Joseph Krist

Publisher

A Happy Thanksgiving to one and all. This most unique holiday in America – not based on a religious holiday or to recognize one ethnic group over another – allows everyone to share in the day and experience a common cultural phenomenon. Not even Christmas or Easter can manage that. So, enjoy the day and those you’re with.

The MCN takes this week off. The next issue will be dated December 8. Travel safely.

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CHICAGO BUDGET (NEWYORK PREVIEW?)

One of the issues which has held back significant budget improvement for the City of Chicago is the Mayor’s ideological approach. It’s not that it has been a surprise given his campaign and his sources  of support but, it has nonetheless made annual budget negotiations and politics all the more difficult. The latest manifestation of this is the current budget process.

This week, the Chicago City Council’s Finance Committee has rejected Mayor Brandon Johnson’s proposed head tax. The vote was 25 to 10. Mayor Johnson is asking City Council to recess until the first week of December as negotiations continue. The City Council has until Dec. 31 to pass a spending plan which closes a projected $1.9 billion budget gap.. The mayor needs 26 votes to get his budget passed.

Johnson first proposed requiring companies with more than 100 employees to pay $21 per month per employee – a head tax. The resulting lack of support for that plan lead to revision of the idea to target companies with more than 200 employees. His administration estimates the plan would generate $82 million for violence prevention programs. Johnson’s $16 billion spending plan avoids a property tax hike. It relies on expansion of the revenue base by expanding the rideshare surcharge zone, adding a social media tax, increasing the cloud tax and borrowing nearly $2 billion for infrastructure projects.

We see parallels in the upcoming administration of Zohran Mamdani in New York. The attitude towards corporate taxation, the belief in government as a cure all, an elected school board, government grocery stores are virtually the same as those held by Mayor Johnson. It will be interesting to see how the New York situation unfolds given the lack of success in Chicago.

KEY BRIDGE

In a news release, the Maryland Transportation Authority said the cost will likely be anywhere from $4.3 billion to $5.2 billion. The change marks a stark contrast after the Associated Press reported in May 2024 that the initial cost was estimated to be between $1.7 billion and $1.9 billion. After initially saying the new bridge should be reopened by fall 2028, officials revised the estimated opening date to be in late 2030. “The Francis Scott Key Bridge and the Port of Baltimore are critically important to our nation’s economy. Preliminary cost and project time estimates were made less than two weeks after the initial crash and before any engineering or design studies were conducted.”

In August 2024, the Maryland Transportation Authority Board approved a $73 million contract for the first of two phases of the rebuilding process. In December 2024, Congress passed a government spending bill that included full funding for the rebuild.

COLORADO RIVER

This week, the deadline for an agreement among the seven states in the Colorado River basin on how to distribute the river’s dwindling flows of water passed with no settlement. Current guidelines are expiring and a new finalized agreement must be put in place by October 2026, the start of the 2027 water year. Final details are due by February 2026.

Interior, the Bureau of Reclamation and the states — Arizona, California, Colorado, New Mexico, Nevada, Utah and Wyoming — issued a joint statement saying “Collective progress has been made that warrants continued efforts to define and approve details for a finalized agreement,”. Neither Interior nor Reclamation responded to questions about how much additional time states will be granted to continue their negotiations.

The Trump administration had previously threatened that if the seven states that share the river did not come to a deal, the Interior Department could step in to decide how to impose cuts to water use. State officials explained that they were coalescing around the concept known as supply-driven planning, or just “natural flow.” Under a natural flow system, the states would rely on a supply-driven calculation of how much water would be in the Colorado River were it not diverted to farms, stored in massive reservoirs or otherwise used by humans.

The acting chair of the Upper Colorado River Commission explains that “the concept under discussion is that (Lake) Powell would release a certain percentage or volume of the average of the last few years of natural flow, as measured at Lee Ferry.” The Bureau of Reclamation already studies the natural flow of the Colorado River, providing annual estimates drawn from data at 29 points on the waterway and its tributaries.

