• MSRB Publishes Summary of Responses to its Request for Information on ESG Practices in the Municipal Securities Market.
• Cases concerning the taxation of commercial wind facilities here and here.
• Interesting case concerning special assessments for shoreline fortification project here.
• CDFA Federal Financing Webinar Series: Funding Community Energy Needs with the Department of Energy.
• Jefferies’ Pitch on Big Texas Muni Deal: No Gun, Oil Policies That Raise GOP Ire.
• And finally, Setting The Scene is brought to us this week by Nunez v. City of Redondo Beach, in which Monica Nunez  went kersplat after tripping on a minor sidewalk defect.  In the ensuing litigation, “Nunez’s deposition established that when she fell it was sunny, not dark or gloomy, she had nothing in her hands and was ‘normal walking, … looking ahead.'”  Gloomy? Have you been to Redondo Beach? Gloom thin on the ground. Gloom thin in the air. Not just thin, downright anorexic, the gloom. And what the hell is “normal walking?” Is there an abnormal walking? Might there be a Ministry of such walks?

Property owners, including trust, filed petition for writ of mandate, seeking to set aside special assessment to fund shoreline fortification project as violative of state constitutional limitations on assessments.

The Superior Court entered judgment invalidating assessment, but subsequently denied property owners’ motions for attorney fees under private attorney general statute. District appealed from judgment and property owners appealed from order denying attorney fees.

The Court of Appeal held that:

• Project would create general benefit of improved public beach;
• State agency’s requirement that city district ensure public access to beach did not render beach cost of project rather than general benefit;
• District was required to apportion special benefits that revetment would confer on parcels behind it;
• District was required to assess county-owned parcels specially benefited by project;
• Possibility of new assessment in future did not render financial benefits from litigation so uncertain as to warrant attorney fees;
• Trial court properly considered litigation benefits to property owners who joined litigation after petition was first filed in considering attorney fee award; and
• Trust had adequate financial motivation to participate in litigation absent award of attorney fees.

Shore fortification project would create wider, sandy beach that would benefit public in general, and, thus, constitutional provision governing assessments required city district to separate project’s special benefits to certain parcels from general benefit, including beach, and include only portion of cost of project representing special benefits in special assessment used to fund project, even if general benefits did not impose additional costs and district did not subjectively intend to widen beach for recreational purposes; allowing any special benefit that also provided general benefits to support assessment for entire cost of project would be inconsistent with constitutional separation and quantification requirements, which depended on real-world effects rather than agency intent.

Coastal Commission’s requirement that city district ensure public access to beach that would be enlarged and enhanced as a result of shore fortification project did not render enhanced public beach a cost of such project rather than general benefit, and, thus, did not exempt district from constitutional requirement of separating such general benefit from project’s special benefit of protecting particular properties and include only costs attributable to special benefit when imposing special assessment on those properties; provision of wide, sandy beach was central to revetment project, not mere condition for approval or required consideration by agency, and Commission’s action to ensure project would not cut off public’s beach access did not transform project’s general benefits into costs.

Revetment was integral part of city district’s proposed shoreline fortification project, and, thus, constitutional article governing assessments required district, when imposing assessment to fund project, to apportion special benefits that revetment would confer by providing additional protection to parcels behind it so that assessment would be proportional to those parcels’ relative special benefits, even though property owners constructed existing, temporary revetment and agreed to fund its relocation; State Lands Commission required district to pay for existing revetment’s unauthorized use of state lands, district persuaded Coastal Commission to keep revetment, and Coastal Commission’s conditions of approval required district to relocate revetment and mitigate its environmental impact.

Shoreline fortification project would provide special benefit of protection to county-owned parcels that contained stairs providing public access to beach, and, thus, constitutional article governing special assessments required city district to impose project-funding assessment against such parcels, even if project would not change stairs’ function; project would protect shoreline, including stairs and parcels, by adding sand and maintaining revetment, each parcel encompassed large area, and constitution did not permit district to treat county parcels more favorably than it did privately-owned parcels that also received special benefit from project, such as by exempting county parcels from assessment or funding benefits to county parcels through in-kind contributions from homeowners.

Pedestrian filed a negligence lawsuit against city after she tripped on an elevated sidewalk slab and injured her left knee and right arm.

The Superior Court granted city summary judgment and pedestrian appealed.

The Court of Appeal held that city’s policy to repair sidewalk tripping hazards greater than a half-inch did not create a triable issue of fact as to the triviality of sidewalk offset.

City’s policy to repair sidewalk tripping hazards greater than a half-inch did not create a triable issue of fact as to the triviality of sidewalk offset, in pedestrian’s negligence lawsuit against city after she tripped on an elevated sidewalk slab; minor defects to the alignment of city’s sidewalk inevitably occur, and the continued existence of such nonalignments without warning or repair was not unreasonable and did not preclude the trial court from finding the sidewalk defect was trivial.

School district filed suit against neighboring school district seeking to recover pro rata distribution of funds arising from their shared trust property.

The Chancery Court entered judgment for plaintiff school district. Both sides appealed.

The Supreme Court, en banc, held that statute governing schools’ division of revenue collected from shared townships was a condition precedent, not a statute of limitations.

Statute governing the manner in which revenue from shared townships was to be administered to school districts, which stated that “any school district failing to timely provide the list to the superintendent of the custodial school district shall forfeit its right to such funds” was not a statute of limitations that established a time limit for bringing a lawsuit; rather, it was a condition precedent school districts were required to fulfill.

County brought action against landowners, alleging that landowners had encroached on county’s purported easement to access sewer and water mains on property by constructing fence and planting trees in easement area, and seeking injunctive and declaratory relief.

The Superior Court granted landowners’ motion for summary judgment, and denied county’s cross-motion for partial summary judgment on the issue of the county’s ownership of the lines and easement. County appealed.

The Court of Appeals held that:

• Any inverse condemnation claim by landowners was untimely, and
• County held title to an easement along the surface of the property.

County held title to sewer and water mains under landowners’ property, and thus held title to an easement along the surface of the property to service, maintain, and repair the utility mains, where county took possession of the lines more than two decades earlier and had continuously used and operated the lines for a public purpose.

Intervenors impacted by potential wind energy farm appealed Public Utilities Commission’s (PUC) approval of siting permit for wind energy farm.

The Circuit Court affirmed, and intervenors appealed.

