how state policies affect municipal bonding and economic development
DESCRIPTION
How State Policies Affect Municipal Bonding and Economic Development. Susie Becker – Vice President Alan Westenskow – Vice President Zions Bank Public Finance January 15, 2013. Utah’s Current Competitive Advantages. Hub location for transportation – rail, air, trucking - PowerPoint PPT PresentationTRANSCRIPT
How State Policies Affect Municipal Bonding and Economic Development
Susie Becker – Vice PresidentAlan Westenskow – Vice President
Zions Bank Public Finance
January 15, 2013
2
Utah’s Current Competitive Advantages Hub location for transportation – rail, air, trucking Low cost of electricity Relatively low cost of living Good work ethic and young, relatively educated work force, which is
always growing Easy access to outdoor recreation opportunities Relatively low taxes for individuals and businesses Fiscally well managed governments Good transportation – public transit and general highway connectivity Good higher education system Foreign language ability
3
Where Can Utah Improve?
Air quality issues Perceptions of nightlife and culture K-12 education stresses Work force that is sufficiently trained in required specialties and
work opportunities to prevent out migration of educated work force
4
Future Issues
Constrained water resources Keeping infrastructure up with rapid population growth Balancing future electricity demands with yet to be determined
environmental regulations Global trade
5
Economic Development Survey
Questions asked:
6
#1 – Decisions Made . . .
7
#1 – Decisions Made . . .
8
Community Development Renewal Agencies
Source: Utah State Office of Education
9
Growth in Tax Increment
Source: Utah State Office of Education
10
Facts About Tax Increment
Source: Utah State Office of Education
11
#2 – Economic Tools Used
12
#2 – Economic Tools Used
13
#2 – Economic Tools Used
14
#3 – Economic Challenges of Cities
15
#3 – Economic Challenges of Cities
16
#4 – Looking Forward . . .
17
#4 – Looking Forward . . .
18
#4 – Looking Forward . . .
19
Past Policy Decisions
What policy decisions in the past have positioned Utah's economy so favorably during these troubling economic times?
20
Past Policy Decisions That Have Benefitted Utah
Because Utah has been conservative in its past debt policies it has had enough capacity to fund necessary infrastructure projects when needed I-15 CORE project could be funded at a time when construction
was needed, but federal money had dried up. State could issue sufficient amount of bonds and still maintain AAA rating
Utah’s debt laws and policies have allowed Utah to build enough infrastructure to meet local and statewide needs
Business friendly tax environment Historic good balance of debt and infrastructure spending
21
Policy Decisions that can be Made Today to Position Future Utah Economy Maintain all financing options at both the state and local levels Resist ideas to limit debt capacity and options
Idaho debt constraints Focus on policies that coordinate resources within state
instead of making communities compete for local business Maintain representative democratic system to coordinate and
steer issues
22
Direct Democracy Case Study: California What is unique about California is not its set of challenges, which differ in scale but not
in kind from those elsewhere. It is its brand of democracy. The Southern Pacific Railroad had corrupted every part of the State. As one reporter
wrote in 1896, “it didn't matter whether a man was a Republican or Democrat. The Southern Pacific Railroad controlled both parties, and he either had to stay out of the game altogether or play it with the railroad.”