Reclamation examines the flow of water in the Upper Basin’s river system while also adding back in any water diverted for use in cities and farms. That data is used to calculate how much water would be found in a hypothetically free-flowing river at Lees Ferry, Arizona, a point south of the Glen Canyon Dam.

The process of calculating natural flow will intensify the already bright spotlight on the conflict between agricultural and human water consumers. Water used for agriculture can account for 70 percent of the water used in the four Upper Basin states, and how much of that is consumed, rather than returned to the river system, is an important data point. The states are weighing an agreement that would rely on the average of the three most recent years of flows.

Reclamation reports show that the Upper Basin consumed 4.7 million acre-feet in 2023, the most recent data available. That same year, the Lower Basin reported using 5.8 million acre-feet. By comparison, in 2021, the Upper Basin used 3.9 million acre-feet while the Lower Basin used nearly 7.1 million acre-feet.

NYC

Mayor Adams released his last Financial Plan Update. The plan update brings the Fiscal Year (FY) 2026 budget to $118.2 billion. The FY 2027 budget gap is now $4.7 billion, a reduction of $353 million, or nearly 7 percent, driven by pension and labor savings. The FY 2028 and FY 2029 gaps are both now $6.3 billion.

The Financial Control Board provides an excellent overview of the conditions facing the City for the Mayor-elect. The majority of new jobs were in lower wage sectors, such as health care (average annual wage of $67,893), social assistance ($39,440), and food services and drinking places ($40,493). In contrast, high paying sectors like finance, professional and business services, and information experienced job losses.

The Financial Control Board’s (FCB) risk analysis of the Plan shows a gap of $515 million in FY 2025, and larger gaps of $5.7 billion in FY 2026, $6.7 billion in FY 2027 and $8.2 billion in FY 2028. The larger gaps stem from higher expenditure estimates in each year, which exceed the Plan by $1.3 billion in FY 2025, $1.9 billion in FY 2026, $2.6 billion in FY 2027, and $3.3 billion in FY 2028.

Partially offsetting these higher expenditures estimates is the FCB’s more optimistic tax revenue forecast which exceeds the Plan forecast in each year, resulting in net risks to the budget of $515 million in FY 2025, $216 million in FY 2026, $1.1 billion in FY 2027, and $1.9 billion in FY 2028.

The economic outlook is mixed. Manhattan’s office vacancy rate in the third quarter of 2024 reached 23.5 percent, a negligible improvement from the record-high 23.6 percent in the previous quarter. The demand for office space is expected to remain relatively low as hybrid work has become the norm.

PUBLIC POWER AND BATTERIES

EPB of Chattanooga, originally was known as the Electric Power Board of Chattanooga. It is an electric power distribution and telecommunication company owned by the city of Chattanooga, Tennessee. EPB serves some 500,000 people across 600 square miles. The public power company currently has a 45-megawatt fleet of batteries, almost all of which were built this year. The battery building was stimulated by a December 2022 blackout. Chattanooga had already used batteries to expand and backup electric supplies to the Chattanooga airport.

That airport experience encouraged more development of batteries for the entire electric system. Until now, they had been employed as supplemental power for the City’s system. Recently, the potential for batteries to reduce blackouts or facilitate repairs to the local grid was demonstrated. An outage on a service line serving some 400 homes was damaged in a storm. While the damage was assessed and repaired, a local battery installation recently installed was able to provide power to the impacted homes. It was the first use of batteries to offset a loss of capability on another system component while repairs were made.

Away from any climate considerations, the battery plan makes economic sense. When EPB buys power from TVA, it pays a demand charge for the hour of highest consumption each month. By discharging the batteries when it looks like a peak hour is approaching, EPB can shave its monthly charge. That lowers the rates it pays to TVA with the savings going to retail. So, it improves redundancy, increases reliability, and lowers costs.

