Muni Credit News March 9, 2026

Joseph Krist

Publisher

TAXES ON THE BALLOT

Contra Costa County voters will decide in June whether to approve a new countywide sales tax to fund services amid federal funding cuts. If approved, the increase— 0.625 percent — would add 62.5 cents to every $100 spent on taxable goods. County officials estimated the tax could generate $150 million per year for five years, totaling $750 million.

Under state law, the local sales tax cap is generally set at 3.5 percentage points above the state base rate of 6 percent, for a combined total of 9.5 percent. However, certain voter-approved and transportation-related taxes are exempt. If approved, the increase would push most cities in the county above the local sales tax cap, with 15 of the county’s 19 cities exceeding the limit. Ten cities would have sales tax rates above 10%.

The Contra Costa measure would direct the new revenue to the county’s general fund and would not be specifically earmarked for health care or hospital costs. That means it needs a simple majority to pass, rather than the two-thirds support that would be required if it was designated for a specific purpose. The county will also need a waiver from the state Legislature to raise its sales tax cap if the measure passes.

LADWP

Moody’s has downgraded the Los Angeles Department of Water and Power (LADWP), California’s Power System revenue bonds to Aa3 from Aa2. Concurrently, the outlook has been revised to stable from negative. Pressure comes from two factors. meaningful additional debt over the next five to ten years, along with substantial contingent liabilities associated with the Palisades Fire in January 2025.

Although criminal investigations led by the Bureau of Alcohol, Tobacco, Firearms and Explosives concluded the Palisades Fire and the preceding Lachman Fire were not caused by LADWP equipment, civil lawsuits against the City of Los Angeles, including LADWP’s power and water systems, are proceeding. The power system’s current five-year CIP includes $11.9 billion in additional debt. 

Moody’s also downgraded the Los Angeles Department of Water & Power, CA’s water system revenue bonds to Aa3 from Aa2. The downgrade of the water system revenue bonds reflects the potential for significant liability judgments against the city and the water and power systems as part of litigation underway by property owners and businesses affected by the 2025 Palisades Wildfire.

KANSAS EXPRESS LANES

The Kansas Department of Transportation recently opened the state’s first express lanes on the U.S. 69 Express corridor. This $572 million design-build project, known as 69Express, included reconstruction of U.S. 69 in Overland Park; widening the highway with one northbound and one southbound express lane between 103rd and 151st Streets; and interchange improvements at U.S. 69/167th Street.

The express lanes – managed by Kansas DOT and its tolling partner, the Kansas Turnpike Authority – will allow the agency to manage congestion using tolls that vary based on traffic levels and time of day to keep express lane trips congestion-free.  If someone with a KTAG drives the entire length of the corridor northbound during the morning rush hour, that trip could cost $1.30. If someone only drives a portion of the corridor, say from 151st Street to 119th Street, that partial-length trip could cost $0.50.

During off-peak times – mid-day, nighttime and weekends – toll rates go down because fewer vehicles are using the highway. The rates drop to approximately $0.35 for a partial trip and $0.65 for a full-length trip. In the southbound direction during afternoon rush hour, the rates increase again as traffic increases. The rates are slightly higher in the afternoon because there is more congestion during the afternoon than in the morning rush hour.  Drivers without a KTAG will pay 2x the rate on the sign. Vehicles with more than two axles will also pay a higher toll.

MANUFACTURING

According to a report from the Association of Equipment Manufacturers, total sales and indirect economic output from the heavy equipment sector was $902 billion in 2025, a slight contraction from $905 billion in 2022. There’s a similar cooling trend in the labor market, with direct employment falling to 421,000 workers, from 423,000 three years prior, the report stated. Direct sales were basically flat at $265.76 billion last year, down from $266.64 billion in 2022 according to revised figures.

