Joseph Krist

Publisher

CHICAGO PUBLIC SCHOOLS

CPS projects a budget of $8.43 billion for FY 2026, with $5.8 billion in personnel costs and $2.6 billion for operations and funding charter schools. The district spends $817 million a year in loan repayments alone. Without cuts and revenue boosts, CPS projects a $1.3 billion deficit by 2030.

Three main factors are driving the deficit, according to CPS: Costs to serve students with disabilities, which have grown by $450 million since 2019. Building expenses that include $14 billion for backlogged repairs, and costs for more engineers and maintenance that have boosted spending by $100 million since 2019. Growing pension payments, including the $175 million CPS took over from the city.

CPS must present a balanced budget to the board by Aug. 28.

PENNSYLVANIA BUDGET

Pennsylvania has become a regular when it comes to being unable to make a budget before the start of the fiscal year. Pennsylvania’s 500 school districts face particular fiscal uncertainty. Cash reserves vary from district to district and may be earmarked for capital expenses like new school buildings, rather than operating expenses like staff salaries and utilities.

Pennsylvania’s Department of Education said it would not be able to make payments for adult basic education and the Early Intervention, Pre-K Counts, and Head Start programs on July 21, which is when payments for these programs are made each month. If there’s no deal by July 31, PDE will also miss payments for special education and community colleges. And if there’s no deal come Aug. 28, more substantial payments will be missed, including for basic K-12 education.

The state’s university system announced its first tuition hike in seven years, citing the unfinished budget.  SEPTA, serving Philadelphia and its suburbs, and Pittsburgh Regional Transit, serving Allegheny County — have approved budgets that will reduce service if no deal to raise transit funding comes through. State payments are due in August for county services like child welfare, mental health, and substance use disorder programs.

FIRE

Fire has been on everyone’s mind after the fire disaster in greater Los Angeles to start the year. While the area continues to attempt to recover and/or rebuild, wildfires are becoming a real concern nationally. So far this year, there have been 41,069 wildfires reported in the United States and a total acreage of 2,892,545 has burned. This is higher than the 10-year-average number of fires, but lower than the average number of acres burned. 

As this is written, three new large incidents have been reported for a current total of 83 large incidents nationwide. Nearly half of the active fires are in Alaska which had its first heat advisory ever. California, Colorado, Oregon, and Washington all are the site of six fires.

OREGON TRANSPORTATION FUNDING UPDATE

Gov. Tina Kotek will call lawmakers into a special session in late August to take up the issue of road funding in the state. In the meantime, the Governor will delay nearly 500 layoffs at the Oregon Department of Transportation, ensuring 12 maintenance facilities throughout the state remain operational. Those layoffs were scheduled to take effect July 31. (See MCN 7.14.25). They will instead be delayed 45 days.

The current estimated funding shortfall for ODOT for fiscal 2026 is $354 million. A variety of proposals have been offered ranging from expense cuts to a significant gas tax hike. The process is complicated in that the ODOT budget fixes will be part of the state’s overall transportation funding plan. Any increased revenues from a higher gas tax would be shared with cities, counties, transit agencies, and bicycle group.

A 6-cent hike to the state gas tax is estimated to be enough to forestall ODOT layoffs and send money to city and county road departments that are also strapped for cash.  a 0.1% tax on Oregonians’ paychecks that goes to public transit. Transit agencies have warned that funding shortfalls will lead to future service cuts if that isn’t increased. Democrats proposed increasing the tax to 0.18% during this year’s session.

MILEAGE FEES

The move to use mileage fees as a base source of user funding for roads is about to receive a potential boost politically. In testimony before Congress, the American Trucking Association said “We’re looking seriously at advocating for a registration fee that applies to everybody – trucks, cars, electric vehicles,”. “You already register your vehicle at the state [motor vehicle agencies], you simply pay for what you normally would pay in fuel costs at the pump. You get rid of the gas tax, the tire tax, and put it in a registration fee.”

There is less unanimity in the industry among the small carrier and owner operator segments. Their trade group supports a registration fee to capture electric vehicles while actually advocating for a rise in the federal gas tax.

