Best of Municipal Market - August 2014

1. Detroit Gets Exit Loan (8/29/2014)
Detroit won a commitment from Bar-clays
Plc for $275 million in financing to
fund the city’s exit from bankruptcy, if a
judge approves its debt-cutting plans at a
trial starting next week.
Detroit is seeking court approval to
eliminate more than $7 billion of its $18
billion in obligations to retirees, bondhold-ers
and other creditors.
The money from Barclays would be
used to pay off $120 million Detroit bor-rowed
to help fund reorganization, pay
some creditors and revitalize the city.
The tax exempt bonds to be issued as
part of the financing will pay an interest
rate equal to a municipal swap index,
plus 4.25 percent, said Bill Nowling, a
spokesman for city emergency manager
Kevyn Orr. The taxable bonds will be
based on Libor, plus 4.75 percent.
“We are very pleased to have secured
this exit facility and are encouraged
by the reception we received from the
broader financial community,’’ Orr said in
a statement.
Detroit filed for bankruptcy after Orr
concluded that decades of economic
and population decline left it unable to
provide adequate public services while
meeting financial obligations. Since
then, the city has cut deals with retirees,
public workers and many bondholders to
reduce its liabilities.
The plan faces opposition from bond
insurers and some bondholders who
claim Detroit should use its art collec-tion
to raise more money. The city has
pledged to keep the collection off limits in
exchange for funding from the state and
a group of philanthropic foundations.
BY STEVEN CHURCH
WHAT’S INSIDE?
DETROIT
Detroit Water and Sewerage Department bond-holders
agreed to sell back $1.47 billion of the
system’s $5.2 billion in outstanding debt. Page 4
PUERTO RICO ELECTRIC
Prepa came to an agreement with creditors to
delay repayment of bank loans. Page 6
SWAPS
Los Angeles is threatening to stop doing business
with banks if they refuse to renegotiate swaps.
Page 10
CREDIT RATINGS
S&P widened its lead over Moody’s on rated muni
debt. Page 11
STORY CHART
Yale’s reputation can’t bail out New Haven
Page 13
CITIES AND PENSIONS
Top cities by population and pensions. Page 14
BLOOMBERG VALUATION AAA BENCHMARK YIELDS
DESCRIPTION CURRENT PREVIOUS NET CHANGE
BVAL 1Y 0.13 0.15 -0.02
BVAL 2Y 0.32 0.33 0
BVAL 3Y 0.59 0.59 +0.01
BVAL 4Y 0.84 0.85 0
BVAL 5Y 1.14 1.12 +0.02
BVAL 6Y 1.40 1.39 +0.01
BVAL 7Y 1.66 1.65 0
BVAL 8Y 1.88 1.88 0
BVAL 9Y 2.03 2.05 -0.01
BVAL 10Y 2.17 2.18 -0.01
BVAL 20Y 2.80 2.85 -0.05
BVAL 30Y 3.16 3.14 +0.03
BLOOMBERG
BAROMETER
(7/31/2014)
BENCHMARK STATES 10-YEAR YIELDS
STATE YIELD SPREAD TO
AAA CHANGE
California 2.37 19 -0.02
Florida 2.29 11 -0.02
Illinois 3.79 161 -0.01
New York 2.28 10 -0.02
Pennsylvania 2.50 32 -0.02
Texas 2.23 5 -0.02
Wisconsin 2.43 25 -0.01
VOLUME
NEW SUPPLY SOLD YTD TRADED OFFERINGS
30-DAY $133.6 Bln (Neg Fixed LT) $11.4 Bln $11 Bln
$3.6 Bln LT (Fixed LT) $46.8 Bln (Comp Fixed LT) (MSRB) (Bloomberg Pick)
$2.9 Bln ST (Fixed ST) $22 Bln (Fixed ST) 0.3% 0.8%
IN THE PIPELINE
MUNICIPALITY AMOUNT
Palm Beach Cty FL $72 million Rev
Essex Cty NJ $61 million Rev
Chicago Water IL $400 million Rev
Los Angeles Harbor CA $340 million Rev
Portland Airport OR $95 million Rev
MTA NY $227 million Rev
VARIABLE RATE (VRDOS)
SIFMA MUNI SWAP RATE
0.05%
BLOOMBERG WEEKLY AAA RATE
0.045%
BLOOMBERG WEEKLY AA RATE
0.052%
DAILY RESET INVENTORY
$209 Mln 49%
WEEKLY RESET INVENTORY
$1.1 Bln 35%
Available VRDO/TOB inventory
offered by remarketing agents for
BVMB<GO> cash settlement
MBM<GO>
CDRA<GO>
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BRIEF
Municipal
Market
Best of August 2014
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2. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 2
DIARY BRIAN CHAPPATTA (8/29/2014)
Pennsylvania Turnpike Bonds With Negative 88 Percent Yield Show Risk of Ignoring Calls
Investors holding some escrowed-to-ma-turity
Bloomberg Brief Municipal Market
Bloomberg Brief Ted Merz
Executive Editor tmerz@bloomberg.net
+1-212-617-2309
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Managing Editor jrossa@bloomberg.net
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Municipal Market Joe Mysak
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212-617-2323
Editor Taylor Riggs
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212-617-2072
Reporter Brian Chappatta
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212-617-0698
Contributing Sowjana Sivaloganathan,
Analysts Bert Louis
Newsletter Nick Ferris
Business Manager nferris2@bloomberg.net
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bonds from the Pennsylvania Turn-pike
Commission will have the debt called
back next month at par, in a blow to buyers
who purchased the securities at significant
premiums as recently as last week.
Turnpike bonds issued in 1998 that ma-ture
in December 2027 traded Aug. 13 at
107 cents on the dollar, the highest price
since January, data compiled by Bloom-berg
show. With the issuer reserving the
right to exercise par call provisions, the
price was equivalent to a negative 88
percent yield-to-worst.
The worst became a reality on Aug. 18,
when a notice was filed that the almost
$73 million of debt would be called on
Sept. 17 at a redemption price of 100
cents on the dollar. Bonds that mature
from 2014 to 2018 and a $42 million series
due in 2023 will also be called at par.
Prices plunged to 99.8 cents.
The Pennsylvania Turnpike debt had com-manded
premium prices long before muni
yields fell to near the lowest in a generation.
After the bonds were advance refunded in
2003, with state and local government secu-rities,
or SLGS, deposited in escrow as col-lateral,
prices have often jumped above 100
cents even with the call provision looming.
Bonds that are escrowed to maturity pay
principal and interest payments through
an account that maintains the funds need-ed
to meet future obligations. Muni issuers
use SLGS or U.S. government securities
as collateral, making the debt attractive to
investors because the probability of repay-ment
no longer rests with the fortunes of
the state or municipality.
Yet the name can be misleading, as
some investors found out in the 1980s.