The decline is a good example of how policies regarding tariffs and their negative impact on farm state incomes are playing out. Texas led the country in heavy equipment employment, with more than 50,000 jobs, followed by Iowa, with more than 32,000. Wisconsin, Illinois, and Ohio each employed more than 25,000 people. About 30 percent of the heavy equipment made in the United States is exported.

TRANSIT FUNDING

The ongoing saga of the effort to increase transportation funding in Oregon has taken a new turn. Gov. Tina Kotek signed Senate Bill 1599 March 2, moving the date of a gas tax referendum vote from November to May.  House Bill 3991 created the increases to the gas tax, payroll tax and registration and title fees that referendum petitioners sought to overturn. The Governor delayed signing the bill into law in order to give referendum supporters less time to gather the necessary signatures. March 12 is the final day to submit materials for the voter’s pamphlet. Voters are widely expected to vote down the tax increases.

A federal judge on Tuesday ruled that the federal government’s attempt to end New York’s congestion pricing toll was illegal. The US transportation secretary, Sean Duffy, had warned that the federal government would withhold approval and funding from a range of highway and transit projects in New York if congestion pricing was not canceled.

The Intermodal Surface Transportation Efficiency Act of 1991 (“ISTEA”) provided for among other things, the creation of a Congestion Pricing Pilot Program, which directed the Secretary of Transportation to “solicit the participation of State and local governments and public authorities for one or more congestion pricing pilot projects” and stated that “[t]he Secretary may enter into cooperative agreements with as many as 5 such State or local governments or public authorities to establish, maintain, and monitor congestion pricing projects.”

The Court found that the Secretary’s actions were arbitrary and capricious, an abuse of discretion, and not in accordance with law. The February letter was based on the conclusion that Congress did not give the Secretary the authority to approve the CBDTP. That conclusion was an error of law. Not unexpected under this administration.

GATEWAY TUNNEL

The Regional Plan Association recently said that that a six-month delay to the Hudson Tunnel project could add $720 million to $1.34 billion to the multibillion-dollar project. The federal government has released some $236 million in funding withheld since last October, allowing construction to resume after halting on Feb. 16. But the Gateway Development Commission, which oversees the project, said it will not award two key contracts — to build the tunnel itself, as well as the surface line leading to it in New Jersey — until it is assured it has access to all $15 billion in previously committed federal grants and loans. Those contracts were scheduled to be awarded late last year or early this year.

DATA CENTERS

​There has been much focus in legislatures this budget season on utility issues. In connection with the spread of data centers the idea of a “large load tariff” – special utility rates and requirements designed for huge energy users is growing. As of late 2025, more than 65 such tariffs have been proposed or approved in over 30 states, according to private analysts. States adopting data center–focused large load tariffs began to do so in 2024, led by early movers like Ohio and Indiana. More such tariffs were approved in Kansas, Michigan, and Virginia last year, and now Illinois and Wisconsin are debating their own proposals. 

To protect the individual power user, about a third of the 65 large load tariffs on deck as of late 2025 require big customers to make minimum payments over a set period of years, whether or not they remain operational over that time. More than half include some form of collateral requirements or other credit risk protections. And roughly half require large customers to pay fees if they exit their contracts early.

One solution adopted by only a handful of utilities and regulators so far: requiring data centers to contract for their own clean energy and capacity. That has raised issues regarding acquisitions of outdated power plants versus the employment of renewables energy sources.

WESTERN WATER

The stalemated talks among the seven Colorado River basin states have heightened anxiety, especially in the lower basin states of Arizona, California and Nevada about future availability from the Colorado. While a plan is negotiated or federally imposed, some cities at particular risk are moving forward with efforts to generate new supplies.

The San Diego County Water Authority purchases water from the Carlsbad desalination plant under a 30-year agreement. The plant has successfully operated since 2015. The plant is operating at less than full capacity, however. The Authority’s board unanimously approved last week a memorandum of understanding to consider selling some of its water to Arizona and Nevada.