The Supreme Court held that:

• PUC correctly applied legal standard requiring an applicant to comply with all applicable laws and rules;
• Application adequately complied with requirement that it include a “forecast” of the impact that the facility would have on solid waste management facilities;
• Adoption of noise levels set forth in amended county ordinance did not pose any danger to the health, safety, or welfare of the inhabitants living near the project;
• Applicant’s failure to commission a field study to measure the ambient sound that existed naturally in area of proposed wind energy farm prior to construction did not indicate that applicant failed to meet its burden to show that the facility would not substantially impair the health, safety or welfare of the inhabitants;
• Applicant met its burden to show that the facility would not substantially impair the health, safety or welfare of the inhabitants as it related to the topic of infrasound; and
• Applicant was not required to submit an air quality study.

Parents of students sexually abused by counselor at charter school brought action against school’s corporate operator, alleging claims for assault and negligence.

The District Court denied operator’s plea to the jurisdiction, which asserted immunity from suit and liability. Operator appealed.

The Court of Appeals held that:

• Operator had governmental immunity from parents’ suit;
• Open-courts provision of the State Constitution did not apply to preclude operator’s governmental immunity; and
• Uncontroverted affidavit established operator’s status as an open-enrollment charter school.

Operator of open-enrollment charter school had governmental immunity from claims for assault and negligence brought by parents of students sexually abused by a counselor employed by operator at school, since a public school district would be immune from such claims.

Open-enrollment charter school had governmental immunity as a matter of common-law interpretation, rather than on the basis of statute, and thus open-courts provision of the State Constitution did not apply to preclude such immunity, so as to confer subject-matter jurisdiction over action against operator of open-enrollment charter school, brought by parents of children sexually abused by counselor, and asserting claims for assault and negligence; although the legislature enacted a statute granting governmental immunity to open-enrollment charter schools, the Supreme Court as a whole did not defer to such enactment in holding that open-enrollment charter schools have immunity.

Uncontroverted affidavit established operator of school as an open-enrollment charter school, as required for school’s governmental immunity from suit brought by parents of students sexually abused by school counselor, where parents did not object to the affidavit, did not file any evidence controverting the school’s status as an open-enrollment charter school, and sought a declaration that a certain statutory provision applicable only to open-enrollment charter schools violated the open-courts provision of the Texas Constitution, which was tantamount to a judicial admission of the school’s status as an open-enrollment charter school.

Landowners brought action against county public utility district, an operator of river dam that caused occasional flooding, seeking injunctive relief and asserting claims of inverse condemnation, trespass, nuisance, and negligence arising from flooding of their agricultural property.

Utility district counterclaimed for declaration of prescriptive easement to flood at water levels above those set forth in express easement.

On summary judgment, the Superior Court declared a prescriptive easement in favor of utility district and dismissed landowners’ claims. Landowners appealed.

The Court of Appeals held that:

• Continuous and uninterrupted use, as element of prescriptive easement, can be decided on summary judgment;
• As matter of first impression, a party asserting a prescriptive easement must prove each element by clear and convincing evidence;
• Factual issues precluded summary judgment on prescriptive easement claim;
• Factual issue as to applicability of subsequent purchaser rule precluded summary judgment on inverse condemnation claims as to riverfront parcel;
• Trespass and nuisance claims for riverfront parcel were not subsumed by inverse condemnation claims; and
• Utility district did not cause injury to inland agricultural parcel that allegedly flooded due to defect in diking improvements.

Fitch Ratings-New York-08 August 2022: State budgets are in a much better position coming into fiscal 2023 and are structured to combat inflationary and macro pressures over the next several months, according to Fitch Ratings in a new report.

All 50 states have enacted budgets as fiscal 2023 gets underway, an improvement from pre-COVID dynamics thanks largely to a second year of surging revenues. “Enacted budgets have effectively moved from restoring cuts taken during the brief but severe downturn to programmatic spending, while also adding to reserves and reducing taxes,” said Senior Director Karen Krop.

Slower economic growth and rising inflation do pose some downside risk. The enacted budgets consider potential economic and geopolitical headwinds. After historically strong US GDP growth of 5.7% in 2021, Fitch expects growth to slow sharply in 2022 to 2.9% and then further to 1.5% in 2023, due to rapidly rising interest rates.

“States are well positioned for slower growth, as a result of generally prudent fiscal choices made over the last two fiscal years,” said Krop. The budgetary safeguards states are enacting include making sizeable deposits to rainy day funds (many of which are now considered fully funded), creating new reserves to address future uncertainty and reducing long-term liabilities.

Strong labor markets, while integral to state revenue strength, also pose a challenge to government and school district in recruiting and retaining employees. In response, states are providing additional funding for school districts and higher education, allotting some of that funding to increase salaries and sweeten compensation packages to retain employees.

“U.S. State Budgets Balanced in 2023” is available at www.fitchratings.com.

Contact:

Karen Krop
Senior Director
+1-212-908-0661
Fitch Ratings, Inc.
Hearst Tower 300 W. 57th Street New York, NY 10019

Eric Kim
Senior Director
-1-212-908-0241

Media Relations: Sandro Scenga, New York, Tel: +1 212 908 0278, Email: sandro.scenga@thefitchgroup.com

Additional information is available on www.fitchratings.com

In FY2022, from July 2021 to June2022, tumultuous financial markets played a key role in many pension funds registering negative investment returns. Since these pension funds invest in a wide array of investment sectors, everything from public and private equity to real estate investments, both domestic and global events adversely impacted these pension fund performances.

These pension fund performances ultimately determine the funding levels of pension obligations for all state and local governments that take part in pension funds for their employees. In addition, when pension funds calculate the pension burden for each participating agency, they use a discount rate to calculate the present value of obligations for a future pension payout. This discount value will typically be adjusted based on the investment performance of the pension fund.

In this article, we will take a closer look at how market investment returns are shaping the future of pension obligations for many local governments in the United States.

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municipalbonds.com

by Jayden Sangha

Aug 10, 2022

The municipal bonds market is ripe for sustainable investing. These bonds are often tied to ESG projects without a premium price—at least for now.

When investors think about sustainable investing, they often focus on broad themes—such as water scarcity or clean energy—or individual companies that are leaders in environmental, social and governance (ESG) practices.

But those looking to build their ESG portfolios could also tap into municipal bonds. Increasingly issued by state and local governments to fund public projects that can have a positive social or environmental impact—from schools in underserved areas to infrastructure for zero-emission transportation—muni bonds can clearly align with sustainability goals.

What makes them potentially alluring right now? New analysis from Morgan Stanley Research finds that muni bond valuations are still driven largely by the issuer’s credit rating, and not according to their ability to address ESG-related risks—a pricing advantage that may soon change.

