.

Author(s): Paul Burton

Publication Date: 21 May 2021

Publication Site: Fidelity Fixed Income

Puerto Rico Oversight Board overrules legislature on PREPA privatization spending

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202105141647SM______BNDBUYER_00000179-6c0f-d5f6-a179-7e4fb2ce0001_110.1

Excerpt:

The Puerto Rico Oversight Board voted to overrule the territory’s House of Representatives on spending for the privatization of the Puerto Rico Electric Power Authority transmission and distribution system.

On Wednesday the House voted 43 to 0 with 2 abstentions against authorizing a revision to this year?s General Fund budget allocating $750 million for the privatization.

On Thursday the board said it had used its budgetary powers in the Puerto Rico, Oversight, Management, and Economic Stability Act to overrule the House vote. On Saturday the board had sent a letter to the leadership of the Puerto Rico House of Representatives and Senate asking them to approve the funding and saying that if it did not the board would act without their approval.

The board said the monetary allocation was ?to ensure the necessary levels of working capital to operate PREPA?s electrical grid and comply with the agreement between LUMA Energy, PREPA and the P3 Authority, by which LUMA is to assume the operation and management of PREPA?s transmission and distribution system on June 1.?

Author(s): Robert Slavin

Publication Date: 14 May 2021

Publication Site: Fidelity Fixed Income News

Federal cash infusion won’t erase Illinois’ chronic fiscal strains

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202104131450SM______BNDBUYER_00000178-cc00-d414-abf8-efa2047e0001_110.1#new_tab

Excerpt:

S&P Global Ratings warns of the pressures posed by the Illinois? burdensome pension tab even as it maintains scheduled contributions despite glaring structural woes cited in the recently published three-year budget forecast from the legislature?s non-partisan Commission on Government Forecasting and Accountability.

When applying fiscal 2022 proposed spending levels, the state?s roughly $5 billion bill backlog could jump to $9.9 billion, and $10.6 billion by the end of fiscal 2024, and a $1.2 billion fiscal 2022 deficit rises to $1.9 billion or $2.3 billion if spending grows by five- and 10-year historical rates of 2.7% or 3.2%, respectively.

The numbers look bleaker with the backlog skyrocketing to record levels of between $19.1 billion and $20.5 billion based on a fiscal 2021 spending base.

Author(s): Yvette Shields

Publication Date: 13 April 2021

Publication Site: Fidelity Fixed Income

GASB critics want more transparency for public pensions and other retirement benefits

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202104091435SM______BNDBUYER_00000178-b7cb-d786-af7b-b7efd3e10001_110.1#new_tab

Excerpt:

The question of whether pensions and other retirement benefits should be more prominently reported by state and local governments is a burning controversy for the Governmental Accounting Standards Board.

What?s at stake is whether the public is being misled by when a governmental general fund is listed in financial statements as balanced while omitting those long-term debts.

GASB requires long-term obligations to be reported in governmentwide reports, but critics say lawmakers too often look only at cash flow funds.

?I implore GASB to stop this confusion and bewilderment,? wrote Sheila Weinberg, founder & CEO of Truth in Accounting in a comment letter. ?Our representative form of government is being harmed.?

Illinois is among the states that critics say have downplayed their tens of billions of dollars of unfunded long-term debts and should be forced by new GASB rules to become more transparent.

GASB officials, on the other hand, say that state and local governments have been required to disclose their long-term debts since the publication of GASB 34 about 20 years ago.

Author(s): Brian Tumulty

Publication Date: 9 April 2021

Publication Site: Fidelity Fixed Income

Illinois governor signs bill that increases Chicago’s pension liabilities

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202104061236SM______BNDBUYER_00000178-a783-de03-a7ff-b7e7bf7e0001_110.1#new_tab

Excerpt:

Illinois Gov. J.B. Pritzker signed legislation that benefits retired Chicago firefighters, rejecting city warnings adding to its already burdensome pension tab could damage ratings and drive up taxes.