HE’S NOT DOING THE WIND THING

The Trump administration has canceled a $4.9 billion loan guarantee for the Grain Belt Express. (See 7.7.25 and 7.21.25 MCN). The Energy Department said Wednesday that its Loan Programs Office has terminated a commitment for the first phase of the Grain Belt Express project. The loan was issued by the Biden administration in November 2024.

When it approved the project, the Missouri Public Service Commission found that Grain Belt would save Missourians $17 billion in lower electric bills. The private developer of the project, Invenergy says it has obtained the vast majority of those easements through voluntary negotiations with landowners. For the rest, the project was granted the right of eminent domain. That is what opponents of the project seized upon to stop the project. As is the case with carbon pipelines, eminent domain has emerged as a primary source of opposition.

We find it interesting that the announcement of the cancellation of the loan highlights that it is at the request of Missouri Senator Josh Hawley. Initially, opposition was driven by the fact that so little of the power being transmitted was to be available to Missouri utilities. Overtime, the project has contracted with 39 municipal utilities in Missouri, including Columbia Water and Light. 

PUERTO RICO SOLAR

A private provider has been selected to install and maintain Energy Resilience Hubs in five Puerto Rico communities in 2025. Each site will feature solar generation and battery storage to maintain electricity for essential services during outages caused by natural disasters or grid failure. The 2025 effort is funded through a cooperative agreement with the U.S. Department of Energy and is expected to be completed by September.

For the past two weeks, LUMA Energy, Puerto Rico’s grid operator has relied on tens of thousands of batteries scattered across the island to overcome energy shortfalls and help deliver power. It is the first operational behind-the-meter virtual power plant in Latin America and the Caribbean. In May, Puerto Rico’s Energy Bureau, which regulates utilities, approved an emergency expansion of the “customer battery energy sharing” program in anticipation of a projected generation shortfall during the summer.

The Puerto Rico Energy Public Policy Act of 2019 codified the role of solar and storage in the island’s energy system and set a 100% renewable energy target by 2050. There are about 175,000 households with solar, and at least 160,000 of those also have storage. Puerto Rico’s Republican governor, Jenniffer González Colón

recently expressed support for maintaining the existing net metering system. Unsurprisingly, Puerto Rico Electric Authority opposed that. PREPA is seeking to add a fixed charge to net metering program participants. 

LAND PORTS

There has rightfully been emphasis on levels of activity at the country’s marine ports in the ever changing tariff environment. We don’t know how this will all play out by the latest deadline of August 1. We do know where to look for potential impacts on cross border land traffic between the U.S., Mexico, and Canada.

Detroit, Port Huron, and Buffalo are the top truck ports for U.S. freight flows with Canada, while Laredo, El Paso, and Otay Mesa are the top truck ports with Mexico. Detroit, Port Huron, and International Falls are the top rail connection ports for U.S. freight flows with Canada, while Laredo, Eagle Pass, and El Paso are the top rail connection ports with Mexico.

Chicago, Port Huron, and Minneapolis are the top pipeline connection regions for U.S. energy freight flows with Canada. El Paso, Hidalgo, and Laredo are the top pipeline connection regions with Mexico. Port of Boston, Arthur, and Portland are the top water port connections for U.S. energy flows with Canada. Port of Houston, Arthur, and Texas City are the top water port connections for U.S. energy flows on the Southern border.

REBUILDING L.A.

Some 800 homeowners who lost homes in areas affected by wildfires applied for rebuilding permits as of July 7, according to the Los Angeles Times. Fewer than 200 have received the permits, however. The City of Los Angeles takes about 55 days on average to approve a wildfire rebuild, and the broader Los Angeles County takes even longer.

Insurance companies in California have been dropping some of their customers in high fire-risk areas, leaving them no option besides the FAIR Plan, the state’s high-priced, limited-coverage insurer of last resort. As the result of the scale of the fires, the FAIR Plan had to collect levy additional assessments totaling an additional $1 billion from its member companies, a move that will raise property insurance prices.