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Morgan Stanley

Aug 9, 2022

• July is typically a slow month for global green bond sales
• BloombergNEF sees issuance slowing under greenwashing scrutiny

Global sales of green bonds, the largest category of sustainable debt by amount issued, plunged to a 19-month low in July amid a typical summer lull and as opportunistic borrowers preferred traditional bond offerings that are faster to complete.

Sales of green bonds fell to about $24 billion last month from over $45 billion the previous month, data compiled by Bloomberg show. That’s the lowest since December 2020, when companies and governments issued about $7.7 billion of green debt.

July, August and December are historically three of the slowest issuance months for green bonds. And while global bond issuance is picking up after a rough first half, borrowers find it harder to accelerate a sustainable transaction when market conditions are favorable because these transactions require more work leading up to the sale, according to top underwriters of the debt.

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Bloomberg Green

By David Caleb Mutua

August 9, 2022

Key Takeaways

• We expect ratings to remain stable or improve over the next two years as rated CDFIs take steps to mitigate risks from inflationary pressure and rising interest rates.
• Some higher equity ratios in 2021 may prove temporary, and thus may not be the sole factors in potential near-term rating actions.
• On lending their recent influx of capital, we expect some CDFIs’ equity to decrease relative to assets over time.
• Other credit factors such as asset quality and liquidity are likely to remain strong.

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10 Aug, 2022

As the US Department of Justice (DOJ) begins to revive the use of Supplemental Environmental Projects (SEPs), it is likely that they will appear again with increasing frequency in settlement agreements moving forward. DOJ received comments through July 11, 2022 on its interim final rule to revoke the Trump-era regulation that prohibited payments to non-governmental, third-party organizations who are not parties to an enforcement action—the regulation that effectively prohibited SEPs in settlement agreements. This post will provide an overview of SEPs, regulations surrounding SEPs, comments received pertaining to the revival of SEPs, and the likely use of SEPs moving forward.

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By Katherine Wenner on August 4, 2022

Squire Patton Boggs

The Infrastructure Investment and Jobs Act (IIJA), also known as the bipartisan infrastructure bill, will increase federal spending on infrastructure by about $550 billion over the next decade, nearly all through grants to state and local governments, which own much of the nation’s infrastructure. At our annual Municipal Finance Conference in July 2022, four experts addressed several questions about the IIJA: Ryan Berni, senior advisor to Mitch Landrieu, the infrastructure implementation coordinator in the White House; D.J. Gribbin, former special assistant to President Trump for infrastructure; Shoshana Lew, executive director of the Colorado Department of Transportation; and Eden Perry, head of the U.S. Public Finance Operation and S&P Global Ratings.

A video of the panel is posted here. Here are some highlights.

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The Brookings Institution

by Nasiha Salwati and David Wessel

Monday, August 8, 2022

The Prospect interviewed researchers Amanda Kass and Philip Rocco on the American Rescue Plan, an unprecedented fiscal outlay for local governments that remains widely unknown.

In March of last year, the American Rescue Plan put $350 billion toward a fiscal recovery fund for state and local governments. Lately, ARPA only seems to get media attention when the center-left complains that it funded tax cuts or set off inflation. Critics who say it was overkill grumble that it was “fighting the last war”—that ARPA overshot in its attempt to avoid the austerity of the Great Recession.

But ARPA is unrivaled in recent history as a flexible, open-ended public-funding package. A multipurpose fund available to tens of thousands of governments nationwide, ARPA is the largest broad-based aid transfer in 50 years, since the General Revenue Sharing program President Nixon enacted in 1972, which ended in 1986. ARPA is also bigger than its $150 billion predecessor, the CARES Act’s Coronavirus Relief Fund, which only went to larger state governments, cities, and counties. That makes it a great trove of information for researchers studying public investment.

Amanda Kass, the associate director of the Government Finance Research Center at the University of Illinois at Chicago, and Philip Rocco, a political scientist at Marquette University, have broken down expenditures by local governments. The Prospect interviewed the researchers about their findings as part of our Twitter Spaces series. The audio is embedded below.

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THE AMERICAN PROSPECT

BY PROSPECT STAFF

AUGUST 10, 2022

The problem is looming for big city transit agencies in places like New York and San Francisco, with ridership unlikely to recover before federal pandemic aid dries up, Fitch Ratings warns.

Some of the country’s busiest transit systems will face big budget pressures in the coming years, because their post-pandemic ridership is not likely to recover before federal stimulus funds run out, a major bond ratings agency warned this week.

Fitch Ratings, one of the three dominant ratings companies, said in a report released Wednesday that transit agencies that relied the most on fare revenues—rather than local sales taxes or other income streams—are “expected to face sizable budget gaps” when the federal aid dries up, Fitch analysts warned.

“Transit agencies and governments have the tools to adjust to volume declines. However, the usual tweaks to spending, service levels and fares will not be enough for the nation’s most economically important urban transit agencies, which rely heavily on fares,” they wrote in their report.

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Route Fifty

By Daniel C. Vock

AUGUST 11, 2022

Fitch Ratings-Chicago/New York-10 August 2022: The pandemic was a severe blow to US public transit systems, resulting in durable declines in ridership and pressures on operating budgets, Fitch Ratings says in its report U.S. Public Transit Faces Multi-Year Recovery. Hybrid and remote work fundamentally changed demand, with ridership facing a long recovery to a new normal that will require new sources of revenue or service reductions at the most fare-dependent agencies.

Public transit ridership was trending lower before the precipitous declines of the pandemic. Overall US ridership subsequently plummeted 53% in 2020 and remains around 50% below pre-pandemic levels.

The nation’s largest transit agencies previously were able to employ pricing power based on commuter demand for transportation to urban job centers but commuter volumes are unlikely to return to pre-pandemic levels. Our base case assumes ridership does not fully recover, although some agencies may exceed this expectation. Major fare-dependent agencies estimate ridership will recover to 70%–90% of pre-pandemic levels.

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Fitch Ratings-Chicago/New York-10 August 2022: The pandemic was a severe blow to US public transit systems, resulting in durable declines in ridership and pressures on operating budgets, Fitch Ratings says in its report U.S. Public Transit Faces Multi-Year Recovery. Hybrid and remote work fundamentally changed demand, with ridership facing a long recovery to a new normal that will require new sources of revenue or service reductions at the most fare-dependent agencies.

Public transit ridership was trending lower before the precipitous declines of the pandemic. Overall US ridership subsequently plummeted 53% in 2020 and remains around 50% below pre-pandemic levels.

The nation’s largest transit agencies previously were able to employ pricing power based on commuter demand for transportation to urban job centers but commuter volumes are unlikely to return to pre-pandemic levels. Our base case assumes ridership does not fully recover, although some agencies may exceed this expectation. Major fare-dependent agencies estimate ridership will recover to 70%–90% of pre-pandemic levels.