The Kansas City Board of Public Utilities
had planned to call some bonds that were
escrowed-to-maturity in 1994 instead of
from 1997 through 2001 after its bond coun-sel
said call options remained intact. The
bond issue was eventually canceled after
bond counsel failed to deliver documents.
Still, confusion ensued among issuers
and regulators, and investors grew frustrat-ed
at the depressed prices on escrowed-to-
maturity securities. What resulted was
a move towards better information that
eventually became the MSRB’s Electronic
Municipal Market Access website.
The Pennsylvania Turnpike’s bond
call shows that even with the bolstered
transparency, investors may still be caught
unaware. On the CUSIP’s DES page on
the Bloomberg Terminal, the refunding
information section indicates that although
the debt is escrowed to maturity, call pro-visions
may be exercised.
SUPPLY AND DEMAND (8/29/2014)
Inflows Overpower Supply Increase, Yields Decline
50
40
30
20
10
0
Monthly Flows Monthly Supply Average 10-Year Yield
The weekly-average municipal bond
yield in August fell to its lowest since May
2013 to 2.23 percent, even as debt sales
rose to $29.6 billion in the month. Demand,
as measured by inflows into Lipper US
Fund Flows, was the highest since May
after investors poured $1.56 billion in cash
into muni bond funds in August. Funds that
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
report weekly to Lipper reported $446.4
million in inflows for the week ended Aug.
27. Long-term funds recorded $288.4
million of inflows while high-yield funds
had $229.8 million of inflows. Intermediate
funds that report weekly saw $137.7 million
of inflows, the only category to see an
increase week over week.
-10
Aug
2013
Sep Oct Nov Dec Jan
2014
Feb Mar Apr May Jun Jul Aug
$ In Billions
Source: Bloomberg
— Taylor Riggs
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4. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 4
NEWS
California Boosts Hollywood Credit (8/28/2014)
California Governor Jerry Brown and lawmakers struck a deal to
more than triple the tax credit for Hollywood studios to stem the flight
of film and TV production to other states.
The $330 million annual subsidy, announced yesterday by the
governor’s office, is second only to New York’s $420 million in tax
breaks for productions and outpaces incentives by Louisiana,
Georgia and Florida, according to state analysts.
More than 40 projects sought and failed to win some of the $100
million California allocated for production subsidies last year, when
$1.06 billion worth of work went outside the state, according to the
California Film Commission, which administers the program.
The agreement “once again makes California a viable place to
film the big-budget movies and TV shows that generate thousands
of jobs and millions in revenue and spending,’’ Chris Dodd, chair-man
and chief executive officer of the Motion Picture Association of
America, said yesterday in a statement. “It stands to bring billions of
dollars into the California economy.’’
California’s tax incentives to film and television studios began in
2009 and have helped keep as many as 51,000 jobs from leaving
the state, according to a statement from state Assemblymen Raul
Bocanegra and Mike Gatto, both Los Angeles-area Democrats who
sponsored the original bill.
The deal eliminates a budget cap that excluded big-budget films
from applying for the credits and makes them available to more TV
shows as well, Gatto said.
“We’re trying to seek productions that employ the most Cali-fornians
for the longest duration,’’ he said in an interview.
The mayors of California’s largest cities lobbied lawmakers earlier
this month for a $400 million incentive package. It was reduced to
$330 million after discussions with Brown.
“The heart and soul of the entertainment industry are the artisans,
craftspeople and tradespeople who you never see on screen, and
that’s who will benefit from this legislation,’’ Los Angeles Mayor Eric
Garcetti said in a statement. “We are the entertainment capital of the
world and this legislation will make sure it stays that way.’’
Subject to the current annual cap, California gives rebates
amounting to 20 percent of qualifying production costs on a mo-tion
picture, and 25 percent for independent films or for TV series
that relocate to the state.”
— Michael B. Marois and James Nash
Detroit Water Board Approves Buying Back $1.47 Billion of Bonds (8/25/2014)
The Detroit Board of Water Commissioners unanimously ap-proved
a proposed buyback of the city’s water and sewer bonds
after reaching deals with enough investors to proceed with a
planned debt refinancing this week.
Owners of bonds from the Detroit Water and Sewerage Depart-ment
agreed to sell back $1.47 billion, or about 28 percent, of the
system’s $5.2 billion in outstanding debt, the board’s advisers
said Friday.
Refinancing the bonds will save $241 million over 26 years, with
about $11 million in annual savings for the first 19 years.
The plan allowed investors to part with their securities at a
known price and protects them against losses in federal court. It
will also free up cash for the city and potentially speed its emer-gence
what state offers the best value i mbm n the municipal market?
<Go>
from bankruptcy.
The buyback’s success means the Michigan Finance Author-ity
is on track to issue bonds next week to replace the old debt.
It also plans to issue $150 million in additional bonds to finance
improvements to the sewage-disposal system.
The deal must still be approved by Detroit Emergency Manager
Kevyn Orr and U.S. Bankruptcy Judge Steven Rhodes.
Should the refinancing move forward as planned, investors and
bond insurers would drop their objections to the water and sewer
portions of Detroit’s debt-cutting plan, according to court records.
That may shorten the bankruptcy trial and make it easier for the
city to win approval of its proposal.
The water and sewer bondholders are among the final obstacles
to the resolution of the bankruptcy after the city reached agree-ments
with general-obligation investors and pensioners during 13
months under court protection.
Bondholders had balked at the city’s debt-adjustment plan,
which seeks to cut interest rates on some securities or scrap
provisions that protect investors from being forced to resell bonds
before they mature. The proposal led the three biggest credit rat-ers
to lower their grades on the bonds to junk.
Once the refinancing is done, any original debt still outstanding
will be unaffected by the proceedings. In contrast, about 43 per-cent
of the water and sewer bonds would be impaired under the
bankruptcy debt-cutting plan, Fitch said in a report last week.
— Chris Christoff and Brian Chappatta
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5. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 5
Texas Notes at 0.13% (8/27/2014)
Texas sold $5.4 billion of one-year notes at a record-low yield for
the second-most populous U.S. state of 0.13 percent, according
to the comptroller’s office.
The borrowing, which will pay for schools and other expenses
before receiving tax revenue, is the state’s smallest short-term
note sale since 2007 and beat last year’s previous all-time low of
0.201 percent.
The offering also came in below benchmark one-year yields of
0.15 percent, according to data compiled by Bloomberg.
Buyers submitted bids for about $19.6 billion of securities,
Comptroller Susan Combs said in a statement. The state has the
highest credit grades from the three biggest rating companies.
“The competitive bids for today’s sale show that investors are
very confident in the Texas economy,’’ Combs said.
Texas is home to seven of the 15 fastest-growing cities in the U.S.
— Darrell Presston
Detroit at 4.85%
The Michigan Finance Authority began pricing $1.8 billion of rev-enue
bonds on behalf of the Detroit Water and Sewerage Depart-ment
to finance the purchase of debt from investors last week.