PHILADELPHIA SCHOOL DISTRICT

Philadelphia School District is coterminous with the City of Philadelphia and is the largest public school district in Pennsylvania. The district operates more than 200 schools with enrollment of 120,148 as of the 2024-2025 school year. Moody’s upgraded Philadelphia School District, PA’s issuer, general obligation unlimited tax (GOULT) and non-contingent lease backed by GOULT ratings to Baa1 from Baa2. 

The upgrade reflects the fruits of efforts over many years to maintain the District’s finances while facing real competition in addition to the pressure the COVID epidemic imposed. Moody’s referenced the district’s materially improved reserve position after the receipt of extraordinary federal coronavirus aid. While the district will draw down reserves over the next three years, its financial position will remain stronger than historical levels. Available fund balance reached a historic high of 27% of revenue in fiscal 2024. structural balance is expected to be achieved by fiscal 2029. 

The District faces significant pressures. Charter schools have been long-term competitors to the traditional models and now cyber learning is growing. Significant charter and cyber school tuition costs now account for approximately 35% of the district’s annual budget. Nonetheless, the longstanding trend of enrollment loss has ceased. Enrollment have grown by a compound 0.5% annually, on average, over the last three years.

SOME QUICK NOTES

AFTER THE FIRE – The Palisades and Eaton fires destroyed 13,000 homes. More than 2,500 property owners have filed full rebuilding applications in Los Angeles County and the city of Los Angeles, the two largest jurisdictions affected, with 1,100 permits approved. A two-bedroom, 630-square-foot accessory dwelling unit in Altadena received a certificate of occupancy on Monday, Los Angeles County records show. This makes that unit the first to be built in the wake of the fire.

THREE MILE ISLAND – The Energy Department announced that it would make a $1 billion loan to help restart Three Mile Island Unit 1, which shut down in 2019. The other unit at the site near Harrisburg, Pa., shut down in 1979 after its well documented operating disaster. Last year, Microsoft and Constellation, Unit 1’s owner, announced a deal to restart the plant. Under the deal to revive the plant, Microsoft would buy as much power as it can from the plant for 20 years in an effort to add carbon-free electricity to the grids that power its operations.

TARIFFS AND PORTS – The Port of Los Angeles processed 848,431 Twenty-Foot Equivalent Units (TEUs) in October. October 2025 loaded imports came in at 429,283 TEUs, 7% less than last year. Loaded exports landed at 123,768 TEUs, 1% more than 2024. The Port handled 295,380 empty container units, 8% less than last year. The numbers reflect the impact of tariffs and highlight that the decline in imports isn’t being offset by export growth.

PUBLIC TRANSIT – Two USDOT funding proposals recently sent to the White House budget office would eliminate the Mass Transit Account of the Highway Trust Fund and prohibit States from using their highway funds for public transit.

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

PENNSYLVANIA BUDGET

Gov. Josh Shapiro signed Pennsylvania’s first $50 billion-plus budget Wednesday, ending a 135-day stalemate with a plan that cuts public funding for cyber schools and boosts it for public schools. The $50.09 billion budget raises spending by 4.7% above the budget that expired June 30. The budget does not tap the state Rainy Day Fund, a key sticking point for Republicans, who repeatedly criticized Shapiro for proposing a 2025-2026 budget with $1.8 billion from the $7.5 billion fund.

The final deal leaves the state’s $7.4 billion rainy day fund untouched, but does use almost $4 billion from other reserves. The budget provides $565 million to aid schools that were found to be inadequately funded under a 2023 court ruling. Pennsylvania school districts must pay tuition to charter schools for any students within their borders who opt to attend one. Districts pay online-only cyber charter schools the same rate that it does for brick-and-mortar schools, despite the former’s lower overhead costs.