The plan would not involve sending desalinated water to other states but rather selling some of San Diego County’s allotment of Colorado River water, which in turn would generate funds to increase output at the Carlsbad desalination plant. the Water Authority is prepared to sell up to 10,000 acre-feet of water starting next year. That’s nearly 5% of the Las Vegas area’s current water use. In future years that could increase to 25,000 acre-feet or more. 

Any agreement to transfer water would need to be approved by the Metropolitan Water District of Southern California, the federal government and agencies in Arizona and Nevada. Then, various water agencies would need to negotiate the details. A decision from MWDSC is pending and provisional federal support has been expressed.

MEDICAID CUTS AND HOSPITALS

Moody’s downgraded Children’s Hospital Los Angeles’ (CHLA)  revenue bond rating to Ba2 from Ba1. The outlook is negative. The Ba2 rating reflects CHLA’S challenged operations, and very weak liquidity, but also its unique clinical and institutional importance. A key driver of the weak performance is CHLA’s heavy reliance on state funding due to its significant Medicaid exposure. It is a leading provider of high-acuity pediatric services, ranking it among the top children’s hospitals in the country. 

At the core, liquidity is the issue. Days cash dropped to approximately 17 days as of December 31. 2025. This after sales of receivables and other maneuvers. A delay in CMS’ approval of round 9 of California’s provider fee program is a major contributing factor. The negative outlook reflects the risk of rapid credit deterioration if liquidity strategies are not achieved over the next two months. 

COLLEGE OUTLOOK DOWNGRADE

Moody’s has revised Pratt Institute’s (NY) outlook to negative from stable. Pratt Institute, founded in Brooklyn, NY in 1887, is a coeducational, private, professional college and one of the largest undergraduate and graduate schools for art, design and architecture in the country. In addition to its main campus in Brooklyn, it has a campus with research and instructional facilities at Brooklyn Navy Yard and a location in Manhattan. Pratt generated operating revenue of $278 million in operating revenue in fiscal 2025 and enrolled 4,983 FTE students in fall 2025.

The issues are declining annual financial results and liquidity. The revision of the outlook to negative reflects a significant thinning in operating performance, in large part due to a substantial reduction in international students. Pratt’s high reliance on tuition revenue exposes it to a highly competitive environment and further declines in its large proportion of international students. The current restrictive environment for international students is likely to continue pressuring both sides of the ledger for at least a couple of more years.

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

CLIMATE LITIGATION

The Supreme Court announced it would hear arguments on a petition by Exxon Mobil and Suncor, a Canadian energy giant, in a lawsuit brought by the city and county of Boulder, Colo. That suit was first filed in 2018. In May, the State Supreme Court ruled 5 to 2, that the plaintiffs’ claims were not pre-empted by federal law, striking down a central argument that the companies have employed in their defense.

We detailed many of the pieces of litigation pending in the courts which could ultimately be impacted by a decision in this case (MCN 1.19.26). In this case, the question before the court is whether federal law precludes state-law claims seeking relief for injuries allegedly caused by the effects of interstate and international greenhouse-gas emissions on the global climate.

In addition to the question presented by the petition, the parties were directed to brief and argue the following question: Whether this Court has statutory and Article III jurisdiction to hear this case? It is a sign that the Court may be looking for a way to avoid making a decision on a significant states’ rights issues.

PROPERTY TAXES

The California Property Tax Exemption for Elderly Residents Initiative may appear on the ballot in California as an initiated constitutional amendment on November 3, 2026. The initiative would amend the California Constitution to establish a property tax exemption on the homesteads of elderly residents 60 years of age or older for certain ad valorem taxes. It would reduce local property tax revenues by exempting a principal residence from property taxes if the homeowner, or the homeowner’s spouse: (1) is 60 years of age or older; and (2) has occupied the home as a principal residence for five consecutive years or has lived in California for at least 10 years.