Transit agency financial performance in the pandemic and recovery varies by revenue structure. Transit systems that rely heavily on tax revenue experienced steady revenue growth, even with declines in ridership, primarily reflecting the growth in sales tax revenue and federal aid during the pandemic. Fare-dependent agencies, such as New York’s Metropolitan Transportation Authority (MTA) and Bay Area Rapid Transit (BART), lag sales tax-dependent agencies, such as Los Angeles County Metropolitan Transportation Authority (LA Metro).

Extraordinary federal aid as part of federal pandemic relief measures helped compensate for lost fare revenue, particularly at the most fare-dependent agencies. These agencies will face sizeable budget gaps when this aid runs out in the next few years unless they are able to adjust budgets based on new baseline levels of demand and fare revenue.

Contacts:

Andrew Ward
Group Credit Officer, US Public Finance
+1 415 732-5617
Fitch Ratings, Inc.
One Post Street, Suite 900
San Francisco, CA 94104

Michael Rinaldi
Senior Director, US Public Finance
+1 212 908-0833
Fitch Ratings, Inc.
Hearst Tower
300 W. 57th Street
New York, NY 10019

Sarah Repucci
Senior Director, Fitch Wire
Credit Policy – Research
+1 212 908-0726

Rucha Khole
Senior Analyst, Credit Policy
+1 646 582-4424

Media Relations: Sandro Scenga, New York, Tel: +1 212 908 0278, Email: sandro.scenga@thefitchgroup.com

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Joe Mysak, Editor of the Bloomberg Brief: Municipal Markets, discusses the latest news from the municipal bond market. Hosted by Paul Sweeney and Matt Miller.

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Bloomberg Markets

Aug 12, 2022

Climate-resilient public transportation is crucial to meeting our climate goals and ensuring mobility for vulnerable communities.

Last September, New York City was so thoroughly inundated by Hurricane Ida that some commuters waded through water up to their waists just to get in and out of the subway station. Across the country, extreme heat battered the West Coast, melting Portland’s streetcar power cables. This summer is seeing similar headlines, with heatwaves warping the BART train tracks in San Francisco and sudden rainfall interrupting Northeastern commutes.

These extreme weather events, which are increasing in severity and frequency due to climate change, pose a problem to the millions of Americans who rely on public transit to get to and from work, school, the grocery store, the hospital and social events. According to Maria Sipin, a former Transportation Justice Fellow at the National Association of City Transportation Officials (NACTO), public transit is a “lifeline” for many groups of people that already face disproportionate challenges due to historic discrimination or marginalization — think disabled individuals, low-income communities where private car ownership is rare, and Black and Brown communities that are less likely to have access to a car and more likely to live further from their jobs and rely on public transit for their commutes (thanks in part to the legacy of redlining and ongoing disinvestment in minority neighborhoods). When extreme weather impacts public transit, it has the potential to deepen existing inequalities.

It also threatens the country’s ability to meet climate goals: Transportation is responsible for 27% of U.S. carbon pollution, and public transit is a key tool for bringing those emissions down. If train and bus service is disrupted by extreme weather, people may turn to more emissions-intensive ways of getting around, creating a negative feedback loop that fuels the global temperature rise that caused the disruptions in the first place.

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NEXT CITY

WHITNEY BAUCK

AUGUST 12, 2022

Taxpayer, which was a limited-liability company (LLC) that owned and operated a wind turbine facility, commenced a municipal property tax appeal after town board of assessment denied taxpayer’s appeal of town’s classification of the wind turbines and their associated equipment as real property for purposes of taxation.

The Superior Court entered judgment for taxpayer on claim that a late-filing penalty was improper but entered judgment for town in all other respects. Taxpayer appealed.

The Supreme Court held that:

• The turbines were “buildings” under statute on taxation of real property;
• The turbines were “structures” under statute on taxation of real property;
• Statute on equalization of assessments did not preclude classifying commercial wind turbines as real property for property-tax purposes;
• The turbines were not “fixtures” of an electric company pursuant to definition of personal property in statute on filing of declarations for personal property; but
• The equipment associated with the turbines constituted “fixtures” of an electric company pursuant to definition of personal property in statute on filing of declarations for personal property.

Commercial wind turbines used for the generation of electricity were “structures” under statute on taxation of real property and thus were taxable as “real property” rather than “personal property”; turbines were virtually permanent and were suitable for occupancy or storage.

Commercial wind turbines used for the generation of electricity were not “machines” so as to be taxable as “personal property”; even if the turbines had characteristics of machines, they did not constitute “machinery used in mills and factories,” which the statute on filing tax declarations for personal property included in its definition of personal property.

Statute on equalization of assessments did not preclude classifying commercial wind turbines as real property for property-tax purposes, despite argument that the only other commercial wind turbine in the state was assessed as personal property; other turbine was in a different municipality, and statute required only that assessors equalize the assessments of property in the town.

Different property-tax classification of hydroelectricity generating turbine did not preclude classifying commercial wind turbines in different municipality as real property for property-tax purposes; unlike the wind turbines, the hydroelectric generating turbine was moveable and removed when not in use.

Commercial wind turbines were not “fixtures” of an electric company pursuant to definition of personal property in statute on filing of declarations for personal property, and thus such an alleged status could not warrant classifying turbines as personal property as opposed to real property; unlike other articles that had been found to be fixtures, the turbines, as constructed, were not once chattels that only became real property through physical annexation to the land.

Equipment associated with commercial wind turbines constituted “fixtures” of an electric company pursuant to definition of personal property in statute on filing of declarations for personal property, and thus equipment was “personal property” for property-tax purposes.

Statute on remedy for wrongful assessment of property was not a basis on which taxpayer, which was a limited-liability company (LLC) that owned and operated a wind turbine facility, could be entitled to relief in property-tax appeal of assessment of wind turbines and association equipment; although the equipment associated with the turbines was improperly was classified as real property, relief was not available under that statute in the absence of evidence of misfeasance or malfeasance.

Employer brought action challenging the constitutionality of collection of premiums from employers to fund the Paid Family and Medical Leave Insurance Act.

The District Court dismissed the action. Employer appealed. On parties’ joint petition, certiorari review was granted.

The Supreme Court, as matter of apparent first impression, held that premiums collected to fund paid leave under Paid Family and Medical Leave Insurance Act did not amount to “added tax or surcharge” pertaining to income tax law.