The budget does not create taxpayer-funded school vouchers — a Republican priority — but it does expand a popular tax credit program that underwrites scholarships for Pennsylvania students to attend private schools. The Educational Improvement Tax Credit, or EITC, will grow by $50 million to a total of $590 million.

The Regional Greenhouse Gas Initiative (RGGI), is a multi-state effort to reduce greenhouse gases and commonly referred to as Reggie. The interstate program caps the amount of carbon that companies are allowed to emit. Then-Gov. Tom Wolf directed the state to join the initiative through an executive order, though lawsuits from Republican lawmakers and energy producers prevented the state from participating in the program.

The budget agreement leads to the withdrawal of the Commonwealth from the RGGI. That was the price to be paid for a settlement of the ongoing budget delay. Litigation against the RGGI had delayed implementation of any of its components. Now, that issue is off the table for future budget negotiations.

GAINESVILLE REGIONAL UTILITIES

The continuing effort to wrest control of the Gainesville Regional Utilities (GRU) continues. The utility service is currently under the control of a five-member authority appointed by Florida Gov. Ron DeSantis. A long-awaited special election on Nov. 4, three-fourths of Gainesville voters chose to return power over Gainesville Regional Utilities from the state to the city. The ballot item was supported by 75% of those voting.

In the summer, the GRU Authority filed a lawsuit against the city. The authority claimed the city was attempting to supersede state power. The courts are blocking any further action until the case is settled, so the authority will remain in control of GRU until a ruling is made. The authority plans to continue to fight to maintain control through the courts.

The election was not open to voters outside Gainesville, although 35% of the utility service’s customers live outside the city limits. Prior to 2023, the Gainesville City Commission had control over GRU. In 2024, Gainesville voters were given a chance to decide whether to return control of the utility to the city. Almost 73% voted in favor of the city. But the election results were thrown out by a circuit judge in April due to a challenge over the ballot language. The judge ruled the referendum’s wording was misleading over whether the general manager of GRU would be elected or appointed. In 2025, the language was changed.

PUBLIC POWER NUCLEAR

The Nebraska Public Power District (NPPD) has operated its Cooper Nuclear Station for 50 years. Now, with energy demand growing, NPPD will request an extension of the operating license for the 835 MW generating plant out through 2054. At the same time, NPPD is undertaking steps to identify a site for a potential new nuclear generator to meet demand.

In 2022, the Nebraska Legislature allocated $1 million to the Department of Economic Development (DED) to provide funds for a feasibility study to assess siting options for new advanced nuclear reactors. DED created the Nuclear Plant Siting Feasibility Study Program to administer the funds, which the state of Nebraska had received from the federal government as part of the American Rescue Plan Act. In January 2023, DED awarded a grant of $863,000 to Nebraska Public Power District (NPPD) to undertake the study.

SAN FRANCISCO TRANSIT FUNDING

Recent press reports have indicated that officials in San Francisco are floating two possible structures for a parcel tax to fund revenue shortfalls facing the Muni transit system. Aimed for the November 2026 election, the tax measure would help fund an estimated $307 million annual budget deficit that could grow to $434 million in five years. The goal is to provide funding to the city’s transit agency to limit service cuts.

Under one proposal, property owners would pay a flat rate of $150 a year for homes smaller than 3,000 square feet. Owners of residential buildings larger than 3,000 square feet would pay the $150 flat rate plus 25 cents for each additional square foot, with a cap at $250,000. Landlords of commercial or industrial buildings, meanwhile, would pay a $600 annual flat rate for property smaller than 3,000 square feet, and $0.675 for each additional square foot, with an upper limit of $400,000.

The second proposal combines a slightly lower flat rate of $99 a year for residences smaller than 3,000 square feet, and a somewhat higher premium for owners of large homes or complexes: 29 cents for each additional square foot. Owners of commercial or industrial property would pay a $600 flat rate for buildings smaller than 3,000 feet, and 73 cents for each additional square foot in larger buildings.