The added cost to bring cost-of-living adjustments for all firefighters in tier one up to a simple 3% annual increase despite their birth date amounts to $18 million to $30 million annually and up to $823 million in full by 2055 when the fund is slated to reach a 90% funded ratio.

Pending legislation to do the same for the police fund carries a steeper price tag of up to $90 million annually and $2.6 billion through 2055.

Author(s): Yvette Shields

Publication Date: 6 April 2021

Publication Site: Fidelity Fixed Income

Murphy’s full pension payment revives debate over New Jersey overhaul

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202102241328SM______BNDBUYER_00000177-cf67-de3f-a9f7-ffef66580001_110.1

Excerpt:

Gov. Phil Murphy?s call for New Jersey to make its first full pension contribution in 25 years is generating questions about retirement-system overhaul in one of the nation’s lowest-rated states, and how might the capital markets respond.

Murphy on Tuesday revealed the proposal to pay toward pensions roughly $6.4 billion, or about 14% of his $44.8 billion fiscal 2022 budget proposal to lawmakers. Overall spending would rise 10%. Democrat Murphy’s election-year budget would increase aid to schools and provide income-tax rebates to low- and middle-income families.

Making the full actuarially required contribution will need an additional $1.6 billion expense, according to Murphy. New Jersey was initially scheduled to earmark 90% of its full contribution this year under a ramp-up plan.

Author(s): Paul Burton

Publication Date: 24 February 2021

Publication Site: Fidelity Fixed Income

Munis end with largest increase in yields in a week since COVID-induced turmoil

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202102191549SM______BNDBUYER_00000177-baa7-d4af-a9f7-bfb72adb0001_110.1

Excerpt:

Municipals ended weaker Friday with triple-A benchmark curves rising the most in a week since COVID-19 disrupted all markets in March and April of last year.

Muni yields rose another five basis points on the 10- and 30-year Friday, bringing the total cuts to scales to 18 and 17 basis points, respectively, from Tuesday as the asset class moved closer to U.S. Treasury movements after lagging weakness in taxables since the start of the year. Treasury yields hit 1.35% in 10-years and 2.15% in 30 after news of stimulus out of Washington gaining ground.

“In the past several days, tax-exempts have finally started to react, and while it remains to be seen if the adjustment will be minor or a bigger move, an overall defensive portfolio stance is warranted,” said Mikhail Foux, municipal strategist at Barclays (BCS). “At the current extremely low ratios, one could consider whether to buy extremely rich high-quality tax-exempts or simply purchase Treasuries instead, which even accounting for the tax-exemption make more sense, especially for short and medium-dated bonds.”

Author(s): Christine Albano

Publication Date: 19 February 2021

Publication Site: Fidelity Fixed Income

No rating red flags stand out in Illinois’ proposed budget

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202102191505SM______BNDBUYER_00000177-bb7c-d32d-a5f7-bbfd87c10001_110.1#new_tab

Excerpt:

The prospects for new federal aid and a proposed budget that avoids negative rating triggers should preserve Illinois? investment-grade status, but neither moves the needle on the structural and pension albatrosses.

Gov. J.B. Pritzker’s proposed $95.5 billion fiscal 2022 budget, with a $41.7 billion general fund, clears what was estimated late last year as a $5.5 billion gap, using higher revenue projections and a combination of structural and one-time maneuvers.

In addition to higher tax collections and federal Medicaid matching dollars now expected, the budget holds spending level to fiscal 2021. It raises about $900 million in revenue by curbing corporate tax breaks, keeps some funds earmarked for local governments, the capital fund, and transit agencies and delays repayment of some inter-fund borrowing. It does not rely on an income tax or other general tax increases and it does rely on more federal funds as they are not yet approved.