Premiums collected from employers and employees to fund paid leave from employment under the Paid Family and Medical Leave Insurance Act did not amount to “added tax or surcharge” pertaining to income tax law that would be prohibited under State Constitution’s Taxpayer’s Bill of Rights (TABOR); unlike taxes, which were designed to raise revenues to defray general governmental expenses, the premiums were fees used “to defray the cost” of providing paid family and medical leave to employees.

County assessor filed petition seeking review of Missouri State Tax Commission’s decision that solar energy system was exempt from property taxes as a solar energy system not held for resale, or alternatively, for declaratory judgment that statute exempting solar energy systems not held for resale from property taxes violated constitutional provision limiting tax exemption to specifically-enumerated property.

County was joined as a plaintiff. Taxpayer filed counterclaim seeking declaratory judgment that prior tax assessments were void. The Circuit Court dismissed claim seeking judicial review of Commissioner’s decision, and entered declaratory judgment that exemption was constitutional and prior assessments were void. County and county assessor appealed.

The Supreme Court held that legislature did not have authority to enact statute exempting solar energy systems not held for resale from property taxes.

Constitutional provisions granting legislature authority to create subclasses of tangible personal property and fix tax rates for such subclasses did not implicitly permit legislature to enact statute exempting solar energy systems not held for resale from property taxes, since separate constitutional provision limited tax exemptions to specifically-enumerated property and explicitly stated that all non-enumerated exemptions were void, solar energy systems did not fall within any category of enumerated property, and permitting legislature to use its authority to fix tax rates to set 0% tax rate for any type of real or personal property would effectively create backdoor for tax exemptions not enumerated in constitution.

• Proposal to win $3.4 billion deal touted securitization record
• Bank now No. 2 Texas muni underwriter in wake of new GOP laws

Jefferies Financial Group Inc. may not seem the obvious choice to handle what is poised to be the biggest municipal-bond deal ever in Texas.

It’s not one of the largest Wall Street banks, nor is it a top-five player in the nationwide muni market. What’s more, the nearly $13 million fee that Jefferies proposed for handling the $3.4 billion offering wasn’t even the lowest. Several larger banks, including Morgan Stanley and UBS Group AG, asked for a smaller payment.

But Jefferies’ ultimately successful pitch to win the deal — which also touted its deep expertise in complicated bond structures — contained a point that many other large, national banks couldn’t put in their proposals: It has never run afoul of new, Republican-backed state laws seeking to punish Wall Street for limiting its work with the fossil fuels and firearms industries.

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Bloomberg Markets

By Amanda Albright and Danielle Moran

August 11, 2022

It’s been a six-month slog for municipal bonds as inflation fears have racked one of the bond markets with some of the best investment-grade and yield options. Nonetheless, for investors who are still wary of municipal bonds, there’s solace in knowing that fundamentally, munis remain healthy.

“It’s hard to believe: Municipal bonds have suffered through one of the worst six-month stretches in their history, yet few marketwide credit concerns are on the horizon,” Vanguard noted in its latest fixed income perspective. “State and local tax collections have been strong in correlation with the robust economic growth of 2021. Credit fundamentals are as healthy as they have been in decades.”

One of the determinants of how healthy those credit levels stay is how local governments handle their surpluses, according to Vanguard. Those flush with cash will be best suited to handle a recession, should one occur.

“Maintaining that credit profile over the long term will be directly tied to how municipal fiscal surpluses are spent,” Vanguard added. “State and local governments that established or bolstered rainy day funds and resisted the temptation to use temporary surpluses to create enduring programs will be best positioned for future downturns.”

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ETF TRENDS

by BEN HERNANDEZ

AUGUST 11, 2022

Summary

• Municipals posted strong total returns and outperformed comparable U.S. Treasuries in July.
• Light issuance and improved fund flows provided a favorable technical tailwind.
• Supply-and-demand dynamics are expected to remain supportive in August.

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Seeking Alpha

by Peter Hayes

Aug. 09, 2022

Three key trends that signal a positive backdrop for municipal bonds.

Municipal bond market volatility has been high this year. Headwinds, such as rising interest rates, slowing U.S. economic growth, and the uncertainty over the persistence of inflation, weighed on investors’ concerns, prompting historically large outflows from municipal bond (muni) funds. But these key trends may suggest a more positive outlook for municipal bonds lies ahead:

1) Resilient municipal bond credit strength and negligible defaults

2) State government issuers in a position of historic fiscal strength

3) Low new issue supply combining with improving demand

Let’s examine each of these trends, illustrated by a telling visual.

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Lord Abbett

By Sean Carroll
Product Consultant

Aug 9, 2022

To celebrate the 20th anniversary of the first bond ETFs, investors flocked to the asset class, pouring in $28 billion in July, double the amount that flowed into equity ETFs during a strong month for the U.S. stock market. Demand was widespread, with 46 products gathering at least $100 million last month. While two credit-risk-averse bond ETFs, the iShares U.S. Treasury ETF (GOVT A) and the iShares 20+ Year Treasury Bond ETF (TLT B+), led the charge with a combined $8.5 billion of net inflows, we are particularly pleased to see many high yield ETFs also gain traction.

In mid-July, we highlighted a survey that VettaFi conducted with advisors during a webcast with State Street Global Advisors where high yield credit/senior loans were the bond investment style most appealing to add to client portfolios, ahead of ultra-short bonds, investment-grade credit, long-term Treasuries, and municipal bonds. Both the poll and the article occurred before the Federal Reserve hiked interest rates by 75 basis points in late July and Chair Powell said the U.S. was not in a recession. During July, the yield on the 10-year Treasury note narrowed by 33 basis points to 2.64%, and investors were willing to take on credit risk to receive higher yields. Indeed, six large high yield corporate bond ETFs managing $44 billion pulled in $5.2 billion in July alone.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG B+) received $1.9 billion of new money in July, shrinking its year-to-date net outflows to $4.6 billion and pushing its asset base back to $15 billion. Demand was also strong for the SPDR Bloomberg High Yield Bond ETF (JNK A-) and the iShares Broad USD High Yield Corporate Bond ETF (USHY A), which gathered $1.7 billion and $1.1 billion, respectively. USHY remained modestly larger than JNK with $8.1 billion in assets ($8.0 billion for JNK). Among the three largest high yield ETFs, USHY has the lowest expense ratio at 0.15%.

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etfdb.com

by Todd Rosenbluth

Aug 08, 2022

Municipal bonds have rebounded off their lows, but the munis segment may have bounced back too quickly and could be overpriced relative to Treasuries and other government-related exchange traded funds.