If one proposal makes the ballot, it would be competing with other initiatives to raise regional sales taxes to support several transit agencies across the Bay Area. Should either of the local proposals fail, Muni would have to slash service on a third of its lines, effectively doubling wait times for riders.

CHICAGO TRANSIT FUNDING YIELDS POSITIVE OUTLOOKS

Moody’s has placed the A1 and A2 ratings of the Chicago Transit Authority, IL (CTA) on review for possible upgrade. Moody’s has also placed the Aa3 rating on bonds of the Regional Transportation Authority, IL (RTA) on review for possible upgrade.

Senate Bill 2111 enables an increase in the sales tax levied on the six-county region currently served by the Regional Transportation Authority, IL (RTA), and redirects existing state tax revenue to transit providers. The CTA will receive a share of the new funding and we expect its share will be more than sufficient to close its currently forecasted budget gaps, providing longer term operational stability. The bill enables the future Northern Illinois Transit Authority (NITA) to collect over $1.2 billion of new annual revenue to support transit operations, exceeding the approximately $800 million fiscal 2027 budget gap projected by the RTA’s service boards. Nearly $500 million of this collective budget gap was within the CTA.  

Under the legislation, the RTA would become the Northern Illinois Transit Authority (NITA). The NITA, in addition to having greater responsibility for the oversight of transit services in the Chicago region, will continue to receive all regional sales tax revenue and state funding, and use those sources of revenue to pay its bonds before distributing funds to its service boards, the Chicago Transit Authority (CTA), Metra and Pace. The bill results in a direct and material increase in the revenue available to pay what are currently bonds of the RTA. 

It enables the future NITA to collect over $1.2 billion of new annual revenue to support transit operations, exceeding the approximately $800 million fiscal 2027 budget gap projected by the RTA’s service boards.

BIG BEAUTIFUL LAYOFFS

GM in particular is set to lay off 1,200 workers from its Detroit plant and another 550 from its Ultium Cells plant in Ohio. Meanwhile, another 850 are being temporarily laid off from the Ohio Ultium Cells plant and another 710 being temporarily let go from an Ultium factory in Tennessee. Freudenberg e-Power Systems said this week it would close two EV battery facilities in Michigan, laying off 324 workers.

Qcells, the U.S. solar manufacturing arm of Korea’s Hanwha said it would furlough 1,000 workers at its Georgia factories because shipments of components it needs from overseas are being routinely stalled by U.S. customs officials. The company said some of its shipments of solar cells had been detained at U.S. ports under a 2021 law which bans imports from China’s Xinjiang region due to concerns about forced labor.

Qcells has committed to a $2.5 billion investment to build a complete U.S. solar panel supply chain to compete with China. The company manufactures cells in Malaysia and South Korea that are imported to be assembled into panels. It is also ramping up its U.S. cell manufacturing in Cartersville, Georgia. Qcells has implemented temporary reduced hours and furloughs for about half of its manufacturing employees at plants in Cartersville and Dalton, Georgia.

KENTUCKY COAL

The state ranked fifth in U.S. coal production in 2023. Wyoming leads the country, followed by West Virginia, Pennsylvania, and Illinois. The number of workers employed in Kentucky coal mines fell below 3,800 in the second quarter for the first time on record. The Kentucky Energy and Environment Cabinet has been monitoring coal employment and production data over the last 25 years.

It’s only the fifth time since 2020 that Kentucky coal employment, both east and west, fell below 4,000. In the first quarter of 2000, Kentucky coal mines employed 15,000 workers statewide. It’s also only the fourth time since 2020 that statewide coal production fell below 6 million tons. The total fell below 5 million tons only once, in the second quarter of 2020. Statewide, production declined 9% from the second quarter of 2024. On a regional scale, production fell nearly 19% in eastern Kentucky and less than 2% in western Kentucky. Employment fell 15% statewide in the second quarter this year.