Author(s): Yvette Shields

Publication Date: 19 February 2021

Publication Site: Fidelity Fixed Income

Chicago Public Schools’ yield penalties hit fresh low

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202101291341SM______BNDBUYER_00000177-4f21-d760-a9ff-4ffdc0490002_110.1#new_tab

Excerpt:

Investors on the hunt for yield with few pickings scooped up Chicago Public Schools? junk paper Wednesday driving down the district?s yield penalties paid in the primary market to their lowest in years.

The 10-year in the $560 million sale that marked the Chicago Board of Education?s first COVID-19 era sale settled at a yield of 1.94%, a 117 basis point spread to the Municipal Market Data?s AAA benchmark.

The BBB benchmark was at an 89 basis point spread Thursday. The new-money and refunding bonds carried one investment grade rating and two speculative grade ones and while high yield investors snapped up the paper, Alliance Bernstein?s high impact social fund shunned the transaction. The fund said the district has failed to provide sufficient evidence it?s protecting students from in-school sexual misconduct in the aftermath of a scandal that drew a rebuke from the U.S. Department of Education.

Author: Yvette Shields

Publication Date: 29 January 2021

Publication Site: Fidelity Fixed Income

Illinois sports agency’s new board chief inherits coronavirus-driven debt woes

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202101251510SM______BNDBUYER_00000177-3a79-d154-a1f7-7ef9935b0001_110.1

Excerpt:

Illinois Gov. J.B. Pritzker tapped incumbent Illinois Sports Facilities Authority board member Leslie Darling to replace outgoing chairman Manuel ?Manny? Sanchez, putting her at the helm of the agency hit hard by the COVID-19 pandemic?s deep wounds to hotel taxes, which are used to repay its debts.

The board governs the agency that owns and operates and issued $150 million of bonds in 1989 for Guaranteed Rate Field where Major League Baseball?s White Sox play and served as the issuer for $400 million of 2001 bonds that financed the renovation of the Chicago Park District-owned Soldier Field ? home of the National Football League?s Chicago Bears. About $430 million of debt is outstanding.

Author: Yvette Shields

Publication Date: 25 January 2021

Publication Site: Fidelity Fixed Income

Puerto Rico bond negotiations slog toward seventh year

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202101251023SM______BNDBUYER_00000177-2bc5-dd67-a377-7bede5980001_110.1

Excerpt:

Negotiations on Puerto Rico?s central government and electric power authority debts have extended for several years, leaving participants with clashing views of the length of time they have taken and the lack of resolution of the island’s debts.

A Feb. 10 deadline looms for the Oversight Board to at least submit a bond deal resolution proposal and several participants expect progress in the coming year.

Since the signing of PROMESA, the Puerto Rico Oversight, Management, and Economic Stability Act, Puerto Rico has been hit or at least shaken by Hurricane Maria, political protests forcing the exit of Ricardo Rossell?, earthquakes, and the COVID-19 pandemic.

Author: Robert Slavin

Publication Date: 25 January 2021

Publication Site: Fidelity Fixed Income

New York MTA buys time as shadows hover

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202101220939SM______BNDBUYER_00000177-208e-d29a-ab7f-b8fea05d0001_110.1

Excerpt:

In sidestepping for now a planned subway and bus fare increase ? a public-relations third rail ? New York?s Metropolitan Transportation Authority called a familiar crisis-management play. It bought time.

Its board on Thursday agreed at Chairman Patrick Foye?s urging not to vote on a 4% biennial fare and toll hikes.

The state-run MTA, which operates mass transit in the New York City region, is in line for $4 billion from the federal rescue bill passed last month and the prospects of an even bigger aid package under President Biden and new Senate majority leader, New York Democrat Charles Schumer.

….

Still, the authority, one of the largest municipal issuers with $47.5 billion of core-credit debt, faces a budget crunch and a variety of pandemic-related uncertainties.

Author: Paul Burton

Publication Date:

Publication Site: Fidelity Fixed Income