Over the past month, the iShares National Muni Bond ETF (NYSEArca: MUB) rose 1.1% while the iShares 7-10 Year Treasury Bond ETF (IEF) gained 0.1%.

The municipal bond market just marked its best monthly gain in July in over two years, and this segment did not pull back as heavily as U.S. Treasuries after Friday’s unexpectedly strong labor market update, which triggered warnings that the Federal Reserve could have more leeway to enact aggressive interest rate hikes, Bloomberg reports.

Consequently, some market observers have warned that munis are now trading at their costliest level since early 2022 relative to U.S. Treasuries. Yields on 10-year tax-exempt munis were hovering around 2.25%, or 80% of the level on similar-maturity Treasuries, according to Bloomberg data. This ratio, which reflects relative value, is near its lowest since February after the outperformance in munis.

“Municipal valuations are completely unattractive at current levels — the muni market simply went too far, too fast in July and early August,” municipal strategists at Barclays Plc led by Mikhail Foux said in a recent research note. “Investors should lighten up going into September, and should look for a better entry point in the fall.”

Municipal bonds have increased 2.5% so far in the new quarter, outperforming Treasuries by almost two percentage points.

“People either really love munis or they really hate them, we’re coming off a period where they love them and it’s harder to get allotments of deals,” John Flahive, head of fixed-income investments at BNY Mellon Wealth Management, told Bloomberg.

“The front end of the curve is very rich,” Flahive added. “It doesn’t make a lot of sense to own at these levels – you should start looking at Treasuries, T-bills with more liquidity.”

ETF TRENDS

by MAX CHEN

AUGUST 8, 2022

Washington, DC – The Municipal Securities Rulemaking Board (MSRB) today published a summary of comments received on its request for information (RFI) to solicit public input on environmental, social and governance (ESG) practices in the municipal securities market.

The MSRB issued the RFI in December 2021 to further understanding of how ESG practices are being integrated in the municipal securities market and to engage in information-gathering to fulfill its statutory mandate to protect investors, issuers and the public interest. The summary synthesizes the diversity of viewpoints expressed by the 52 commenters according to three broad themes:

• The evolving nature of ESG practices in the municipal securities market
• Challenges associated with ESG integration in the municipal securities market
• Opportunities to improve market transparency through the MSRB’s Electronic Municipal Market Access (EMMA®) website.

“The MSRB acknowledges and appreciates the robust level of stakeholder engagement from across the municipal market,” said MSRB CEO Mark Kim. “The 52 commenters provided a broad range of perspectives on ESG that achieved our goal of advancing our own and the broader market’s understanding of the current challenges and opportunities presented by two distinct and evolving market trends: disclosure of ESG-related information and the marketing of municipal securities with ESG designations.”

The MSRB will continue to monitor and engage with the broader market on understanding emerging ESG practices and their implications for market fairness, efficiency and transparency.

All comment letters are available to read in full on the MSRB’s website here.

Date: August 9, 2022

Contact: Leah Szarek, Chief External Relations Officer
202-838-1300
lszarek@msrb.org

Earlier this year, a judge halted the formation of a new city from unincorporated neighborhoods in the southeast corner of Louisiana’s East Baton Rouge Parish, ruling that it was “unreasonable.” Campaign organizers had argued cityhood would give their residents more control over the spending of their tax dollars. But the judge ruled that the proposed City of St. George — whose residents would have been disproportionately white and wealthy — would take away revenue from the parish and the city of Baton Rouge, forcing them to make serious budget cuts, including to the sheriff’s and fire departments.

The case against St. George stands to have implications beyond Louisiana, writes Brentin Mock: Like other municipal breakaway attempts, the campaign aims to transfer revenue from an under-resourced government to communities that are already flush.

Bloomberg CityLab

By Angel Adegbesan

August 10, 2022

An affluent corner of East Baton Rouge Parish is trying to incorporate as a new city called St. George. But leaders of the Louisiana capital warn of budget consequences.

Ten years ago, a group of residents in the southeast corner of East Baton Rouge Parish, Louisiana, began organizing around the idea of turning their unincorporated neighborhoods into a city. In 2019, the group succeeded in winning a ballot referendum, with 54% of the voters in those neighborhoods electing to form the City of St. George.

But less than two weeks after voters approved the measure, the mayor-president of Baton Rouge, Sharon Weston Broome, sued to stop the effort from proceeding. And on May 31, a judge rejected St. George’s cityhood, saying that its formation was “unreasonable” and that it would cause fiscal harm to the parish and the city of Baton Rouge, which have one combined government. (A parish is Louisiana’s equivalent to a county.)

Judge Martin Coady ruled that the revenue loss from St. George’s departure would have forced the city and parish to make serious budget cuts. “This will have a significant decrease in services to citizens of Baton Rouge,” reads the ruling, “including the Sheriff and the operation of the city government.”

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Bloomberg CityLab

By Brentin Mock

August 9, 2022

• Deficit smaller than 2022, bolstered by stronger revenues
• Mayor says 2023 budget gap is “lowest in recent memory”

Chicago faces a $127.9 million budget deficit in fiscal 2023, a gap smaller than in the previous year given a rebounding economy and stronger-than-expected revenue picture.

The city is “starting on a true road to financial stability and recovery,” Mayor Lori Lightfoot said during a budget address on Wednesday, when she shared her preliminary deficit estimate for the next fiscal year. She called the budget gap “the lowest in recent memory.”

The third-largest US city closed a $733 million hole in 2022 and a $1.2 billion gap in 2021 within its corporate fund. That’s the main operating fund from which the city pays for services ranging from policing to tree trimming, through a combination of tax increases, cost cuts and other revenue. Rising pension contributions have been a key reason for higher city expenditures.

The city’s spending is increasing about $228.2 million over what was budgeted in 2022, led by $100.8 million in additional personnel costs and $66.6 million of pension spending. Revenues are expected to be $100.3 million more than this year’s budget, a city document outlined.

Like many other municipalities, the city has benefited as revenue increased since the depths of the pandemic, helped by a broader economic recovery. Large events such as Lollapalooza in recent weeks have contributed to an uptick in leisure travelers, and office workers have been trickling back to a once-shuttered downtown.

Lightfoot also touted the new Chicago casino, which she said will generate $2 billion of new value for the city, creating 3,000 permanent jobs and 3,000 construction jobs.

“The Chicago Casino also features a $40 million upfront payment from Bally’s, which we already received and has gone entirely towards the City’s annual required pension contribution,” she said.

The city’s outstanding debt is expected to be reduced by $866 million by the 2023 fiscal year, expanding infrastructure funding capacity, Lightfoot said.