The exemption terminates if property no longer qualifies as a principal residence. After five years, homeowners must certify their continued eligibility to maintain exemption. Exemption does not apply to voter-approved special taxes, assessments, or bonds. A simple majority vote is required for voter approval. 546,651 valid signatures are required. The deadline for signature verification is June 25, 2026. However, the secretary of state suggested deadlines for turning in signatures of January 12, 2026, for initiatives needing a full check of signatures and April 17, 2026, for initiatives needing a random sample of signatures verified.

The Florida House of Representatives approved a proposal that would eliminate non-school property taxes on homesteaded homes. The measure seeks to reduce the tax burden on residents significantly but faces additional legislative hurdles before becoming law. If the proposal receives final approval from the state Senate and Florida voters, the tax elimination would take effect in 2027. The plan focuses specifically on property taxes used to fund municipal and county operations rather than those designated for local schools.

CHICAGO DOWNGRADE

Fitch has downgraded Chicago’s Issuer Default Rating (IDR) and outstanding GO bonds to ‘BBB+’ from ‘A-‘. Fitch has also downgraded the Sales Tax Securitization Corporation’s (STSC) outstanding sales tax securitization bonds (senior lien) to ‘AA+’ from ‘AAA’. The downgrade reflects consecutive operating deficits since 2023, the still high dependence on non-structural solutions and assumptions underpinning the adopted 2026 budget, persistent out-year gaps, and ongoing disagreements between the administration and the city council. 

Fitch does not expect significant budget reductions, particularly involving broad program or service cuts. It notes that “the city is pursuing new revenue streams that require state or voter approval, but this support does not appear likely in the near term. Property tax increases, which the city can implement under home rule, do not appear to have political support. Once the budget process went off the rails in December it was pretty clear that downgrades were likely.

DALLAS AREA RAPID TRANSIT

We reported in February (MCN 2.16.26) on efforts being undertaken to reform the board structure of the Dallas Rapid Transit District to give participating cities more of a say in the system’s operations. The hope was that the new structure would encourage members to take steps to remain a part of DART going forward. This week saw the first of a couple of deadlines come upon us and now at least three of the participants – Irving, Plano and Farmers Branch – have moved to cancel elections on the issue of withdrawal from Dart scheduled for May 2. The renewal of membership binds the cities to a six year commitment to DART.

OAKLAND SCHOOLS

The board of the Oakland, CA School District has been dealing with a looming budget deficit. (See MCN 1.26.26) Like many districts it faces pressures on enrollments and attendance at the same time that inflation also pressures the expense side of the budget. Last month it indicated that a variety of steps to reduce costs which cut the projected deficit to $50 million had been identified. This left the District with some very hard choices.

One of those choices was approved this week when the Board voted to approve layoffs that could affect more than 400 positions. Nearly 80% of the district’s entire budget goes toward paying staff, administrators to teachers to support staff. The cuts could impact a wide range of staff, including substitute teachers, tutors, counselors, nurses and other support positions. The layoffs would take effect next school year. This provides some time as the state budget process unfolds to see if any additional funding is provided.

The timing of the announcement reflects a March 15 state deadline requiring school districts to notify teachers and other employees of potential layoffs for the upcoming school year. It comes at a difficult time for the Board which is in the midst of labor negotiations with the Oakland Education Association, the union representing district teachers. Union members have authorized a potential strike, which leaders say could be announced if they determine the district is not bargaining in good faith. The union said it would provide at least 48 hours’ public notice before any strike begins.

ILLINOIS MUNICIPAL ELECTRIC

The Illinois Municipal Electric Agency, a nonprofit that procures power for 32 municipal electric utilities, began a process of asking its members to extend their commitments to buy energy through the group until 2055, even though existing contracts don’t lapse for another decade. Most communities signed on, but two that account for almost half of IMEA’s power demand — the Chicago suburbs of Naperville and St. Charles — have rebelled, declining to renew their contracts past 2035.