The sale includes a $121 million uninsured senior-lien por-tion
maturing in July 2044 that’s being offered at a 4.85 percent
yield, according to three people with knowledge of the terms who
requested anonymity because the deal isn’t final. The rate is 1.73
percentage points more than benchmark munis, data compiled by
Bloomberg show.
Detroit won investment grades on its new water and sewer
bonds from Standard & Poor’s yesterday, getting a BBB+ rating,
the eighth-highest rank. S&P’s rating is the highest among the
three biggest credit raters.
Moody’s released a report late Monday that rated the senior-lien
bonds Ba2 and the second-lien debt Ba3. Those grades are four
and five steps lower than S&P’s, respectively. Fitch Ratings as-signed
grades of BBB- and BB+, two and three levels lower than
S&P’s, respectively.
The refinancing is supposed to save $11.4 million a year for
the first 19 years of the deal, Nicolette Bateson, chief financial
officer for the water and sewer department, said in court Monday.
It would also raise $150 million for projects to improve the city’s
sewage system.
Some bonds are backed by Assured Guaranty Municipal Corp.
and National Public Finance Guarantee Corp., according to the
people with knowledge of the deal.
— Brian Chappatta
NEWS
SEC Charges Kansas (8/12/2014)
The SEC charged Kansas with failing to disclose a “multibillion-dollar’’
pension liability to bond investors.
Documents for eight bond offerings in 2009 and 2010 by the
state’s Development Finance Authority didn’t tell investors that
a study had pegged Kansas’s public-employee pension as the
second-most underfunded in the nation. Kansas, which didn’t
admit or deny the findings, put in place new disclosure policies
and agreed to settle the case.
“Kansas failed to adequately disclose its multibillion-dollar pen-sion
liability in bond offering documents, leaving investors with an
incomplete picture of the state’s finances and its ability to repay
the bonds amid competing strains on the state budget,’’ LeeAnn
Ghazil Gaunt, chief of the SEC Enforcement Division’s Securities
and Public Pension Unit, said in a statement from Washington.
The SEC settled a similar case with New Jersey in 2010, the first
time the regulator targeted a state. Last year, Illinois became the
second state to settle with the SEC over charges it misled inves-tors
about a growing shortfall in its employee pension funds as it
sold $2.2 billion in bonds.
Around the same time as New Jersey’s settlement, the SEC
began questioning the disclosures in eight Kansas bond issues
that raised $273 million, the SEC said.
As the Sunflower State prepared to issue $127 million of bonds
in 2009, a draft actuarial report provided to Kansas’s public pen-sion
found that the gap between its liabilities and assets had
grown to $8.3 billion in 2008, from $5.6 billion the previous year,
lowering the pension’s funding level to 59 percent, the SEC said.
The gap was the result of years of insufficient contributions by the
state and school districts to cover the cost of benefits earned by
public employees and their accumulated liabilities, the SEC said.
Only Illinois had a lower pension funding status than Kansas.
Neither the finance authority nor the Kansas Department of
Administration, which advised the authority of material changes
to state finances, determined that additional disclosure regarding
the pension fund in the bond offering statement was necessary,
the SEC said.
Kansas has adopted new policies and procedures to ensure it’s
making appropriate disclosures about its pension liabilities. The
state mandated closer communication and cooperation among
agencies responsible for preparing bond disclosures and estab-lished
a disclosure committee, the SEC said.
The SEC didn’t seek financial penalties or make claims of
intentional misconduct, according to Jim Clark, the state’s sec-retary
of Administration.
— Martin Z. Braun
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6. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 6
NEWS
Perry’s Final Months Leading Texas Clouded by Indictment MARK NIQUETTE (8/18/2014)
Texas Democrats are calling for Governor Rick Perry to resign
after being indicted yesterday, while Republicans say the charges
are politically motivated and won’t stop him from governing or
even running for president.
Perry, a possible 2016 Republican candidate for the White
House who leaves office in January after more than 13 years,
faces charges of abusing his powers by vetoing money for pros-ecutors
who investigate public corruption. An arraignment date
will be set next week, said special prosecutor Michael McCrum.
Texas Democratic Party Chairman Gilberto Hinojosa said in
a statement that Perry should step down because he “brought
dishonor to his office, his family and the state of Texas,’’ even as
Republicans and Perry’s lawyer said he was indicted “in a political
prosecution’’ for exercising his constitutional authority.
Perry, 64, is accused of trying to force Travis County District At-torney
Rosemary Lehmberg, a Democrat, to resign by threaten-ing
to veto funds for the state’s public integrity unit, which oper-ates
from her office and investigates corruption. A Travis County
grand jury accused him of abuse of official capacity and coercion
of a public servant in the indictment. Perry asked Lehmberg to
resign after her arrest for drunken driving last year.
David L. Botsford, a criminal defense lawyer representing Perry,
said the governor has a legal right and duty to veto spending. The
indictment “sets a dangerous precedent by allowing a grand jury to
punish the exercise of a lawful and constitutional authority afforded
to the Texas governor,’’ he said. McCrum has said there’s evidence
to support both counts.
Craig McDonald, director of Texans for Public Justice, the non-profit
Prepa Gains Extension BRIAN CHAPPATTA (8/15/2014)
group that filed a complaint with the district attorney over
the governor’s actions, said Perry should weigh resignation.
“A governor under felony indictment should consider seriously
stepping down,’’ McDonald said.
Steve Munisteri, chairman of the Republican Party of Texas,
said Democrats calling for resignation are being hypocritical when
they made no similar demands of Lehmberg or other Democratic
officeholders who got in legal trouble.
Perry is facing “the criminalization of what is normal political ac-tivity’’
in the indictment by a grand jury drawn from a Democratic
area of the state, he said.
“The vast majority of Texans are going to think this is a political
prosecution,’’ Munisteri said.
The Puerto Rico Electric Power Authority, the main supplier of
electricity in the struggling U.S. territory, said it agreed with credi-tors
to delay repayment of bank loans until March.
The agency uses the lines of credit to buy fuel. It was sched-uled
yesterday to repay $146 million to Citigroup Inc. unit
Citibank and $525 million to a syndicate of banks led by Scotia-bank
de Puerto Rico, which is serving as administrative agent.
Prepa, which has $8.6 billion of debt, had already pushed back
payments last month after using $41.6 million of reserves to pay
investors July 1.
Under the agreement, Prepa must appoint a chief restructuring
officer by Sept. 8 and come up with a five-year business plan by
Dec. 15, according to a statement the utility released yesterday.
Prepa must also deliver a debt restructuring plan by March 2.
The announcement “is an important milestone in the transfor-mation
of Prepa and gives us a clear line of sight to the future,’’
Harry Rodriguez, president of Prepa’s board of directors, said in
the statement.
The utility said it will make full debt-service payments during the
term of the agreements. The agency must repay about $214 mil-lion
to bondholders on Jan. 1, according to advisory firm NewOak.