To reform the influence of special interests in October 1911 California voters had to decide on three new types of balloting: referendums, recalls and initiatives. They accepted them all with enthusiasm. Referendum: A vote in which the citizens accept or reject a proposal such as a
law passed by their legislature Recall: A vote by the people to remove an elected official from office before the
official’s term expires Initiative: A measure put on a ballot by a petition of citizens Proposition: An initiative or measure that has qualified for a ballot
http://www.economist.com/node/18563638
23
Characteristics of Different Types of Bonds
Source: Zions Bank Public Finance
24
Bond Ratings
Source: Moody’s, Standard & Poor’s and Fitch
25
Moody’s Ratings Distributions: Municipals vs. Corporates, Year End 2011
Source: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_140114
26
1
State Rating Category Map
AZ*Aa3/AA-/NR
UTAaa/AAA/AAA
CAA1/A-/A-
NVAa2/AA/AA+
WAAa1/AA+/AA+
ORAa1/AA+/AA+
I D*Aa1/AA+/AA
KS*Aa1/AA+/AA
OKAa2/AA+/AA+
MOAaa/AAA/
AAA
ARAa1/AA/NR
LAAa2/AA /AA
KY Aa2/ AA-/ AA-
I N*Aaa/AAA /AA+
OH Aa1/ AA+/ AA+ WV
Aa1/AAAA+
MIAa2/AA-
/AA-
NHAa1/AA/AA+
TNAaa /AA+ /AAA
TXAaa/AA+/AAA
NE*NR/AAA/NR
I A*Aaa/AAA/AAA
MN Aa1/AA+/
AA+WI
Aa2/AA/AA
I LA2/A+/A
MSAa2/AA
/AA+
ALAa1/AA/
AA+
GAAaa/AAA/AAA
FL
SCAaa/AA+/
AAA
NC Aaa/AAA/
AAA
PAAa2/AA/AA+
NYAa2/AA
/AA
ND*Aa1/AA+/NR
SD*NR/AA+/AA
NMAaa/AA+/NR
CO*Aa1/AA/NR
MTAa1/AA/AA+
WY*NR/AAA/NR
RIAa2/AA/AA
CT Aa3/AA/AA
DE Aaa/AAA/AAA
NJAa3/AA-/AA-
VTAaa/AA+
/AAA
ME Aa2/AA/AA+
VA
AKAaa/AAA/AA+
HIAa2/AA/AA
MAAa1/AA+/AA+
DC Aa2/A+/AA-
MD Aaa/AAA/AAA
Aa1/AAA/AAA
Aaa/AAA/AAA
AAA
AAA/AA
AA
Moody’s/S&P/Fitch
NR= Not Rated
* No GO debt- Issuer Rating
Last updated on 7/19/2012
Data Sources: Moody’s, Standard and Poors and Fitch Ratings
A
GuamNR/B+/NR
PRBaa1/BBB/BBB+
BBB
BB/B
US VIBaa2/BBB+/BB
BBB/BB
AA/A
Slide courtesy of Wells Fargo
Bond Ratings of US States
27
3
Rating Action Heat Map: 7/2011 - 7/2012
AZ*Aa3/AA-/NR
UTAaa/AAA/AAA
CAA1/A-/A-
NVAa2/AA/AA+
WAAa1/AA+/AA+
ORAa1/AA+/AA+
I D*Aa1/AA+/AA
KS*Aa1/AA+/AA
OKAa2/AA+/AA+
MOAaa/AAA/
AAA
ARAa1/AA/NR
LAAa2/AA /AA
KY Aa2/ AA-/ AA-
I N*Aaa/AAA /AA+
OH Aa1/ AA+/ AA+
WVAa1/AA
AA+
MIAa2/ AA-
/AA-
NHAa1/AA/AA+
TNAaa /AA+ /AAA
TXAaa/AA+/AAA
NE*NR/AAA/NR
I A*Aaa/AAA/AAA
MN Aa1/AA+/
AA+WI
Aa2/AA/AA
I LA2/A+/A
MSAa2/AA
/AA+
ALAa1/AA/
AA+
GAAaa/AAA/AAA
FL
SCAaa/AA+/
AAA
NC Aaa/AAA/
AAA
PAAa2/AA/AA+
NYAa2/AA
/AA
ND*Aa1/AA+/NR
SD*NR/AA+/AA
NMAaa/AA+/NR
CO*Aa1/AA/NR
MTAa1/AA/AA+
WY*NR/AAA/NR
RIAa2/AA/AA
CT Aa3/AA/AA
DE Aaa/AAA/AAA
NJAa3/AA-/AA-
VTAaa/AA+
/AAA
ME Aa2/AA/AA+
VA
AKAaa/AAA/AA+
HIAa2/AA/AA
MAAa1/AA+/AA+
DC Aa2/A+/AA-
MD Aaa/AAA/AAA
Aa1/AAA/AAA
Aaa/AAA/AAA
Downgrade
Upgrade
Favorable Outlook change
Unfavorable Outlook change
Moody’s/S&P/Fitch
NR= Not Rated
* No GO debt- Issuer Rating
Colors represent rating action by at least one agency within the past 12 months
Last updated on 7/19/2012
Data Sources: Moody’s, Standard and Poors and Fitch Ratings
PRBaa1/BBB/BBB+
GuamNR/B+/NR
US VIBaa2/BBB+/BB
No Action
Slide courtesy of Wells Fargo
Recent Rating Action for US States
28
Average One-year Rating Transition Rates, 2008-2011, GO and Non-GO
Source: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_140114
29
Municipal Bond Default Counts by Sale Purpose, 1970-2011
Source: http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_140114
30
Notable Municipalities in Distress
Source: Moody’s Special Comment: Recent Local Government Defaults and Bankruptcies May Indicate a Shift in Willingness to Pay Debt
31
Job loss trends in local government jobs
Since the beginning of President Obama’s term, state and local governments have shed 611,000 employees — including 196,000 educators — according to government statistics.
