VIEWS: 8 PAGES: 2 POSTED ON: 4/6/2012
11.28.11 Bloomberg Brief | municipal market 3 accorDing to DiarY firms Wary of hiring new orleans agrees to Bank Loan to extend katrina Debt ■ The pace of hiring in november new Orleans, the Louisiana city rebuilding after Hurricane Katrina collapsed its le- probably failed to reduce unemploy- vees, extended maturities of about $15.5 million in debt to March 2013 through a loan ment in the u.S., showing employers from JPMorgan Chase & Co. to avoid additional budget cuts. remain concerned growth will slow, JPMorgan was the only company willing to finance privately, said Lisa Daniel, a economists said before reports this managing director at Public Financial Management in Memphis, the city’s adviser. it week. Payrolls climbed by 120,000 offered a 5.95 percent rate, the lowest among five banks new Orleans talked with, workers after rising 80,000 in October, she said. The previous interest rate was 5 percent. The refinancing will add about according to the median forecast of $924,000 in debt-service costs over two years, she said. 59 economists in a Bloomberg news “What they’re doing is irresponsible,’’ said John Kennedy, Louisiana’s republican survey before a dec. 2 report from the treasurer and chair of the State Bond Commission. “All the city is doing is push- Labor department. The jobless rate ing the payment of debt into the future, instead of dealing with it today. it’s a very probably held at 9 percent. The lack dangerous precedent.’’ of jobs will probably pressure wages, The move delays payments on the 1998 bonds for 15 months. About $7.5 million of depriving consumers of the means to debt service would have come due on dec. 1 without the refinancing. All six members boost spending, which accounts for of the democrat-dominated City Council voted in favor of the plan on nov. 17, and it about 70 percent of the economy. “We passed the bond commission 9-3, said Kennedy, who voted against it. have a labor market that’s improving, new Orleans Mayor Mitch Landrieu, a democrat, inherited a $100 million budget but it’s still not great,’’ said Stephen deficit when he took office in May 2010, said Andy Kopplin, the city’s chief adminis- Stanley, chief economist for Pierpont trative officer. The city has cut spending from $528 million in 2009 to $488 million this Securities LLC in Stamford, Connecti- year, he said. “We’ve done all the things that you can do to get your fiscal house in cut. “uncertainty over europe and the order, but we have this lingering $25 million deficit,’’ Kopplin said. “A modest restructur- u.S. fiscal situation is an impediment ing of that debt can be easily managed.’’ to firms expanding, whether it is labor The approval came two weeks after Moody’s investors Service put $699 million of or capital investment.’’ new Orleans debt on review for possible downgrade, citing audited fiscal 2010 results — Shobhana Chandra that fell “significantly below expectation.’’ The company rates the city’s GOs A3. Similarly rated one-year notes yield 1.09 percent. new Orleans has a history of relying on so-called “one-shot’’ revenue sources, or state enhancement non-recurring income such as funding from the Federal emergency Management Agency, said Robyn Rosenblatt, a senior analyst at Moody’s who covers the city. ■ investors who miss municipal With a payment deadline of dec. 1, the city waited until the last minute and didn’t bond insurance might consider the consider other options, Kennedy said. revenue anticipation notes, which are short- securities supported by state credit term securities, might have saved taxpayers’ money, he said. enhancement programs, according The decision to refinance through a private placement “was mostly a timing issue’’ to Alan Schankel, director of fixed- because the city could not obtain a rating on the debt and draft an official statement income research at Janney Mont- fast enough, said PFM’s daniel. revenue-anticipation notes “clearly would have been gomery Scott LLC in Philadelphia. At less efficient,’’ she said. “it would have incurred a whole lot of debt-service burden and least 24 states have such programs, would be viewed negatively by the rating agencies.’’ the majority being for public school — Brian Chappatta district issuance. “Bondholders ben- efit from this double barreled type of security feature, with the first line of new Jersey toll-road revenue Lags by $45 million defense being the creditworthiness of revenue from new Jersey’s toll roads fell $45 million short of projections this year the local issuer including factors such through September as high gasoline prices, joblessness and storms kept drivers off as tax base, state support, quality of the new Jersey Turnpike and Garden State Parkway. management and other traditional The new Jersey Turnpike Authority collected $845 million in the first nine months of metrics and indicators,’’ Schankel 2011, 6 percent below targets, according to a financial report. Toll revenue was $710 wrote in a special report published million, $43.4 million below projections. The authority’s forecast for average annual last week. “The state programs, revenue growth of 6 percent is “optimistic given the state’s currently sluggish econom- rarely invoked, provide a secondary ic recovery,’’ Moody’s said in a nov. 17 report. Moody’s maintained a negative outlook backstop for bondholders.’’ Most pro- on $8.4 billion of Turnpike Authority debt, rated A3. grams intercept and redirect state aid The authority will have enough cash to cover payments on its bonds, the report to bondholders if issuers fail to make said. Moody’s lowered its outlook on the agency’s debt to negative from stable in debt service payments. december, citing the move to spend toll money on other transportation projects in the state. Standard & Poor’s rates the agency’s debt A+, Fitch, A. — Terrence Dopp and Elise Young 1 2 3 4 5 The attached article was a free sample from Bloomberg Brief Newsletters. BRIEF Bloomberg Brief is a new publishing division of Bloomberg L.P. focused on high quality, electronic newsletter products, providing unique data, commentary and analysis from the premier source of data and analytics in the financial world. The following newsletters are currently published: eCONOMiCS eCONOMiCS eUrOPe HeDGe fUNDS fiNANCiAL reGULATiON CLiMATe & CArBON LeVerAGeD fiNANCe MerGerS MUNiCiPAL MArKeT STrUCTUreD NOTeS riSK BANKrUPTCY AND reSTrUCTUriNG To take a trial to any of the above newsletters, or for more information on subscriptions or advertising, please visit bloombergbriefs.com or email us at firstname.lastname@example.org. The attached article was a free sample from Bloomberg Brief Newsletters.