Municipal Bonds, The Next Crises (bankrupt, taxable, credit, debt)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Municipal bonds are looking like the next shoe to drop in falling dominoes of the nation’s economy. With scores of cities and counties unable to balance their books, bankruptcies are imminent. We can expect mass layoffs in government jobs as the final option is the only solution left after years of mismanagement. This will mean severe cutbacks in services that most people have come to consider normal. This will come at a bad time for many communities who have been deferring maintenance on vital services for decades such as bridges, water mains, and sewage systems. I am afraid what we are going to witness over the next couple of decades is the US deteriorating to a point that few of us believed we would ever see.
most states laws require most things like paying the police , teachers etc to default before they can default on their general obligation bonds.
very very unlikly to happen in most localities, a bigger risk is credit down grades reducing the value of your bonds if you wanted to sell or bond funds ......
Last edited by mathjak107; 06-21-2010 at 02:03 PM..
NEW YORK (CNNMoney.com) -- Just two weeks after Illinois Gov. Pat Quinn chopped $1.4 billion from the budget, the cash-strapped state is turning to the debt markets to get it through the fiscal year.
On Wednesday, it plans to raise $900 million through Build America Bonds to fund its first capital program in more than a decade. The money will be used to improve roads, bridges and schools.
And this debt issuance is only the beginning. The state plans to raise $1.3 billion in short-term notes next week and $1.4 billion in debt related to tobacco settlement funds in November.
And, the state plans to turn to the debt markets to fund $3.7 billion in pension obligations in December, if the state legislature approves. The state already sold $2.4 billion in pension notes in January.
States don't traditionally fund their pensions with debt, but the practice frees up other money that can be used for operations, said John Sinsheimer, Illinois' director of capital markets.
The Prairie State is in the midst of correcting years of overspending that has left the state in deep financial trouble. It could have as much as $6 billion in unpaid bills that have left schools, social service agencies and vendors waiting months to be paid, according to state comptroller Daniel Hynes.
"We're leveraging our future and that's not the correct approach, but it was what was chosen out of a lot of bad options," Hynes told CNNMoney.com.
On Wednesday, the state intends to issue Build America Bonds, a Recovery Act program that has proven very popular among states and municipalities. The bonds are taxable, but the federal government subsidizes 35% of the interest payments.
The state has issued $2.3 billion in Build America Bonds so far this year, attracting many new investors, including those from overseas, said Sinsheimer.
Illinois is not alone in turning to the debt markets to get out of a fiscal whole. Many states and municipalities have ramped up their borrowing as tax revenues plummet amid the economic downturn.
But Illinois' actions have not sat well with rating agencies. Both Moody's and Fitch downgraded the state in June, before the $24.9 billion budget was passed. That makes it more expensive and more difficult for the state to raise money in the debt markets.
"The state has not demonstrated the political willingness to take action during the fiscal crisis to restructure its budget to achieve balance," according to Fitch. It "has relied almost exclusively on borrowing to close its sizeable budget gaps."
Funding pensions with debt??? Is IL serious? That's pretty much what GM did prior to their eventual BK.
Funding pensions with debt??? Is IL serious? That's pretty much what GM did prior to their eventual BK.
Hey don't worry about it, Mathjack said it can't happen. Pay no attention to the man behind the curtain, drink the koolaid and everything will be fine.
Seriously though, wait until you see the size of the Federal bail out package to deal with Municipal and State defaults...it will be huge. Of course no one has the political courage to speak about it until after the elections.
Hey don't worry about it, Mathjack said it can't happen. Pay no attention to the man behind the curtain, drink the koolaid and everything will be fine.
Seriously though, wait until you see the size of the Federal bail out package to deal with Municipal and State defaults...it will be huge. Of course no one has the political courage to speak about it until after the elections.
There was an article about a local city here that just had their bond rating bumped up to AAA. Chesapeake, VA.
Some municipalities are realing, but there are a number that are doing ok.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
