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									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

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