Investors have been speculating that Prepa would be the first
Puerto Rico public corporation to use the island’s new debt-restructuring
law to reduce obligations.
Prepa would represent the largest restructuring ever in the muni
market, exceeding the $8 billion of GOs and water-and-sewer
debt in Detroit’s bankruptcy. Most holders of Prepa debt don’t
have insurance.
Bond funds affiliated with Franklin Resources Inc. and Oppen-heimer
Rochester Funds filed a lawsuit saying the Puerto Rico
Public Corporation Debt Enforcement and Recovery Act, ap-proved
by lawmakers in June, is unconstitutional.
Some of the longest-maturing Prepa bonds have rallied since
reaching as low as 34 cents on the dollar July 2.
Uninsured Prepa securities due in 2042 traded Aug. 13 at about
50 cents on the dollar, the highest since June 26. That was the day
Fitch downgraded the authority to CC, citing a probable restructur-ing
or default.
Follow Brian Chappatta on Twitter for regular updates and additional insights @bchappatta
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7. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 7
CREDIT CLOSE-UP (8/28/2014)
Pennsylvania Issuers Again Turn to Swaps
‘‘
Last month, commissioners approved
an ordinance authorizing a swaption in-volving
an upfront payment to the county
that Wenger says would go toward debt
service. The counterparty, Royal Bank of
Canada, would have the right at a future
date to compel the county to pay a float-ing
rate in exchange for fixed payments
until 2033.
Transactions involving immediate cash
have “been the cause of 99 percent of
the abuse in the market,’’ said Lucien
Calhoun, the Flourtown, Pennsylvania-based
president of Calhoun Baker Inc.
The company administers the Delaware
Valley Regional Finance Authority, which
provides municipal loans. Calhoun said
the agency uses swaps for Pennsylvania
localities to reduce borrowing costs.
Pennsylvania municipalities are turning
once again to the kinds of derivative deals
that backfired during the credit crunch as
the lure of upfront cash and the potential
to cut costs prove too hard to resist.
Dauphin County in July cleared the way
to enter into an interest-rate swap on a
deal that helped settle the debt of the
formerly insolvent state capital Harrisburg.
Berks County, which in 2009 spent about
the equivalent of its parks and library
budgets to end swaps, agreed to a new
contract in March. Lancaster County in
November and the Oley Valley School
District in 2012 exited deals in exchange
for immediate cash and new accords.
The governments are tapping swaps
even as borrowers pay to end money-los-ing
deals. In 2009, Pennsylvania had the
most local governments using swaps on
variable-rate debt, according to Moody’s.
“You’ve got to think long and hard before
you take a risk that you have no control
over,’’ said Steven Goldfield, who helped
develop Harrisburg’s recovery plan as
senior counselor at Public Resources Ad-visory
Group. “As a governmental official
with public funds, you want to preserve
the funds.’’
Even after federal regulators pushed
through rules sparked by the swaps
fallout, public money remains at risk,
according to Pennsylvania state sena-tors
backing stronger restrictions. Their
bills, up for a vote as soon as next month,
would have barred the latest deals.
“We still have a lot of risky transac-tions
that are not working out well for
the taxpayers,’’ said state Senator John
Eichelberger, a Republican sponsor of
the measures. “We need more protection
built into the law.’’
In the last eight years, about 1,000
audits of school districts, including those
who’ve engaged in swaps, have shown
that “whatever benefit they got upfront
wasn’t worth it on the back end,’’ said
Auditor General Eugene DePasquale.
Swaps figured in the fiscal woes of Har-risburg,
which was forced into the state’s
first receivership in 2011. In response,
state senators pushed bills that would limit
the use of swaps through steps such as
banning upfront payments and mandating
that municipalities be able to exit deals
at no cost when the contracts are longer
than 10 years.
Dauphin County backed the incinerator
debt and made payments that the city
skipped. As part of the settlement that al-lowed
Harrisburg to exit receivership, the
county contributes a portion of the interest
rate on $24 million in fixed-rate bonds that
financed the December sale of the waste
facility, said Jay Wenger, managing direc-tor
at Susquehanna Group Advisors Inc.,
the county’s financial adviser.
Dauphin hasn’t entered into the contract.
In 2011, it agreed to two swaps with RBC,
effective in 2015 and 2016, that would cost
about about $626,000 combined to termi-nate,
according to Susquehanna.
Wenger said commissioners would do
the third swap to manage their interest-rate
risk, the same reason for the 2011
deals. “They’ve been very judicious with
their evaluation and decision-making,’’
Wenger said. “If you’re using the right tool
for the right job, you’re probably going to
have a lot of success with that tool.’’
“All proposals are advanced in full
compliance with Pennsylvania law,’’ which
requires municipalities to use an inde-pendent
adviser, Lauren Hopkinson, a
spokeswoman for RBC, said in an e-mail.
“In each instance, the financial risks and
benefits are fully vetted’’ by the adviser,
she said.
Even though federal law requires
independent advisers for municipalities
entering into swaps, the compensa-tion
the advisers earn through the deal
“compromises their independence,” said
state Senator Rob Teplitz, a Democrat
representing Harrisburg.
In Berks County, finance director Robert
Patrizio said it was his idea to enter a
transaction in March.
Berks has returned to the swaps market
after the government lost money on ear-lier
deals, he said. In 2009, the county
paid termination fees totaling $13.8
million, about its budget for libraries and
parks that year. The March structure, as
with one from 2011, is a basis swap in
which the county pays a variable rate
based on tax-exempt municipal notes
and receives from PNC Bank an amount
based on a taxable variable rate, docu-ments
show.
Patrizio said that for the 2011 transac-tion,
he asked the county’s financial advis-er
to pull 10 years of historical averages
for the two rates and to determine how
the county would fare if the contract were
in place by each month.
The March swap would save at least
$2.6 million over its 23-year term;
reserves would cover exit payments if
needed, Patrizio said.
— Romy Varghese
You’ve got to think
long and hard
before you take a risk
that you have
no control over. ‘‘
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

8. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 8
CREDIT CLOSE-UP (8/15/2014)
Michigan Towns Ready More Pension Bonds
Michigan municipalities, facing a year-end
deadline to borrow for retirement
costs, are planning record bond sales to
pay for workers’ health care and pensions.
The Detroit suburb of Macomb County
plans a $270 million sale, its biggest
ever, to finance retiree health-care costs.
Kalamazoo is considering a $100 million
deal. Bloomfield Hills plans to borrow a
record $17 million for pensions. The law
allowing the practice expires Dec. 31.
States and cities are struggling with how
to pay for promises to workers. Yet few
communities see debt as the answer —
sales of revenue-backed pension bonds
have tallied $356 million this year. Interest
rates close to five-decade lows are mak-ing
it more attractive to pursue the risky
strategy of investing borrowed funds.
“We can’t afford to wait,’’ said Peter
Provenzano, Macomb County finance
director. “Timing the market is difficult. You
could sit on the sidelines and miss out on
an opportunity.’’