The realities of the current situation are that a combination of underinsurance, inflated construction costs, competition for skilled workers and pressure on the general unskilled workforce in the region resulting from the immigration crackdown. All of those factors are driving an increased fear that many victims will move rather than rebuild. 

COAL

The U.S. Energy Information Administration reports that coal-fired power plants will remain relatively well-stocked through the end of next year. Power plants in the United States had 124 million short tons of coal on-site at the end of June for them to consume that coal at a rate of about 1.3 million short tons per day, meaning they had about 93 days’ worth of fuel on-site. 

Days of burn is calculated by dividing coal inventories held at power plants by a seasonal consumption rate. EIA forecasts days of burn will range between about 90 and 120 days between now through the end of 2026, or about a month’s worth of coal more than power plants had on-site between 2019 and 2022. The clear impact of policy changes including the mandated operation of coal generation is showing up.

Coal inventories held at U.S. power plants have fallen since early 2024, coal consumption in the U.S. electric power sector has also fallen since then, so the supply measure of days of burn remains relatively high. Coal shipments to power plants have declined in line with coal consumption in the U.S. electric power sector.

The electric power sector accounted for more than 90% of U.S. coal consumption in 2024. U.S. coal consumption in the first quarter of 2025 was 18% more than in the first quarter of 2024. In its short-term forecast, EIA expects coal’s share of U.S. electricity generation to increase from 16% in 2024 to 17% in 2025 and then decrease to 15% in 2026. It’s clear that the use of coal does correlate with the price of natural gas. As natural gas prices increased in the first quarter of 2025, coal became more competitive driving an estimated 6% increase in 2025 consumption.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

PORTS AND TARIFFS

The Port of Los Angeles handled 892,340 Twenty-Foot Equivalent Units (TEUs) in June, 8% more than last year. It was the busiest June in the 117-year history of the Port of Los Angeles. According to the Port “Some importers are bringing in year-end holiday cargo now ahead of potential higher tariffs later in the year,”. “July may be our peak season month as retailers and manufacturers bring orders in earlier than usual, then brace for trade uncertainty. 

June 2025 loaded imports came in at 470,450 TEUs, 10% more than last year. Loaded exports landed at 126,144 TEUs, a 3% improvement from 2024. The Port processed 295,746 empty container units, 7% more than last year. After six months in 2025, the Port of Los Angeles has handled 4,955,812TEUs, 5% more than the same period in 2024. The latest delay in the trade war has extended the period of lower tariffs to August 1.

The negative impacts of tariffs are already being felt in the Port of Oakland. Port of Oakland June container volume declined, as shippers and carriers adjust to softening demand and ongoing tariff uncertainty. The Port handled 168,460 TEUs (twenty-foot containers), down 10.1% from May, and 12.8% from June 2024, when 193,158 TEUs passed through Port facilities. Year-to-date container volume remains higher than the same period last year. Total volume registered 1.14 million TEUs, marking a 0.6% increase over June 2024.

Loaded imports were up 1.5%, while loaded exports experienced a 1.3% decrease. Loaded imports totaled 70,334 TEUs, marking an 11.3% decline from May, and a 16.3% drop from June 2024, when 84,040 TEUs transited Port facilities. Loaded exports registered 59,593 TEUs, marking an 11.5% month-over-month decline, and a 10.3% decrease from June 2024, when the Port handled 66,424 TEUs. 

RURAL AMERICA

The ongoing uncertainty with the prosecution of the tariff trade war is taking its toll in many ways on the rural economy. Commodity pricing has not been favorable. Program changes at the federal level are closing long established outlets for commodities especially grain. Input and capital costs are rising. Now with the enactment of the BBB, more changes are coming October 1.

The 2002 Farm Bill created the program now known as REAP; it was given its current name under the 2008 Farm Bill. For over two decades, the federal Rural Energy for America Program has provided grants for solar, wind, energy-efficiency upgrades, grain dryers, biodigesters, and other projects in rural America. The most common use case for REAP grants is helping farmers install solar.

The 2022 Inflation Reduction Act funded REAP with some $2 billion, but those funds will soon run out. Under the Trump administration, A U.S. Department of Agriculture document outlined its Make Agriculture Great Again agenda. Going forward, REAP ​“will disincentivize funding for solar panels on productive farmland.” The program will likely revert to the lower funding level of $50 million per year ensured by the current iteration of the federal Farm Bill.