Federal stimulus, including almost $1.9 billion from the American Rescue Plan Act earmarked for the city, has helped Chicago recover some of the revenue lost when the spread of Covid-19 closed businesses and kept residents at home. Affordable housing and homelessness support, family assistance and community development are some of the city’s top priorities for the aid money, as outlined in the Chicago Recovery Plan.

Lightfoot called the federal stimulus money a “once in a generation” resource. “We will be making opportunities created by the American Rescue Plan permanent and tangible,” she said.

In the coming months, the mayor will release her formal 2023 budget proposal, and the Chicago City Council will deliberate and vote on it before the end of this year.

Bloomberg

By Mackenzie Hawkins and Shruti Singh

August 10, 2022

• Some maturities are priciest since early 2022 in comparison
• ‘Investors should lighten up going into September’: Barclays

Municipal bonds have become the costliest since early 2022 relative to Treasuries after a furious rally in recent weeks, spurring some strategists to recommend that investors seek alternatives.

US state and city debt surged in July by the most in more than two years and hasn’t sold off as dramatically as Treasuries in the wake of Friday’s unexpectedly strong labor data, which roiled bond markets as it spurred bets on further aggressive Federal Reserve interest-rate hikes.

Benchmark 10-year tax-exempts yield 2.25%, which is about 80% of the level on similar-maturity Treasuries, data compiled by Bloomberg show. That ratio, a key gauge of relative value, is close to the lowest since February, and compares with an average of 90% in the five years before the pandemic. The muni outperformance is even more glaring in shorter maturities.

“Municipal valuations are completely unattractive at current levels — the muni market simply went too far, too fast in July and early August,” municipal strategists at Barclays Plc led by Mikhail Foux wrote in an Aug. 5 research note. “Investors should lighten up going into September, and should look for a better entry point in the fall.”

Munis have gained 2.5% this quarter through Friday, beating Treasuries by almost two percentage points, according to Bloomberg index data. To be sure, on Monday, city and state debt was trailing, showing little movement while Treasuries gained, paring some of Friday’s big decline. But the bigger picture is that munis have been on a roll in comparative terms.

The tax-exempt market has been buoyed of late by cash flowing back to investors through maturing bonds, redemptions and coupon payments, while offerings of new debt have been lackluster. Since the start of June, new long-term muni sales have dropped by nearly 30%, according to data compiled by Bloomberg.

That’s made it difficult for buyers to get bonds and caused the securities to grow more expensive, said John Flahive, head of fixed-income investments at BNY Mellon Wealth Management.

“People either really love munis or they really hate them, we’re coming off a period where they love them and it’s harder to get allotments of deals,” he said in an interview.

For him, shorter maturities in particular are costly.

“The front end of the curve is very rich,” he said. “It doesn’t make a lot of sense to own at these levels — you should start looking at Treasuries, T-bills with more liquidity.”

Bloomberg Markets

By Danielle Moran

August 8, 2022

— With assistance by Amanda Albright

• Brightline needs more cash to finish expansion to Orlando
• Expects revenue surge after delayed station comes on line

Brightline Holdings, the rail company backed by Fortress Investment Group, got the go-ahead to sell up to $1 billion of tax-free debt to finance an expansion of its Florida system that’s key to meeting its revenue targets.

Brightline is building a 168-mile extension to Orlando International Airport to boost ridership for its three-station line, currently running only between Miami and West Palm Beach. The company needs the bond proceeds to finance the project until next year, when it expects to get revenue from sharing its line with area governments.

The board of the Florida Development Finance Corp., the municipal agency that gives private entities access to low-cost debt financing, in a split vote Monday cleared the way for Brightline to issue the bonds. The company expects to issue $785 million of short-term debt but could sell $1 billion, said Brent Wilder, managing director at PFM Financial Advisors LLC, before the vote.

The latest financing plan, which also calls for $300 million in additional equity, is a “positive development” that would ensure the completion of the Orlando construction, said John Miller, head of municipals at Nuveen, the biggest holder of Brightline debt.

The country’s first new privately financed intercity passenger rail in a century, launched in 2018 along Florida’s east coast, missed passenger and revenue forecasts even before the onset of the Covid-19 outbreak. Brightline’s adding two more stations and working on commuter rail initiatives with Miami-Dade and Broward counties to increase ridership and revenue.

Brightline recently pushed back to next year the expected completion of the Orlando stop, the “most critical component of our business model,” as Chief Financial Officer Jeff Swiatek said during the meeting before the vote. Brightline expects 2025 to end with 7.9 million passengers and $733 million in total revenue, according to a PFM memo. That’s a massive surge from the 1.29 million passengers and $39 million in total revenue expected at the end of this year.

The company also says its short-distance line will be more lucrative than it is now with the addition of two new stations between Miami and West Palm Beach later this year. It projects the 2025 fare to average $29.30. That’s a 58% jump from the average fare in June among the existing three stations.

The latest issuance will come as short-term escrowed debt, a less risky type of security. When remarketed into long-term debt, payments from Miami-Dade and Broward counties in exchange for using the line for their commuter services would help back some of the debt payments.

Moshe Popack, a board member of the Florida agency, unsuccessfully voted against the debt authorization, saying he didn’t believe there was enough collateral for the issue.

The company had earlier used the tactic of issuing short-term debt as it finalizes details of its project’s financing. In June, the company rolled over some short-term securities instead of issuing long-term debt because it couldn’t find enough of such investors amid market turmoil.

“We’ve made tremendous progress, achieving more than 80% completion on Brightline’s Orlando extension,” said Brightline spokesperson Ben Porritt in an emailed statement. “We appreciate the support of the FDFC board as we complete funding, as originally planned, for the remaining elements of the project.”

Brightline had already sold $3.2 billion of tax-exempt debt for the project. A bond due in 2049 traded Aug. 5 at an average yield of 7.88%, a record high, according to data compiled by Bloomberg.

The company’s line will ultimately extend to Tampa from Miami for a total of 320 miles (515 kilometers). Brightline is also planning a line connecting Las Vegas to southern California.

Bloomberg Markets

By Romy Varghese

August 8, 2022

The 2022 California Economic Summit is coming to Bakersfield on October 27-28.

The Summit’s bipartisan network of business, equity, environmental and civic organizations is unique in championing solutions that meet the triple bottom line — balancing equity, environmental sustainability and economic growth.

THE EVENT

Produced by California Forward in partnership with the California Stewardship Network, the Summit influences CA FWD’s ongoing movement to make the government and economy work for everyone. The two-day Summit is designed to create a shared economic agenda known as the Roadmap to Shared Prosperity and strengthen the Summit network, setting the stage for collective action in 2023.