Source: http://www.washingtonpost.com/business/economy/threat-from-mounting-public-job-losses-tested-obamas-economic-strategy/2012/04/29/gIQAhJpMqT_story.html
32Source: Bond Buyer Index
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
Jan-
88
Jul-8
8
Jan-
89
Jul-8
9
Jan-
90
Jul-9
0
Jan-
91
Jul-9
1
Jan-
92
Jul-9
2
Jan-
93
Jul-9
3
Jan-
94
Jul-9
4
Jan-
95
Jul-9
5
Jan-
96
Jul-9
6
Jan-
97
Jul-9
7
Jan-
98
Jul-9
8
Jan-
99
Jul-9
9
Jan-
00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
Wee
kly
Inte
rest
Rat
e (%
)
Date
BBI on 08/09/12
Interest Rate Trend20 Year 20 Bond Buyer Index
January 1988 to August 2012
Bond Interest Rates
33
New Money Borrowing Only Modestly Reactive to Interest Rates Interest rates are usually only a modest factor driving new-money bond
issuance. State and local governments base their new-money borrowing plans
primarily on capital needs, voter sentiment, political viability and relative health of operating budgets, with interest rates representing only a secondary consideration except during periods of extreme volatility.
Source: Moody’s Debt Driver 2012 Report 3/5/2012
34
Volume of Bonds Issued in US 1992-2011
Source: The Bond Buyer 2012 Yearbook
35
Bond Volume Issued by Utah 1992-2011
Source: The Bond Buyer 2012 Yearbook
36
Bonds Per Capita: US and Utah
Sources: The Bond Buyer 2012 Yearbookwww.census.gov
37
Comparison of State Bonds Per Capita Utah
Sources: The Bond Buyer 2012 Yearbookwww.census.gov
38
Uses of Utah Bond Issues 2011
Source: The Bond Buyer 2012 Yearbook
39
Uses of Utah Bond Issues 2010
Source: The Bond Buyer 2011 Yearbook
40
Utah Full Use of Bond Issues 2011
Source: Thomson Reuters Municipal Market Analysis Utah – Financial Advisor Year End 2011
41
State of Utah General Obligation Bonds Annual Debt Service (P&I)
Source: State’s Financial Advisor (compiled from past Official Statements)
42
State of Utah Recommended Debt Levels
43
Permanent Community Impact Fund
The Utah Community Impact Board Permanent Community Impact Fund provides grants and or loans to subdivisions of the state, which are or may be socially or economically impacted, directly or indirectly, by mineral resource development on federal lands. The CIB receives funding from a portion of federal mineral lease royalties returned to the State by the Federal Government.
From 2007 to 2011 CIB distributed $535,454,657 $215,847,657 in ML Grants $160,981,000 in ML Loans $158,626,000 in Bonus Loans
http://housing.utah.gov/cib/documents/2011LEGISLATIVEREPORT.pdf