VIRGINIA TOLL REBATES

The Virginia Department of Transportation (VDOT) is set to cancel US$36m in unpaid toll debt accumulated by drivers who used the Midtown and Downtown tunnels in the city of Portsmouth, as part of a targeted effort to address long-standing concerns about the potential impact of tolls on working commuters with limited means. The Midtown and Downtown tunnels are operated under a 58-year public-private partnership (PPP) between VDOT and Elizabeth River Crossings (ERC), a private concessionaire owned by Spanish infrastructure group Abertis. The PPP includes tolling, maintenance and operations across both tunnel facilities.

Although ERC remains contractually entitled to pursue unpaid tolls under the PPP, the firm agreed to waive collections in exchange for reimbursement from the state.

The state will cover the full cost of the US$36m debt write-off using funds from its Toll Relief Program, introduced in 2022 under then-governor Ralph Northam to support frequent tunnel users earning less than US$50,000 per year. To qualify, drivers must reside in eligible ZIP codes and make a minimum of eight trips per month through the Midtown or Downtown tunnels.

FOLLOWING UP

In Los Angeles, MTA estimated a ridership count of roughly 23.7 million last month on its bus and rail systems — a 13.5% drop from May and the lowest June on record since 2022, when numbers had started to rebound since the pandemic emergency, according to Metro data. Metro’s numbers fell to its lowest levels of the year in June after the immigration raids throughout Los Angeles County. The large immigration sweeps began June 6.

Senator Josh Hawley, Republican of Missouri, said he had secured a commitment from Energy Secretary Chris Wright to cancel a conditional loan guarantee that the federal agency had granted to the developers of the Grain Belt Express. (See MCN 7.7.25)

The New York State Public Service Commission has terminated its offshore wind transmission planning process due to stalled federal permitting. The commission cited recent federal actions halting new offshore wind leasing and permitting, which it said make short-term project execution unfeasible.

The Maine Governor’s Energy Office was supposed to issue its first solicitation for energy generated by offshore turbines at the beginning of July, according to a 2023 law. But last month the Maine Public Utilities Commission agreed to the office’s request to extend that deadline indefinitely the extension was due to “recent changes in the energy landscape that have caused significant uncertainty in the offshore wind industry, including shifts in federal energy policy and market conditions.”

STADIUM NEWS

The Tampa Bay Rays may be poised to finally play home games in their own stadium in Tampa. A sale of the team had been in the works since talks with the City of St. Petersburg over the replacement of the existing but damaged stadium that had served as the Rays home since their inception. A sale was reported this week to a group led by a Jacksonville developer for about $1.7 billion. It is believed that new ownership would have the team play in a stadium in Tampa.

The battle over the future location of Kansas City’s Royals and Chiefs is heating up. A bipartisan council of Kansas lawmakers voted Monday to extend by six months the deadline for the Missouri-based Kansas City Royals or the Kansas City Chiefs to accept economic development incentives from Kansas for construction of sports stadiums. The 2024 law that established procedures for issuance of STAR (Sales Tax and Revenue) bonds to cover 70% of construction costs for one or both stadiums and support structures had a deadline of June 30, 2025. The statute gave the LCC authority to add another year to the timeline.

Missouri offered to finance up to 50% of the cost to renovate or build new stadiums for the Royals and Chiefs. Missouri’s legislation authorizes bonds covering up to 50% of the cost of new or renovated stadiums, plus up to $50 million of tax credits for each stadium and unspecified aid from local governments.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

NEW ORLEANS 20 YEARS AFTER

Researchers at Tulane University and the Jet Propulsion Laboratory released a study highlighting emerging areas of risk from subsidence in the City of New Orleans. The report comes as the 20^th anniversary of the Hurricane Katrina disaster nears this August. Reductions in ground elevation relative to sea level due to historic and recent subsidence likely not only played a part in levee failure in Hurricane Katrina but also accounted for the extreme post-storm flooding depths in parts of the city. While the US Army Corps of Engineers conducted a significant project to repair and enhance seawalls and levees, there are still risks to the system as the result of natural activities.