Municipalities have sold pension bonds
since 1985, led by Illinois and California,
according to the Center for Retirement
Research at Boston College. This year’s
issuers include Orange County and the
city of Riverside, both in California.
Investing borrowed cash to pay for
health expenses is a new twist in Michi-gan,
where 284 municipalities owed a
combined $12.7 billion in unfunded liabili-ties
for retiree medical care, according to
Michigan State University. About half didn’t
require employee contributions.
The practice of issuing debt for retire-ment
costs draws criticism from Matt
Fabian, managing director at Municipal
Market Advisors. The borrowing shows
a lack of political will to raise taxes or
reduce benefits, he said.
From the issuer’s standpoint, the sales’
timing dictates the success of pension
bonds, according to the Boston College
center. Reinvested proceeds must earn
more than it costs to service the debt.
Because of stock-market gains follow-ing
the recession that ended in 2009, the
majority of pension bonds have gener-ated
positive returns as of February 2014,
according to the center. That’s a reversal
for health-care costs, and won’t be able
to afford the premiums by the mid-2020s,
said Provenzano, the finance director.
The bonds will allow the county to keep
up with projected cost increases, he said.
The plan projects that debt proceeds will
earn an average of 7.5 percent annually.
“We’re being proactive about this,”
Provenzano said.
Money from the issue will be invested
over the course of a year to adjust to
swings in financial markets, he said.
With 850,000 residents, Macomb abuts
Detroit’s northeast border and is domi-nated
by 155 auto plants and suppliers,
and the General Motors Technical Center
in Warren. The county’s $53,628 median
household income compares with about
$48,500 statewide.
Oakland County, which also borders
Detroit, sold $350 million in GOs last year
to refinance debt issued in 2007 for retiree
medical benefits.
Investments from the 2007 issue
gained more than projected, result-ing
in overfunding for health benefits,
said Robert Daddow, county deputy
executive. The refinancing will save at
least $125 million over the 13-year bond
repayment, he said.
The county also reduced costs by clos-ing
its defined-benefit health plan to new
hires in 2006, Daddow said.
Kalamazoo may borrow $100 million
to partly finance $188 million of retiree
health-care liabilities.
A city panel this week recommended
the bonds and negotiations with retirees
and unions to lower medical costs. The
city pays $6 million annually from its
$50 million general fund toward retiree
health care.
If investment returns fall short of repay-ing
the debt and health insurance, the
city would renegotiate with employees for
savings, said Tom Skrobola, Kalamazoo
finance director. Without revenue from
borrowing, the city won’t keep up with ris-ing
medical costs and demands for other
city services, he said.
“We’ve had great success with bargain-ing,
but it’s not enough,’’ he said. “It has to
be a combined approach.’’
— Chris Christoff
from mid-2009, when the financial crisis
left most of the deals in the red. The
analysis is complicated because many
of the securities have 30-year maturities,
according to the center.
Grand Rapids won’t use debt to finance
$135 million in unfunded health-care liabili-ties,
said Scott Buhrer, the city’s CFO.
‘‘
We can’t afford to wait.
Timing the market is difficult.
You could sit on
the sidelines and miss out
on an opportunity. ‘‘
“The best way to have odds in your favor
is to do this when stock prices are de-pressed,’’
Buhrer said. “We’re in the latter
stage of a bull market.’’
Michigan didn’t allow such borrowing
until a 2012 law, which limits sales to local
governments with at least a AA rating, and
requires state approval. A bill to extend the
law for a year awaits action in the house
after passing the senate. Republican Gover-nor
Rick Snyder supports the extension.
Borrowing for retirement costs works
when coupled with benefit changes,
said John Axe, a bond attorney based in
Grosse Pointe Farms, Michigan.
Axe said he represents six municipali-ties
that are considering borrowing for the
expenses; he declined to name them.
Macomb County is paying half the rec-ommended
$30 million annual expense
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

9. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 9
CREDIT CLOSE-UP Port St. Lucie, Florida (8/07/2014)
‘‘
We’re done with this
type of economic
development program.
It’s been a
‘‘
traumatic experience.
The crowd of 80,000 revelers went wild
as a lifelike hologram of rapper Tupac
Shakur took the stage at the 2012 Coach-ella
Music Festival. Six months later, the
Florida visual-effects firm that resurrected
the deceased musician in the California
desert would itself be dead.
Its debt, $37 million owed by taxpayers,
lives on.
While Digital Domain Media Group filed
for bankruptcy nine months after mov-ing
into a state-of-the-art studio in Port
St. Lucie, Florida, local taxpayers are on
the hook for the building’s bonds through
2031. The $3.5 million payment due this
year amounts to about 4 percent of Port
St. Lucie’s operating budget.
“We’re done with this type of economic-development
program,’’ said Ed Fry Jr.,
treasurer of the city of 170,000 about 100
miles north of Miami. “It’s been a trau-matic
experience.’’
Florida filed a lawsuit last month alleging
fraud by the company. The city council
called a meeting last week to consider
selling the now-empty studio for as little
as $8.5 million.
The city tapped its general fund to make
last year’s debt-service payment. With
another payment due Sept. 1, the city has
been trying to convince bondholders to
approve a refinancing plan.
As of the end of June, investors owning
28 percent of the bonds had agreed to the
plan, according to a July 18 city memo.
That’s less than the 51 percent threshold
required for changing borrowing terms.
Studio bonds maturing in 2031 traded
Aug. 5 as high as 102 cents on the dollar,
compared with about 97 cents when the
debt was sold in 2010. They traded most
recently at an average yield of about 4.7
percent, or 3.1 percentage points above
benchmark debt. S&P grades them A.
“The bonds are trading still pretty strong,
not at anywhere close to what you would
consider a distressed level,’’ said Michael
Schroeder, chief investment officer at
Wasmer, Schroeder & Co., which man-ages
about $3.5 billion in munis. “The
market is still believing that the city is on
the hook.’’
“Debt-service payments on the Series
2010 Bonds are coming too fast, and
too soon,’’ Fry wrote in an April 21 letter
to investors.
Politicians in Port St. Lucie voted unani-mously
in 2009 to build a 115,000-square-foot
facility for Digital Domain, after the
company received a $20 million grant
from Florida on the promise of creating
500 jobs.
The city sold $40 million in bonds in
2010. Local officials hailed the studio as
a salve for a recession-battered economy
built on tourism and construction. Unem-ployment
was 13.1 percent when the deal
was approved in November 2009, higher
than the U.S. rate of 9.9 percent.
controlling stake in an indebted California
company. That company’s debt weighed
down the Florida startup, forcing it to bor-row
more to keep the doors open, accord-ing
to the suit. Textor got financing from a
group of hedge funds at “predatory’’ terms
designed to send Digital Domain into a
“death spiral,’’ the state’s complaint said.
