Cities, States Back off Bonds amid Budget Anxiety

The Tom Warne Report, 8 September 2011

Associated Press – September 4, 2011

JEFFERSON CITY, Mo. – Budget concerns have caused a decline in the municipal bond market, which in turn is leading to fewer states and cities breaking ground on public works projects. This cancellation or delay of projects worth tens of billions of dollars deals yet another blow to economic recovery efforts. By mid-August, the total value of municipal bonds issued in the U.S. had dropped by 40 percent compared to a year ago – the largest drop in about 20 years.

“There’s no question that this year some of the decline is simply budget problems that people have,” said John White, chief executive officer of the Public Financial Management Group, a Philadelphia-based investment advisory firm.”There is an atmosphere now where taxpayers are asking more questions about anything that’s debt-related than they have in the past.”

Concord, N.H. would have issued $10 million to $12 million in bonds, but because taxpayers were unwilling to pay for the larger debt, the city will instead issue between $7 million and $8 million this year. In Ohio, municipal bond sales are down more than 55 percent this year so far, so the Elyria City School District voted not to place a $50 million bond issue on the November ballot after a survey found it was unlikely to pass. In Georgia, Gov. Nathan Deal cut bonds from $1 billion as in previous years, to $563 million, delaying numerous state university projects.

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