Although most of New Orleans is generally stable, rapid elevation loss occurs in parts of the city (up to −20 millimeters per year) and on flood protection walls constructed following Hurricane Katrina (up to −28 millimeters per year). One area of concern with potential credit implications involves the City’s airport. Localized areas of greater elevation loss (<−15 mm/year) are present at the Louis Armstrong International Airport. That area of elevation loss at rates of <−20 mm/year around New Orleans International Airport as due to the soil disturbance associated with construction of a new terminal in 2016–2019.

HIGH SPEED RAIL

The State of California has responded to the effort by the US Department of Transportation to terminate two grants made to finance a portion of the proposed high speed rail line from LA to SF. California officials said the project was in compliance with federal grant requirements and would indeed meet the 2033 deadline to start limited passenger operations within the Central Valley.

The federal government claims that the state had made only minimal progress on construction. Across an initial 119 miles of construction, 54 structures and 70 miles of rail bed — 59 percent of the total — had been completed. The state also notes that an electrified rail system between San Francisco and San Jose was also in place, with infrastructure currently used for the commuter rail system but intended for future high-speed operations. And it noted that environmental reviews

were now complete for the entire expanse between the Bay Area and Southern California.

On the funding side, the project has used up nearly all of a $9 billion bond approved by voters in 2008. There is an estimated $4 billion in funds remaining from the project’s share of greenhouse gas fees that the state collects. It will continue to collect $1 billion per year in those funds, leaving the state with an estimated $6 billion to $8 billion to continue construction over the next three years.

CARBON CAPTURE

In June (6.2.25 MCN) we commented on legislation under consideration in Illinois to prevent carbon sequestration to limit impacts on an aquifer serving some 800,000 with drinking water. In 2024, legislators enacted a two-year moratorium on new carbon sequestration pipelines through the SAFE CCS Act, which also addressed loopholes in federal regulations. Now, a new bill also requires that the state conduct a five-year study on carbon sequestration to determine any additional risks. It awaits the Governor’s signature.

ROAD FUNDING IMPACTS

In Oregon, the state legislature considered but did not pass increased transportation funding. The money was needed to close a $300 million budget shortfall in the Oregon DOT. Now, the lack of increased funding is having a direct effect. Some 483 Oregon Department of Transportation employees will be laid off in what is being called the largest round of layoffs in the state government’s history.

The layoffs are the first of two rounds of cuts. They include road maintenance crews, technical support staff and operations staff. The Department has estimated that the total of layoffs could be 700. 100 more employees could lose their jobs in a second round of layoffs expected to take place in early 2026, absent legislative action. Planned and existing infrastructure projects will be canceled or delayed. The agency is also eliminating 449 vacant positions. In total more than 900 positions at the state transportation agency will be gone.

In Illinois, a bill proposing a pilot program for a mileage-based tax on drivers failed to pass the state senate. The trial would have tested the reliability, the ease of use, cost, and public acceptance of technology and methods for counting miles. The program would have looked at the enforceability of the road usage charge and considered how drivers could have evaded or manipulated the fee. Illinois has the second highest gas tax in the U.S.

MASS TRANSIT FUNDING

The major mass transit agencies have been dealing with the fiscal impact of the pandemic and its aftermath. Now, they have to operate in an environment of hostility to federal financing for mass transit. This state budget cycle saw the issue of aid to mass transit move to the fore. The responses across the country have varied.

New York’s early budget cycle saw the State harden its stance against efforts by the US DOT to somehow stop congestion pricing. The federal opposition focused attention on mass transit funding which resulted in a new plan for state monies to cover the costs of the ongoing capital needs of the MTA. The agency had been looking at a significant financing shortfall given federal hostility to funding. We will see if pending lawsuits can be settled to remove any uncertainty about congestion pricing.

In California, the state budget includes more than $1 billion in funding and a $750-million loan for Bay Area transit. The loan is interest free. The funding intended to support current service levels at BART and the SF Muni system until a more permanent funding source can be established.