The lenders, led by Tenor Opportunity
Master Fund Ltd., took short positions in
the stock of Digital Domain, which was
running low on cash in the months before
it failed. The hedge funds received $35
million from the sale of the bankrupt com-pany,
the complaint said.
A representative of Tenor, who declined
to provide his name when reached by
phone, said the company had no com-ment
on the lawsuit, in which it isn’t
named as a defendant.
The complaint describes Digital Domain,
which was awarded $135 million in state
and local-government subsidies, as a
Ponzi scheme.
Textor, 48, denies the allegations. He
blames the hedge funds for forcing the
company into bankruptcy while profiting
from declines in its stock. Digital Domain
was a legitimate business and the Florida
studio helped produce visuals for films
including “Rock of Ages,’’ starring Tom
Cruise, Textor said. Its failure was the
result of bad luck and a few unfortunate
financial decisions, he said.
“The guys that run Ponzi schemes run
away with a lot of money,’’ he said. “I lost
everything. I invested more than the state
of Florida did and lost it.’’
Textor said he feels remorse for how the
company’s failure has burdened the city.
That’s why he decided to base his new
company, Pulse Evolution Corp., in Port
St. Lucie, he said. The digital production
firm has hired 50 people.
That’s no consolation for Michelle Lee
Berger, a city council member who voted
for the subsidy in 2009. Last week she lis-tened
to proposals from companies seek-ing
to buy the taxpayer-financed studio.
Offers ranged from $8.5 million to $15
million. The council is considering raising
taxes this year.
“People who haven’t even moved here
yet will be paying for what happened to
Digital Domain,’’ Berger said.
— Toluse Olorunnipa
The visual-effects company, which had
worked on such films as “Titanic’’ and
“Apollo 13,’’ promised to deliver technology
jobs with average annual salaries exceed-ing
$64,000. CEO John Textor wowed
city council members with plans to build a
studio that would produce groundbreaking
special effects.
Rent payments by the company were
supposed to back the bonds. When
Digital Domain filed for Chapter 11, it
dismissed more than 200 workers and
stopped paying rent.
The state of Florida filed a lawsuit last
month seeking to recoup the $20 million
grant it gave to Digital Domain. According
to the civil complaint filed in Florida circuit
court, Textor and his affiliates defrauded
the state by withholding information about
the company’s financial challenges.
The lawsuit alleges that Textor used
the state’s grant money to purchase a
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

10. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 10
CREDIT CLOSE-UP (8/14/2014)
Los Angeles Fights Banks Over Swaps
The Los Angeles City Council is threat-ening
to stop doing business with Bank
of New York Mellon Corp. and Dexia SA if
they refuse to renegotiate swaps.
In a 14-0 vote yesterday, the council
asked BNY Mellon and Dexia to return
$65 million in what the lawmakers called
unfair profits and fees paid since 2008 on
debt for sewer work.
The companies would also risk losing
out on future business under the union-backed
measure.
A six-year statute of limitations is closing
for localities to try to recoup payments to
Wall Street on bond deals that went awry
in the financial crisis. Municipal borrowers
nationwide have paid over $4 billion to
banks to end swaps.
“We need to hold Wall Street account-able
where others have not, and let Wall
Street know that we’re too big to ignore,’’
Councilman Paul Koretz said.
The time limit is approaching for issuers
to try to claw back losses by arguing that
banks misled them about the risks of
the deals, former Congressman Bradley
Miller, an attorney with Grais & Ellsworth
LLP, said last month.
Wall Street banks pitched the transac-tions
as a way to reduce borrowing costs.
They unraveled after the financial crisis
and the Fed’s policy of holding its bench-mark
borrowing rate near zero since 2008
turned many swaps into wrong-way bets.
If the banks don’t unwind the agree-ments,
according to the motion spon-sored
by Koretz and backed by municipal
employee unions, Los Angeles should
terminate other business with them and
exclude the companies from future con-tracts.
The vote directs the city attorney to
“evaluate potential legal remedies’’ against
the banks.
Kevin Heine, a BNY Mellon spokes-man
in New York, declined to comment.
Caroline Junius, a Dexia spokeswoman
in Brussels, didn’t immediately respond
to e-mail messages seeking comment on
the measure.
Second only to New York in popula-tion
among U.S. cities, Los Angeles
Santana told the council yesterday.
Santana met with representatives of
BNY Mellon and Dexia in June, accord-ing
to a memo he wrote that month. Dexia
was amenable to renegotiating, though a
significant discount was unlikely, Santana
wrote. BNY Mellon wouldn’t agree to
terminate the deal at no cost. He said he’ll
keep exploring options with the banks.
The financial crisis drove up interest
rates on the wastewater bonds and other
city debt, something that officials couldn’t
have anticipated when the securities were
sold two years earlier, Santana said.
“Every financial transaction has risks,’’
Santana said in the memo. “When we an-alyze
those risks, it is difficult to compare
to what could happen due to changing
market conditions.’’
Koretz’s motion asserts that BNY Mellon
and Dexia are profiting by a combined
$4.8 million a year on the swaps. The city
might lose an additional $69 million at
current rates if the swaps remain in effect
until they expire in 2028, said Koretz.
Koretz and fellow Councilman Gil Ce-dillo,
both Democrats who served in the
state legislature, sponsored the motion at
the urging of the labor-backed Fix LA Co-alition.
In a report this year, the coalition
said Los Angeles pays about $300 million
a year in interest and transaction fees
while cutting services to save money.
Lawmakers’ vote yesterday drew cheers
from city employees in the council cham-bers,
many wearing stickers from Fix LA
that read, “Our Streets, Not Wall Street.’’
Oakland, California, considered severing
ties with Goldman Sachs Group Inc. last
year over a $14.8 million termination fee
for a swaps agreement.
The contract remains in effect and the
city continues to make debt payments,
Karen Boyd, a city spokeswoman, said
by e-mail.
“Hopefully we’ll bring back a few million
bucks,’’ Koretz told union leaders and
workers after the vote. It’d be “a huge
amount for city services if we can pull
this off.’’
— James Nash
paid $26.1 million in 2012 to terminate
another interest-rate swap with BNY Mel-lon
and Dexia.
The subject of the council’s vote was
part of $151.1 million in swaps associated
with a portion of $281 million in wastewa-ter-
system revenue bonds.
Los Angeles sold $316.8 million in
bonds in 2006 to refinance debt issued in
1988 for work on the wastewater system.
‘‘
We need to hold
Wall Street accountable
where others have not,
and let Wall Street
know that we’re
too big to ignore. ‘‘
The city refinanced the debt again last
year, reducing the amount by half.
Because of a decline in interest rates
since 2006, the swaps had a negative fair
value of $24.7 million as of June 2013. Ex-iting
the contracts would cost from $23.5
million to $25.7 million in termination fees,
according to a June analysis by the Public
Resources Advisory Group for Miguel
Santana, the city administrative officer.
Santana advised the council against
terminating the swaps in a May memo,
saying the financing had saved the city
about $21.7 million.