TRI-STATE CAN’T WIN

The Tri-State Generation and Transmission Association revealed that DOE officials have indicated that they will issue a Section 202 order to keep Unit 1 of the electric cooperative’s Craig Station coal plant online past its scheduled closure later this year. Tri-State provides power to member utilities that collectively serve over 1 million customers in rural Colorado, Nebraska, New Mexico, and Wyoming. That puts the cooperative in a bind, given that ​“we do have legal requirements to close that unit, but we also are closing it for economic reasons,”.

At the same time, U.S. Rep. Jeff Hurd, a Republican representing a district in western Colorado, wrote a letter to the DOE last month asking it to delay the planned retirement of Comanche Unit 2, a more than 300-megawatt power plant owned by Xcel Energy. The utility estimated in 2018 that shutting down two Comanche units and building out renewables would save some $231million for its customers. This week, Xcel Energy and state agencies petitioned Colorado regulators to delay the retirement of Comanche Unit 2 until the end of 2026 due to continuous operating failures at the newer Unit 3.

In both Michigan and Colorado, regulators and utilities had previously determined that shutting down the coal plants in question would not compromise grid reliability. The U.S. Energy Information Administration noted that 4.7% of the U.S. coal fleet was scheduled to retire this year as of February. That list includes the 1,800-megawatt Intermountain Power Project in Utah, the 670-megawatt Unit 2 of the TransAlta Centrailia plant in Washington state, and 847 megawatts of generation capacity at the Schahfer plant in Indiana..

Lawsuits against the DOE’s Section 202(c) order for the J.H. Campbell plant are now awaiting review at the federal D.C. Circuit Court of Appeals. 

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

NYC

The irony involved in noting that Zohran Mamdani was elected just past 50 years to the day of the Urban Development Corporation default that triggered the 1970’s financial crisis in New York City cannot be lost on anyone. For those who grew up in it or lived through it, the thought of a return to the days of the rebuilding of the City’s finances is unacceptable. It accounts for the post-election hysteria over the City’s short-term future.

Let’s put some things on the table right away. The City is not going to default, the revenues for the GO bonds are segregated, and the City remains at the center of an economy larger than that of all but several countries. At the same time, the agenda proposed by the Mayor-elect is not all under his control. The State Legislature will have much to say about the City’s taxing and spending power. It will be interesting to see how the actual mechanics of free bus service play out. After all, the MTA farebox bonds are based on gross revenues as security. That will require a significant new expenditure for the City.

Notice that the Mayor-elect is not talking about shifting the tax burden away from individuals. The new tax proposals are not designed to replace but to expand the total of revenues available for the new planned spending. The debate will likely be robust and there are strong arguments to be made for a variety of approaches. The Mayor-elect will not get much of what he wants.

What has not helped is the real lack of detail regarding how to finance what would be a massive expansion of government even in NYC. That may be because some of his tactics will be contradictory. There are 4 million apartment dwellers in NYC – 25% of them are in rent stabilized units. That puts some 3 million at risk of seeing a cost shift as landlords deal with general inflation and pressures to maintain all housing stock. The cost of maintaining revenue constrained properties will be shifted to market rate payers.

One puzzlement is given the Mayor-elect’s “equity” platform, why will there not be a means test for free bus service or child care?

ILLINOIS VETO SESSION

The Regional Transportation Authority, Chicago Transit Agency, Metra commuter rail and Pace Suburban Bus collectively face a $230 million funding shortfall in 2026 as pandemic relief money runs out. The funding deficit is projected to grow to $834 million in 2027 and $937 million in 2028. Generating funds for the system as it exists led to extended efforts to achieve structural reform while address the short term issues faced by the transit agencies.

Now, the General Assembly has passed a funding package to address those current needs. The bulk of the funding, $860 million, would come through redirecting sales tax revenue charged on motor fuel purchases to public transportation operations. Another estimated $200 million would come from interest growing in the Road Fund — a state fund that is typically used for road construction projects but can also be used for transportation-related purposes under the state constitution.