Existing law creates the Metropolitan Transportation Commission as a local area planning agency for the 9-county San Francisco Bay.  Legislation is pending to establish the Transportation Revenue Measure District with jurisdiction extending throughout the boundaries of the Counties of Alameda and Contra Costa and the City and County of San Francisco.

The legislation would authorize a retail transactions and use tax applicable to the entire district to be imposed by the board of the district or by a qualified voter initiative for a duration of 10 to 15 years, inclusive, and generally in an amount of 0.5%, subject to voter approval at the November 3, 2026, statewide general election. 

In Massachusetts, the budget authorizes $470 million for the Massachusetts Bay Transportation Authority in fiscal 2026. The MBTA will also receive some $548 million from fiscal 2024’s Fair Share revenue. That is a “millionaire’s tax”, an additional tax imposed on those with incomes over $1 million. Those funds were applied to fund a portion of the T’s budget gap. In June, the agency’s board of directors approved a $3.24 billion budget for the 2026 fiscal year, narrowing its deficit from $307 million in 2025 to a projected $168 million in 2026.

In Illinois, the legislature was not able to solve the riddle of funding the mass transit system serving greater Chicago. The issue of control is the primary impediment to resolving funding issues in the legislature.

SOVREIGN IMMUNITY TEST

The US Supreme Court agreed to hear two cases involving NJ Transit, which is being sued in Pennsylvania and New York state court after its buses allegedly hit people outside the borders of its home base of New Jersey. At their core, the two suits are basic personal injury suits. The SCOTUS gets involved because in 2019, it ruled 5-4 that one state cannot be sued in another state’s courts without the first state’s consent.

The ruling did not directly address the issue of which state entities get such immunity, leaving open a question about things like state hospitals, student loan servicers and public transit providers. The plaintiffs argued NJ Transit isn’t actually entitled to a state’s immunity, even though the transit agency was created by the state. NJ Transit said lawsuits should be brought against it in New Jersey state court because that’s where it is based.

NJ Transit, which considers itself an arm of state government, argues that it is protected from lawsuits in other states because of sovereign immunity. It won a sovereign immunity argument in the Pennsylvania Supreme Court. In another state the New York Court of Appeals, that state’s highest court, said immunity didn’t apply and allowed another man to sue NJ Transit after he said he was hit by a bus crossing an intersection in Manhattan.

NUCLEAR

TerraPower, the company founded by Bill Gates to develop new nuclear generation plants was notified that the Nuclear Regulatory Commission will follow the shorter time line for approvals backed by the Trump administration. The Commission intends to complete its environmental and safety review process by December 31 of this year.

TerraPower was the first ever to submit a construction permit application for a “commercial advanced reactor” in March 2024. The approval process was expected to extend into mid to late 2026. The $4 billion project, backed by $2 billion from the Department of Energy, was already under a streamlined review process through the NRC’s Advanced Reactor Demonstration Program. The NRC did admit that there may be “unresolved items” related to any “substantive” public comments to address after the December deadline. 

The plant will be operational in 2030, according to TerraPower. The proposed reactor will use liquid sodium for cooling, which requires less water and provides more energy efficiency. The plant will also use a different type of radioactive fuel referred to as high-assay, low-enriched uranium (HALEU), which is more potent than traditional nuclear fuels. The NRC did admit that there may be “unresolved items” related to any “substantive” public comments to address after the December deadline. 

ELECTRIC VEHICLES

Ford Motor said this week that a $3 billion plant it is building in Marshall Mich., to produce batteries for electric vehicles will still qualify for federal tax credits. Some last minute language in the BBB eliminated language in earlier versions which would have excluded the project because it will use technology licensed from a Chinese company, Contemporary Amperex Technology Ltd., known as CATL. Ford has already begun hiring for the factory and expects to employ 1,700 people there.

The factory will produce batteries whose principal ingredients are lithium, iron and phosphate, referred to as LFP. Most of the electric cars produced in the United States use batteries made of lithium, nickel, cobalt and manganese, or NCM. LFP batteries are heavier than NCM batteries, but substantially less expensive and less likely to catch on fire. 