“Even today, the swaps are the most
cost-effective action when you look back,’’
MONITOR, GRAPH AND ANALYZE GLOBAL CDS MARKETS CDX<GO>
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

11. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 11
S&P Widens Lead over Moody’s on Rated Muni Debt (8/12/2014)
The chart on the right shows the mar- Moody’s and S&P’s Market Share
ket share of long-term fixed-rate muni
debt that carried a rating from Standard
& Poor’s and Moody’s. Based on the
number of deals since 2008, S&P has
rated an average of 58 percent of muni
deals compared to 48 percent of deals
that carried a grade from Moody’s, data
compiled by Bloomberg show. In July
2014, 63 percent of deals carried an S&P
grade and 44 percent held a rating from
Moody’s. Based on par value of deals (not
shown in the chart), Standard & Poor’s
has a market share of 86 percent on aver-age
since 2008; Moody’s, 80 percent. This
July, about 86 percent of deals based on
par value carried an S&P grade, while 74
percent used Moody’s.
— Taylor Riggs
DATA
75%
70%
65%
60%
55%
50%
45%
40%
35%
S&P Rated
Moody's Rated
Jan-2008 Jan-2009 Jan-2010 Jan-2011 Jan-2012 Jan-2013 Jan-2014
Source: Bloomberg
Texas Sells Debt at Fastest Pace in Five Years, Bucking Austerity Trend (8/28/2014)
Texas is selling debt at its fastest pace Texas Bond Issuance
since 2009, issuing $23.4 billion year
to date. A surge in issuance from the
second-most populous state comes as
total issuance in the municipal market is
at its lowest since 2011. Total Texas issu-ance
for the year through August is above
2013’s $23 billion and 2012’s $20.9 billion.
Texas sold $13.9 billion of debt in 2011
and $19.7 billion in 2010. The increase in
debt from Texas isn’t hampering demand.
This week, Texas sold $5.4 billion of one-year
notes at a record-low yield of 0.13
percent, breaking its previous record low
of 0.201 percent when it sold debt last
year. Bloomberg’s AAA muni benchmark
one-year note yields 0.15 percent.
— Taylor Riggs
40
35
30
25
20
15
10
5
0
2014
2013
2012
2011
2010
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
In Billions of U.S.
Source: Bloomberg
FOLLOW TAYLOR RIGGS ON TWITTER>>>
FOR REGULAR UPDATES AND ADDITIONAL INSIGHTS @TaylorRiggsMuni
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

12. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 12
DATA
Sponsored by
Pittsburgh Shakes Off Recession, Population Drop TAYLOR RIGGS (8/22/2014)
Pittsburgh’s population and real estate
taxes have declined in recent years, but its
per capita income topped $50,000 in 2012,
above the national average of $43,700.
1. Pittsburgh Population Declines
2. Real Estate Taxes Fall Below Budget
3. But Expenditures Keep Pace With
Revenues
4. And Per Capita Income Above National
Levels
5. Debt Service Falls as Pension Costs
Increase
6. Pittsburgh Sells Wrapped Debt With
Tighter Spreads
$55,000
$50,000
$45,000
$40,000
$35,000
Pittsburgh Per Capita Income
U.S. Per Capita Income
PA Per Capita Income
http://briefs.blpprofessional.com/viz/Pittsburgh-Shakes-Off-Recession-Population-Drop/index.html
E-mail questions or comments on Bloomberg Brief StoryCharts to Deirdre Fretz at dfretz@bloomberg.net
CLICK HERE TO LAUNCH
the StoryChart in your internet browser.
$30,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Pittsburgh POS
Worst City Pension Plans in Michigan, 2013 (8/19/2014)
POSITION CITY FUNDED RATIO TOTAL POPULATION* TOTAL PENSION UNFUNDED ACCRUED
LIABILITIES ($MILLIONS)**
UNFUNDED PENSION LIABILITY
PER CAPITA ($)
1 Bloomfield Hills 50.7 3,882 15.032 3,872
2 Flint 61.1 100,515 322.876 3,212
3 River Rouge 58.9 7,951 24.686 3,105
4 Norway 50.6 2,864 8.597 3,002
5 Saginaw 55.4 51,776 145.679 2,814
6 Traverse City 64.9 14,702 34.173 2,324
7 Ecorse 48.1 9,545 21.973 2,302
8 Hamtramck 54.2 22,317 45.508 2,039
9 Melvindale 52.3 10,637 21.649 2,035
10 Lansing 66.9 113,488 218.261 1,923
11 Manistique 51.7 3,102 5.936 1,914
12 Crystal Falls 66.2 1,540 2.835 1,841
13 Lincoln Park 32.0 37,998 69.115 1,819
14 Escanaba 64.0 12,609 21.979 1,743
15 Huntington Woods 52.7 6,236 10.814 1,734
16 Iron Mountain 51.0 7,662 13.147 1,716
17 Wayne 70.8 17,562 29.229 1,664
18 Fraser 50.8 14,563 23.960 1,645
19 Jackson 55.3 33,661 54.620 1,623
20 Highland Park 47.0 11,971 18.728 1,564
State of Michigan 61.3 9,883,360 31,199.500 3,157
* Most recent population data available from Census
**Does not include OPEBs
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

13. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 13
DATA
Sponsored by
Yale Reputation Can’t Bail Out New Haven TAYLOR RIGGS (8/15/2014)
Moody’s rated New Haven’s GOs A3 due
to “an extremely narrow financial position
resulting from several years of structurally
imbalanced operations.”
510
500
490
480
470
460
In Millions of U.S. Dollars
Tale of Two States TAYLOR RIGGS (8/08/2014)
Wisconsin’s 10-year yield trades at
2.60 percent, below Connecticut’s 2.65
percent. In April 2013, Wisconsin’s 10-year
yielded 2.48 percent compared with Con-necticut’s
2.40 percent.
1. Connecticut GDP Tops Wisconsin
2. Connecticut, Wisconsin Personal
Income Rebounds
3. Wisconsin Unemployment Rate Falls
4. Wisconsin 10-Year Yields Lower
Than Connecticut
5. Wisconsin Benefits in Pricing With
Tighter Spreads
3.6%
3.4%
3.2%
3.0%
2.8%
2.6%
2.4%
2.2%
WI 10-Year Yields
CT 10-Year Yields
Revenues Expenditures
http://bit.ly/1kpgyPj
E-mail questions or comments on Bloomberg Brief StoryCharts to Deirdre Fretz at dfretz@bloomberg.net
CLICK HERE TO LAUNCH
the StoryChart in your internet browser.
2.0%
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14
Source: Bloomberg
1. City Budget Structurally Imbalanced
2. Pensions Take Bigger Bite of Budget
3. New Haven Unemployment Tops
National Level
4. Yale Acceptance Rate Declines and
Endowment Grows
5. Yale’s Net Assets Grow
6. Even With Insurance, New Haven Pays
Extra to Borrow
http://bit.ly/1uoAsw1
E-mail questions or comments on Bloomberg Brief StoryCharts to Deirdre Fretz at dfretz@bloomberg.net
CLICK HERE TO LAUNCH
the StoryChart in your internet browser.