It’s all about the Prairie State Energy Campus, a 1.6-gigawatt facility in rural southern Illinois that is the state’s largest coal plant. IMEA owns 15% of Prairie State, which makes up over a third of the agency’s power portfolio. In September, Naperville sent IMEA a proposed contract calling for mandatory net-zero emissions by 2050. The agency countered that it would ​“endeavor to achieve” carbon neutrality by 2050 but declined to set binding targets.

Illinois’ 2021 Climate & Equitable Jobs Act mandates Prairie State specifically to reduce carbon emissions by 45% by 2038, which would likely mean closing one of its two units. The law contains exceptions from fossil-fuel emissions limits if needed to maintain grid reliability.

THE ELECTRIC ECONOMY

The Michigan Court of Appeals once again upheld a lower court’s decision to dismiss a citizen opposition group’s legal challenge over the rezoning of the land where Ford’s mile-long BlueOval Battery Park Michigan is being built in Marshall. ruling that the city’s rezoning ordinance is not subject to a public referendum. The $3 billion factory will produce lithium iron phosphate batteries by licensing technology from China’s Contemporary Amperex Technology Co. Ltd., the world’s largest battery manufacturer. Production is scheduled to begin this summer. 

In Indiana, Hanjung America, a South Korean manufacturer of parts that support the energy storage supply chain for Stellantis and Samsung, announced its first U.S.-based plant in Huntington, Indiana. It is expected to provide 350 permanent jobs after construction is complete. It will make parts for large battery storage systems called Energy Storage Systems, or ESS. These batteries are used in electric vehicle (EV) production. The parts made in Huntington will support battery factories in Kokomo, run by Stellantis and Samsung.  The company plans to break ground in April and expects to begin operating in June 2027. 

In Tennessee, Ford reiterated this week that it still intends to honor its commitments to the state, according to a company spokesperson, including promises to create roughly 5,800 jobs at the BlueOval City site in exchange for a $900 million state-sponsored incentives package. This in the wake of the decision to halt electric truck production by Ford in December. Ford’s 2021 agreement with the state requires the company and the BlueOval SK joint venture to create at least 90% of the total 5,800 jobs within 10 years. Meeting that mark secures Ford and BlueOval SK a $500 million state reimbursement for construction work.

Failing to reach 80% of the promised jobs by 2032 would trigger a “clawback” requirement forcing the company to pay back that $500 million in addition to $175 million, based on the value of the state’s donated land. 

BlueOval SK (Ford and SK On announced plans to end their joint venture in December) currently employs around 300 people in Tennessee and construction at the plant is complete. The facility is yet to have started production. The plant will manufacture batteries for Ford under a supply agreement and SK On plans to supply batteries to other customers, including for use in energy storage systems.

TEXAS WATER

The Corpus Christi City Council approved a resolution authorizing the negotiation of a contract for the Inner Harbor Seawater Desalination Treatment Plant project with Corpus Christi Desal Partners (CCDP), a joint venture with Acciona Agua Corporation and MasTec Industrial Corporation. The vote revives a project which was halted in September. (See MCN 11.10.25)

It also authorizes construction contracts for ancillary improvements in an amount up to $11,451,526 and emergency construction contracts totaling up to $120 million for a pump station and conveyance system connecting the Western Well Field to the O.N. Stevens Water Treatment Plant.

HOUSTON FLOOD MAPS

Since FEMA last released flood zone maps in 2007 for Harris County, Texas, the region has undergone significant development and has experienced greater rainfall. These are among the factors that have led FEMA to expand designated flood zones significantly. the area’s 100-year flood zones have grown by 43%. Meanwhile, 500-year flood zones increased 30%. In total, about 420,000 properties could be reclassified as having a greater risk of flooding. 

There are real implications. Any property owner with a federally backed mortgage will be required to carry flood insurance. Overall, location in a flood zone will increase the cost of insurance. Many neighborhoods impacted by this risk are more financially vulnerable. It comes in a time of lower federal support for disaster recovery which for many of the less well off is their only significant assistance.

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.