Nissan announced a delay in the launch of two new electric crossovers scheduled to be built at its Canton manufacturing plant in Mississippi. Nissan cited a recent slowdown in electric vehicle demand in the U.S. as a key reason for the postponement. The company is now targeting November 2028 for the Nissan crossover and March 2029 for the Infiniti version. The Canton facility, which has been operational since 2003, currently builds gasoline-powered vehicles but is slated to be a major hub for Nissan’s U.S. EV production.

Panasonic Holdings will postpone its plan to bring its new U.S. electric vehicle battery plant to full capacity by March 2027 as Tesla, its main customer, is experiencing sluggish sales. The Kansas plant, Panasonic’s second large-scale battery plant in the United States after one in Nevada, is scheduled to start mass production soon.

SMALL COLLEGE PRESSURES CONTINUE

Allegheny College, founded in 1815, is one of the nation’s oldest private liberal arts colleges and is located in western Pennsylvania. The college has several unique programmatic characteristics, including a senior project and a requirement for students to declare a minor from a different division of knowledge than their intended major. Moody’s has downgraded Allegheny College’s (PA) issuer and revenue bond ratings to Ba1 from Baa3.

The downgrade of the issuer rating to Ba1 is driven by persistent operating deficits. The rating reflects the college’s difficult student market and the hurdles of   a highly competitive landscape and unfavorable demographics. Financial operations remain unbalanced, and student demand remains strained.  poses further a with suppressed pricing power. While first-year enrollment in Fall 2025 is expected to rise, total FTE will decline. Failure to improve operating performance and meet fall 2025 enrollment targets could lead to credit pressure.

Moody’s has affirmed the Caa1 issuer rating and revenue bond rating of Hartwick College (NY). Hartwick College is a small, tuition-dependent private liberal arts and sciences college with fall 2024 enrollment of 1,070 full-time equivalent students and fiscal 2024 operating revenue of $43.5 million. The affirmation of the Caa1 issuer rating reflects the college’s structurally imbalanced financial operations, challenging student market conditions and very thin liquidity profile. 

Sizable operating deficits over a multi-year period have created a reliance on elevated endowment distributions to support operations.  

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

BIG BUT NOT SO BEAUTIFUL

The Big Beautiful Bill has stumbled across the finish line and as far as municipal credit sectors are concerned, two stand out especially. The first is higher education which was already facing demographic headwinds. Now a combination of culture war politics and immigration law are combining to result in some serious hits to revenues. The sector really under the gun will be healthcare. The expected loss of medical insurance by some 12 million people is incredibly negative. Many of those were enrolled under the ACA in time to receive care during the pandemic.

Then there is the issue of Medicaid provider taxes. These taxes the state levies on various health care providers, such as hospitals, nursing homes, managed care organizations and even ambulances. Cutting the rate of the tax is good, right? These taxes are considered to be a contribution to a state’s total spending on Medicaid. The federal government matches state spending at a rate between 50% and 80%, with no upper limit, higher provider taxes can mean higher state spending, which results in a higher federal contribution. That money can then ultimately go back to providers in the form of increased Medicaid payment rates.

By cutting the rate of the tax, the Federal government effectively makes a smaller payout to the state. That means that Medicaid reimbursement rates will decline while now uninsured patient numbers will likely increase. The math simply does not work if you want to strengthen balance sheets and liquidity. The rules date back to the Reagan administration. States have been taxing health care providers since the 1980’s to pay for the non-federal portion of Medicaid programs. Congress restricted the use of these taxes in 1991, establishing rules still in place today for how states implement them.

The must apply equally to all providers equally within a specific class, such as hospitals or nursing homes. States also must not directly or indirectly guarantee that the money will go back to providers — a concept referred to as “holding harmless.” However, the federal government currently exempts states from the hold harmless requirement on taxes up to 6% of revenues from treating patients. That limit is called the “safe harbor” limit and 38 states have provider taxes higher than 5.5%. Georgia is the only state with provider taxes below 3.5%, and Alaska is the only state that has no provider taxes.