OCTOBER 27, 2022

Interactive in-person plenary and work group sessions to advance Summit goals — along with receptions, regional tours and artistic performances

OCTOBER 28, 2022

Dynamic plenary sessions featuring keynote speakers, state policy leaders, regional business and civic leaders on critical issues facing California

Click here to learn more and to register.

Tuesday, August 23, 2022 – 2:00 PM – 3:30 PM Eastern

The CDFA Federal Financing Webinar Series is an exclusive, six-part online offering that will convene finance experts from several federal agencies to discuss the variety of federal programs available to restore local economies, preserve small businesses, invest in our communities, and protect our environment.

In the last year, two major pieces of legislation have changed the federal funding landscape with new programs being created through the American Rescue Plan and the Investment in Infrastructure Jobs Act. During each webinar, CDFA will feature timely and in-depth conversations with federal financing experts discussing new programs, updates to existing programs, and the latest strategies for applying and deploying funding. Representatives from various agencies, including DOC, EDA, NIST, HUD, EPA, DOE, USDA, Treasury, and SBA will join us for these discussions.

This series complements the information featured in the CDFA Federal Financing Clearinghouse, provides an in-depth discussion about key federal programs, and offers new and innovative ideas for how communities can utilize federal financing programs. As new programs emerge, they will be highlighted throughout the series.

CDFA maintains strong relationships with federal agencies, giving attendees unprecedented access to the inner-workings of the government’s economic development finance activities. We leverage these relationships to offer insider access to the newest initiatives from every agency and help communities prepare for funding and submit applications.

To participate, register for a single webinar or the entire series, and CDFA will send you reminders for each webinar as they are hosted. All webinars will be recorded and presentation materials will be shared with the attendees for long-term viewing.

Click here to learn more and to register.

September 14, 2022 – Columbus, OH

We are excited to bring back the CDFA Ohio Financing Roundtable on September 14, 2022! During this special one-day conference, we will share knowledge of best practices within the state’s development finance industry. This event will feature economic development finance experts from around the state discussing the latest and most innovative development finance tools, authorities, resources, and approaches, and how these can affect the Ohio economy going forward. After what seems like an eternity apart, we are ready to get back together in-person for the networking opportunities we have all been missing. Space is limited, so be sure to register soon and grab your seat at the roundtable. See you there!

Click here to learn more and to register.

Highlights

• In Fix the City, Inc. v. City of Los Angeles, the Los Angeles Superior Court ruled that conflicts between qualifying Transit Oriented Communities (TOC) Guidelines and specific plan requirements should be resolved in favor of a specific plan.
• The incentives provided by the TOC Guidelines do not carry legislative authority, while the Westwood Specific Plan was created by ordinance, and the TOC Guidelines therefore lack the requisite authority to override the Specific Plan.
• Developers should use caution when seeking to deploy TOC Program incentives in the face of more stringent, conflicting regulations within a local specific plan.

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Holland & Knight LLP – Andrew J. Starrels and Luca Trumbull

August 11 2022

State law and a complicated bond financing deal stand in the way of bringing legal betting to Citi Field area

The owner of the Mets has spent hundreds of thousands of dollars lobbying city officials in connection with his push to build a casino near Citi Field — but there could be multiple legal hurdles to bring the slots to Queens.

Both state law and the team’s own lease agreement with the city stand in the way, in particular a financing deal tied to the parking spaces, and rules about building on park land.

Owner Steve Cohen’s dream of turning Willets Point into a gambling hub materialized earlier this year when Gov. Kathy Hochul proposed creating three more downstate casino operator licenses.

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THECITY.NYC

BY KATIE HONAN

AUG 15, 2022

Municipal bonds, like the bulk of the fixed income space, are being adversely affected by the Federal Reserve’s aggressive interest rate hikes — more of which could be on the way due to persistently high inflation.

However, some market observers believe that the worst is behind munis and that the summer could stoke fresh buying of these bonds among professional investors. That could be a boon for exchange traded funds such as the Franklin Dynamic Municipal Bond ETF (NYSEArca: FLMI).

“Municipal bonds rebounded in July and posted their strongest total returns since the COVID-19 performance snapback experienced in May 2020. Falling interest rates provided positive direction as recession fears intensified amid a backdrop of elevated inflation and continued U.S.,” according to BlackRock research.

That bodes well for the near-term outlook for municipal bonds, but FLMI offers investors the goods to capitalize on a more substantial rebound. For example, FLMI is actively managed, meaning the fund’s managers can potentially capitalize on a variety of market settings. That’s an important point at a time when things are changing on a dime.

“Favorable supply-and-demand technicals surpassed already lofty seasonal expectations and provided a strong tailwind in July. Issuance underwhelmed historical norms at just $26 billion, 20% below the five-year average. Reinvestment income from maturities, calls, and coupons outpaced issuance by $23 billion and made July the largest net-negative supply month since December 2016,” added BlackRock.

Further enhancing the allure of FLMI’s status as an actively managed fund is the point that an active muni bond ETF can more readily capitalize on credit opportunities while searching for value across the municipal debt spectrum. FLMI’s index-based rivals generally don’t offer such advantages.

Something else to consider with FLMI is that state finances are mostly healthy at the moment, indicating that if a standard recession comes to pass in the U.S., the bulk of the fund’s holdings should be in decent shape.

“With reserves at historically high levels, states are well positioned to weather an economic downturn. According to the National Association of State Budget Officers’ recent Fiscal Survey of States, total fund balances for the 50 states reached $234.7 billion, or 25.4% of general fund (GF) expenditures at the end of fiscal year (FY) 2021, the highest level since at least 1979,” concluded BlackRock.

Illinois, Florida, and California are the largest state allocations in FLMI, combining for about 41% of the fund’s roster.

ETF Trends

AUG 11, 2022

Getting core bond exposure to investment-grade debt holdings might be the default move for investors who want to simply diversify their portfolios of equities, but municipal bond exposure offers its own benefits that investors should also consider. U.S. News offered three advantages to municipal bonds that investors may not be aware of.

With investors already knee-deep into 2022, it’s hard to believe that the year will soon be coming to a close. As such, it’s never too late to try to minimize the year’s tax burden when April 2023 is around the corner.

Municipal bonds can provide tax-free income, making it an ideal source of cash flow for high net worth individuals. Its relative safety compared to other riskier assets also make it an ideal option for retirees.

“Investing in municipal bonds doesn’t incur federal income tax and, in certain cases, state and local income taxes,” the article noted.

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ETF TRENDS

by BEN HERNANDEZ

AUGUST 12, 2022