The plan calls for raising the existing Regional Transportation Authority sales tax by 0.25 percentage points, to 1% in Lake, McHenry, Kane, DuPage and Will counties and 1.25% in Cook County. That tax hike will generate $478 million.

Drivers of passenger vehicles on northern Illinois’ toll roads will also have to pay 45 cents more per toll as part of a plan to create a new capital program for tollway projects. It will also increase by inflation each year. That will raise up to $1 billion annually. The bill also calls for 25% of the systems’ revenue to come from fares. Historically, half of the funding was generated by the riders, but that requirement became unsustainable after the pandemic.

The controversial statewide taxes on package deliveries, streaming or event tickets that were part of previous bills were not included. That and $129 million annually to downstate transit agencies helped generate support to put the bill over the line.

The bill would create the Northern Illinois Transit Authority, which would be a stronger version of the RTA and would have the ability to establish a universal fare system and coordinate scheduling between the three service agencies. The board would be comprised of 20 members: five appointed by the mayor of Chicago, five by the Cook County Board president, five by the governor and five collectively by Lake, McHenry, DuPage, Kane and Will counties. 

The bill also blocks transit agencies from transferring operating dollars to capital expenses — a controversial move Metra recently proposed in its 2026 budget that raised red flags for several state lawmakers and RTA leaders. The RTA now says it is no longer requiring the CTA, Metra and Pace to implement 10% fare increases next year. The transit bill prohibits fare hikes for the first year after the expected law goes into effect on June 1.

The General Assembly also passed an energy bill that creates grid-battery and geothermal incentives and a virtual-power-plant program. The Clean and Reliable Grid Affordability Act, or CRGA, calls for the procurement of 3 gigawatts of energy storage by 2030. The Illinois Power Agency estimates that developing and operating the storage will cost $9.7 billion over 20 years. That money will be collected from utility customers through a new charge on their electricity bills. 

The bill also, for the first time, makes geothermal eligible for state renewable-energy incentives. And it lifts a decades-old moratorium on the construction of large nuclear plants. The legislature had revised the moratorium in 2023 to allow small modular reactors to be built, though this technology is still nascent.

COAL COSTS

The Trump administration’s emergency order to keep the huge J.H. Campbell coal plant on Lake Michigan operating past its planned retirement date has cost at least $80 million since May, its operator, Consumers Energy, told regulators and investors this week. It will pursue the process laid out in the U.S. Department of Energy’s order for collecting those costs: It will seek payment from ratepayers across the Midwest.

Consumers Energy will have to apply to the Federal Energy Regulatory Commission in order to pass the costs to the ratepayers, and states that oppose such a cost allocation could move to intervene in those proceedings. One issue is that the plant must be maintained. Yet, according to recent Environmental Protection Agency data, two of the three units at the Campbell plant were not operating at all for about 30 days of the 131 days from the start of the DOE order through Sept. 30. The third unit at the plant only ran for 18 days. 

Consumers Energy previously stated goal of achieving net-zero carbon emissions by 2040, had projected that the retirement of the Campbell plant would save its customers $600 million over the next 20 years, or $30 million per year. Instead, running the plant for the past five months has cost close to three times that annual amount.

CHICAGO

In 2019, the City of Chicago had a budget of $8.9 billion, excluding grants from the State of Illinois and the Federal government. By 2025, expenditures had grown to $12.4 billion—a 40% increase. The Chicago budget’s increase of 40% over the period between 2019 and 2025 equates to an average annualized growth rate of 5.8%, compared to an average annualized inflation growth of 3.9% over the same timeframe.

Pensions were the largest driver of the spending, increasing by $1.5 billion over six years. This increase is due in large part to rising obligations from a combination of state-mandated and supplemental payments needed to pay down the City’s massive unfunded pension liabilities. Increased pension costs alone drove 44% of the total increase in spending. Total personnel count has slightly declined by 371, or 1%, but the City still maintained over some 4,000 vacant positions in October of 2025.