The other component of the healthcare funding issue is the role of the industry as a major employer. Healthcare writ large is the largest source of employment in the U.S. going from 9 percent of the total workforce in 2000 to 13 percent today. In 38 states, the industry is now the biggest employer. In big cities, healthcare is a major entry level job provider to immigrants and non-college graduates. In rural areas, hospitals and physician practices are often the largest employers.

GRAIN BELT EXPRESS

The Grain Belt Express would carry electricity produced by wind farms in Kansas across Missouri and Illinois all the way to Indiana. The Missouri attorney general opened an investigation into Grain Belt Express and requested that the state’s Public Service Commission reconsider its approval. The AG claims that developers of the transmission line fraudulently inflated the number of jobs it would create, overstated cost savings to consumers, and misled landowners. He said his intention was “ultimately killing this project.”

The Biden administration in November offered a $4.9 billion conditional loan guarantee to help finance the project. And Invenergy awarded $1.7 billion in contracts to construction firms, saying work would begin next year.

CALIFORNIA

The California Environmental Quality Act, or CEQA, requires government agencies to review and disclose the environmental impact of any public project, including new housing developments. It is often cited as a significant contributor to the State’s housing shortage. Now several factors have come together to drive the legislature to approve the first major reform of CEQA after some four decades of its impact. The Los Angeles fires were just a final straw that turned CEQA into an obstruction to development.

This time, the Governor tied his signing the budget to the approval of the legislation required to relax CEQA rules. Those bills reduce the number of documents that projects must provide for their environmental reviews; eliminates the reviews entirely when cities rezone neighborhoods to meet their state-mandated housing goals, as well as for building farmworker housing, sewer systems in disadvantaged communities, broadband internet, public parks and trails, rural health clinics, food banks, advanced manufacturing facilities, day care centers and stations for the high-speed rail project.

ROAD USAGE FEES

The Hawai‘i Department of Transportation implemented its Hawaiʻi Road Usage on July 1. On the next registration renewal received after July 1, eligible EV owners will have the option to pay a state per-mile road usage charge (RUC) of $8 per 1,000 miles, capped at $50, or a state flat annual state RUC of $50. Both options replace the state’s current $50 EV registration surcharge. By 2028, the state per-mile RUC will become mandatory for EVs, and by 2033, the program is expected to expand to all light-duty vehicles.

NEWARK AIRPORT

Air traffic control problems that plagued Newark Liberty Airport were blamed for a 20% reduction in passenger volume this May than in May 2024. The reduction at Newark drove down the overall volume number at the three metro airports handled by the Port Authority. “May passenger volume at the airports overall was 7% below May 2024 which was driven by a sharp monthly decline at Newark Airport”.

The Federal Aviation Administration (FAA) ordered reduction in flights at the airport in May. The FAA mandated flight reduction brought the total to 56 flights an hour until a scheduled major runway repaving was completed. John F. Kennedy airport “broke a record set last year” for the busiest May on record at 5.54 million passengers, the PANY/NJ said. JFK topped the 2024 number by 1%. Volume at LaGuardia airport was “extremely strong” but slightly below the 3.01 million record set in May 2024.. May 2025 was the third busiest May on record at the airport.

CHICAGO PUBLIC SCHOOLS

Interim CPS CEO Macqueline King adjusted the district’s estimated deficit last week to $734 million, $200 million more than it was under her predecessor.  CPS announced it was laying off 161 employees, including 87 crossing guards, and cutting 209 open positions. CPS enrollment has dropped from 402,000 in 2010 to about 324,000 today in 634 schools. About 150 of those schools are half-empty and 47 operate at less than one-third capacity. A current CPS’ closure moratorium lifts in January 2027.

Chicago Public Schools’ budget for the 2025-26 school year, normally released in June, is delayed until at least late July. The district’s new fiscal year starts on July 1 and schools received their budgets for the coming school year in May, based on the assumption that the district would have just a $229 million deficit to close. It was assumed the school district would receive an additional $300 million in new revenue that did not materialize from the state and has not yet come from the city. Those projections also assume that the district will not reimburse the City $175 million to fund part of a City pension payment that covers some school staff.

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