450
2010 2011 2012 2013 2014 2015
Source: New Haven City Budget/POS
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14. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 14
Puerto Rico Electric Power Bonds Rebound From July Low TAYLOR RIGGS (8/04/2014)
Puerto Rico Electric Power Authority Puerto Rico Electric Power Authority 5 Percent of 2042
bonds were downgraded July 31 to CCC
from B- by Standard & Poors, its fourth
downgrade in 2014. The bonds were
investment grade, rated BBB-, as recently
as June of this year. Moody’s downgraded
the bonds three times in 2014, most
recently to Caa2 on July 1 from Ba3 on
June 26. Fitch downgraded Prepa three
times this year, from BB+ in February to
CC on June 26. Prices fell to a low of $37
on July 1 and have since rebounded to
$48.63 last Thursday.
— Taylor Riggs
DATA
110
100
90
80
70
60
50
40
30
July 1: Fitch
downgrades to BBB-Feb
June 11: Fitch downgrades to BB;
June 18: S&P downgrades to BBB-;
June 26: Fitch downgrades to CC;
June 27: S&P downgrades to BB
18: Fitch
downgrades to BB+
July 9: S&P
downgrades to B-;
July 31: downgrades
to CCC
June 19: Moody's
downgrades to
Baa3; June 20: S&P
to BBB
Aug 26: Barron's article in
August on PR
Feb. 7: Moody's
downgrades to Ba2
June 26: Moody's
downgrades to Ba3; July 1:
downgrades to Caa2
May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14
Source: Bloomberg
Top 14 Cities by Population and Their Pension Plans (8/06/2014)
CITY ISSUER FISCAL
YEAR
TOTAL
POPULATION
UNFUNDED ACTUARIAL ACCRUED
LIABILITIES ($MILLIONS)
FUNDED
RATIO
UNFUNDED LIABILITIES
PER CAPITA ($)
City of New York, NY 2013 8,336,697 71,949 60.7 8,630
City of Los Angeles, CA 2013 3,857,786 9,769 77.1 2,532
City of Chicago, IL 2013 2,714,844 20,110 34.3 7,407
City of Houston, TX 2013 2,161,686 2,971 76.2 1,374
City of Philadelphia, PA 2013 1,547,607 5,461 47.4 3,529
City of Phoenix, AZ 2013 1,488,759 2,538 60.9 1,705
City of San Antonio, TX 2013 1,383,194 313 91.9 227
City of San Diego, CA 2013 1,338,354 2,279 68.6 1,703
City of Dallas, TX 2013 1,241,108 1,750 79.2 1,410
City of San Jose, CA 2013 982,783 1,772 71.6 1,803
City of Austin, TX 2013 842,595 1,463 68.0 1,737
City of Jacksonville, FL 2013 836,507 2,706 51.4 3,235
City of Indianapolis, IN 2013 835,806 816 7.9 976
City & County of San Francisco, CA 2013 825,863 3,414 83.1 4,134
* Population from Census
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15. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 15
DATA
Popular Municipal Securities on Bloomberg August 26, 2014 (published 08/27/2014)
MSRB MARKET FLOW (08/29/2014)
Top Traded Borrowers in the Municipal Market 8/22/14 to 8/28/14 ($millions)
DEALER TO CLIENT VOLUME DEALER TO
DEALER
ISSUE BORROWER** VOLUME CUSTOMER SELLS CUSTOMER BUYS NET VOLUME
Total 24742 5375 10933 -5558 8434
1 Michigan Finance Authority 1386 24 1287 -1263 74
2 State of California 686 194 233 -39 259
3 State of Texas 515 45 448 -403 21
4 City of New York NY 506 112 162 -50 232
5 University of Colorado 328 14 296 -282 17
6 New York State Dormitory Authority 260 71 89 -18 101
7 State of Washington 255 53 66 -12 137
8 New York City Water & Sewer System 247 78 85 -7 85
9 State of Maryland 231 47 73 -26 111
10 Alabaster Board of Education 219 28 95 -67 96
Source: Bloomberg
* excludes variable rate & derivative debt *“Borrower” is defined as a municipality, an enterprise fund of a municipality or 3rd party obligor
* Volume numbers treat trades > $5MM as $5MM due to MSRB reporting restrictions
MFLO<GO>
POPULARITY DESCRIPTION STATE COUPON MATURITY
AMOUNT
OUTSTANDING
($MILLIONS)
BLOOMBERG MARKET SECTOR CALL
PROVISIONS DATED DATE FEDERAL
TAX
1 Puerto Rico-A PR 8.000 07/01/35 3500 General Obligation Call/Sink 03/17/14 Exempt
2 IL St Txb-Pension IL 5.100 06/01/33 7650 General Obligation Sinkable 06/12/03 Taxable
3 PR S/Tax-Cabs-A PR 0 08/01/54 7620 Sales Tax Sink/MW Call 07/31/07 Exempt
4 Liberty Dev Goldman NY 5.250 10/01/35 1243 Economic Development MW Callable 10/12/05 Exempt
5 PR-Ref-A PR 5.000 07/01/41 633 General Obligation Call/Sink 04/03/12 Exempt
6 PR Aqueduct-A-Sr Lien PR 5.250 07/01/42 551 Water/Sewer Call/Sink 02/29/12 Exempt
7 PR Elec Pwr-A PR 5.000 07/01/42 358 Public Power Call/Sink 05/01/12 Exempt
8 PR Elec Pwr-Xx PR 5.250 07/01/40 588 Public Power Call/Sink 04/07/10 Exempt
9 Bay Area Toll Auth-B CA 1.500 04/01/47 552 Toll Highways/Bridges/Tunnels Call/Put/Sink 08/05/14 Exempt
10 ID Hlth Fac Auth-A ID 4.125 03/01/37 36 Hospital Call/Sink 08/20/14 Exempt
11 Salt Verde Fnl Corp AZ 5.000 12/01/37 565 Gas Forward Contract Sink/MW Call 10/25/07 Exempt
12 PR-Ref-A PR 5.000 07/01/35 323 General Obligation Call/Sink 04/03/12 Exempt
13 FL Hurricane-Ser A FL 2.995 07/01/20 1000 Miscellaneous MW Callable 04/23/13 Taxable
14 Texas Transprtn-A-Ref TX 5.000 08/15/41 462 Toll Highways/Bridges/Tunnels Call/Sink 11/01/12 Exempt
15 CA Cmnty Dev Auth-A CA 5.000 04/01/42 870 Hospital Callable 04/18/12 Exempt
Source: Bloomberg SECF<GO>
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16. 09.11.14 www.bloombergbriefs.com Bloomberg Brief | Municipal Market 16
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