The proposed FY2026 budget reduces the supplemental pension payment by more than half, resulting in an overall decrease in pension expenditures from 2025 to 2026. Debt service makes up a considerable part of Chicago’s budget, with the City paying just over $2 billion in 2025 in interest and principal payments on bonds. This represents 16.2% of the total budget. However, debt service has only increased by 5% since 2019.

The City’s expenditures on employee benefits, which include healthcare and other types of insurance, increased significantly between 2019 and 2025. In 2019, benefits spending totaled $461 million, but by 2025 it had grown to $758 million, an increase of $296 million, or 64%. As the number of employees did not grow over that time, this cost increase was driven primarily by more expensive healthcare benefits for City employees,

CORPUS CHRISTI WATER CRISIS

In September, we noted the cancellation of a desalinization project for the City of Corpus Christi, TX. (See MCN, 9/8/25) Now, the potential for water shortages and rationing of supplies has had a credit impact. Moody’s has affirmed the Port of Corpus Christi Authority, TX’s prior lien and senior lien revenue bond ratings of Aa3 and A1, respectively. The rating action affects approximately $262 million of revenue bonds outstanding. The outlook has been revised to stable from positive.

The revision of the Port of Corpus Christi Authority’s (POCCA) outlook to stable from positive considers its regional water supply challenges. A Stage 4 drought mandate, currently forecasted by the city to occur in November 2026, that causes operational shutdowns of key industries would negatively affect port volume and revenue. Almost all of POCCA’s customers obtain their water from the City of Corpus Christi.

The port as the number one crude exporter in the United States, of oil and LNG. Although POCCA is a landlord port, revenues are highly linked to throughput volumes and can be volatile. The city and local industry are currently implementing solutions, including wastewater reuse and additional groundwater acquisition that are likely to be operational in the next 6-12 months.

INTERNATIONAL STUDENTS AND RATINGS

Moody’s revised Illinois Institute of Technology, IL’s (IIT) outlook to negative from stable and affirmed the Ba2 issuer and revenue bond ratings. 

The Ba2 issuer rating reflects Illinois Tech’s sound overall wealth and good regional brand with its STEM focus and urban location. Following several years of significant enrollment progress and growth in net student charges, IIT significantly improved its operating performance and moved to budget surpluses.

However, federal policy shifts have complicated the university’s ability to enroll international students which, until fall 2025, accounted for around 50% of total FTE enrollment. Similar to the higher education sector at large, IIT experienced a significant decline in international enrollment, largely at the graduate level. 

THE POWER OF PUBLIC POWER

A recent analysis from UCLA highlighted another trend—the increasingly unfavorable spread between the rates charged by investor-owned utilities and those of publicly owned electricity providers. That’s happening in many regions of the country, but especially in California, where average rates for the investor-owned utilities Pacific Gas and Electric (PG&E), Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E) rose between 48 and 67 percent during that same recent  four year period. Their rates are over 50 percent higher than average rates for municipal utilities like the Los Angeles Department of Water and Power (LADWP) and the Sacramento Municipal Utility District.

The California Public Utilities Commission (CPUC) voted to set the ground rules for an independent assessment of what it would cost for San Francisco to take over a portion of PG&E’s grid. This has been a goal for many and they have continued to pursue it since the company rejected their $2.5 billion offer in 2019. investor-owned utilities raise money through a mix of higher-interest bonds and borrowing money from shareholders who receive at double digit rates. IOUs also pay taxes on the profits they earn, while municipal utilities are not taxed on revenue (although some, like LADWP, pay into their cities’ general funds to replace the lost tax income). 

Municipal power agencies also don’t pay into the state’s wildfire fund to reimburse damages for utility-caused fires.

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