Joseph Krist

Publisher

NEW YORK BUDGETS

As we go to press, the State fiscal year end approaches with major uncertainties overhanging the process due to the Mayor of New York’s plan to raise property taxes. That idea has been pretty effectively shot down in both the State and City legislatures. There is simply no appetite for a property tax increase which would primarily impact working class homeowners. This week, the Mayor signaled that the fight over property taxes is over for now.

That doesn’t reduce pressure on the State to provide more revenues to the City. At the same time, it brings the Mayor’s new spending plans into focus. There is strong pressure from Albany in an election year being applied to the Mayor to reduce his spending wish list. It is the budget process which will reveal if the Mayor has the requisite skills to manage the City. You can’t balance the budget on Tik Tok.

It was political mismanagement that initially damaged Mayor Brandon Johnson in Chicago. We see parallels in Mayor Mamdani’s approach. The politics of the issue were pretty clear – a new City Council and Council Speaker; a governor up for reelection along with the entire state legislature – all facing tremendous pressure to address affordability. Yet the initial ask is for more revenue.

Both the State and City face issues stemming from legislative mandates. The City is under pressure to meet reduced class size mandates in its public schools. The new School Chancellor has already indicated that the resources do not currently exist to meet those mandates on a timely basis. The State is dealing with the realities of its climate policies. At the end of a winter heating season marked by historically high electric rate increases as well as absolute rate levels, the expectation is that the clean energy goals in existing law will be relaxed.

All this in the wake of the four rating agencies all casting doubt on the City’s short term rating outlook. IBO released its analysis of the 2027 Preliminary Budget and Fiscal Years 2026 – 2030 Financial Plan. IBO forecasts budget gaps of $535 million in 2026 and $5.939 billion in 2027. It estimates $5 billion less in property tax revenue at existing rates. IBO’s economic forecasting projects slower growth in personal and business income tax collections. It is noted that budget expenses are more accurately shown, correcting prior underbudgeting. IBO estimates that total revenues will grow by an annual average of 2% a year from 2025 through 2030, but expenditures will increase by an average of 4.5% a year.

The Preliminary Budget proposes using nearly a billion dollars of the $1.97 Billion currently in the Revenue Stabilization Fund (“Rainy Day Fund”) to balance the current year budget, with the financial plan reflecting a replenishment in 2028.  This would be the first withdrawal of funds since the Rainy Day Fund was established in 2020.  State law limits the withdrawal of more than 50% of the fund in any fiscal year, absent a compelling fiscal need certified by the Mayor.

As the process unfolds, information about the City’s economic engine produced mixed results. Wall Street’s securities industry bonus pool reached a record $49.2 billion in 2025, up 9% from the previous year, while the average bonus rose 6% to $246,900, according to New York State Comptroller Thomas P. DiNapoli’s annual estimate. The increases reflect a rise of more than 30% in Wall Street’s profits, which totaled $65.1 billion in 2025.

Securities industry employment edged down slightly to 198,200 in 2025 from a 30-year high of 201,500 in 2024, according to preliminary data. The city’s share of securities industry jobs nationally was about 17.9% in 2024, down from roughly one-third in 1990, but still more than any other state. Wall Street was responsible for 20.2% of all economic activity in the city in 2024. 

It accounted for 19.4% of the state’s tax collections in State Fiscal Year (SFY) 2024-25 and 8.4% of city tax revenue in City Fiscal Year (FY) 2025. DiNapoli estimates the 2025 bonuses should generate $199 million more in state income tax revenue and $91 million more for the city when compared to the previous year. 

So, what is the problem? The Governor’s proposed budget assumed bonuses in the state’s broader finance and insurance sector would increase by 25.9% in SFY 2025-26, while the city’s FY 2026 financial plan assumed an increase of 15.1% in the city’s securities industry bonuses. Based on DiNapoli’s estimate, tax revenue from the bonuses may fall short of expectations for the current fiscal year. 

Given the recent state of the market and the uncertainty associated with the war against Iran, any estimate of bonuses and the tax revenue they might generate should likely be tempered. So, it was disappointing to see that the Mayor’s response to the bonus data was “This report makes clear how now more than ever we need to tax the wealthiest New Yorkers and the most profitable corporations to make the most expensive city in the country more affordable,”.

The campaign is over. It’s either govern or take a downgrade.

IMMIGRATION AND GROWTH

Budget season offers a chance to see how optimistic the economic assumptions are which guide legislators’ budget decisions. In the midst of these budget deliberations, the US Bureau of the Census released its 2025 population estimates. The data provides food for thought as to what a realistic level of projected growth is going forward under current immigration policies, many of which were established in the second half of 2024.

Population growth slowed in a majority of the nation’s 3,143 counties and the District of Columbia between July 1, 2024, and July 1, 2025, according to the estimates released by the U.S. Census Bureau. Among the 2,066 counties that grew between 2023 and 2024, nearly 8 in 10 saw their growth slow or reverse direction in 2025. In many cases, counties already in decline saw losses accelerate. Every metro area in the United States, in fact, experienced lower immigration rates 

Meanwhile, 310 of the 387 U.S. metropolitan statistical areas (metro areas) had slower growth between 2024 and 2025 than during the prior year. The three metro areas with the steepest percentage point declines in population growth rates were along the U.S.-Mexico border: Laredo, TX (from 3.2% in 2023-2024 to 0.2% from 2024 to 2025); Yuma, AZ (3.3% to 1.4%); and El Centro, CA (1.2% to -0.7%).

These shifts were largely due to lower levels of net international migration (NIM), which declined nationwide. Nine out of 10 U.S. counties experienced lower NIM levels between July 1, 2024, and June 30, 2025, compared to the year prior. The one in 10 counties that did not see a drop in international migration did not see an increase either.

San Diego County in California lost about 5,300 people. Net international migration fell to about 6,100, from about 18,000 in the previous year. Los Angeles, the country’s most populous county, experienced a loss of nearly 54,000 residents. In Miami-Dade County, the population shrank by more than 10,000 people, after growing by over 64,000 residents the year before. New York City also experienced a decline of about 12,200.

CLIMATE

The Maryland Supreme Court ruled against reviving climate lawsuits brought by Baltimore, Annapolis and Anne Arundel County that were struck down by lower courts. The lower Maryland court ruled that federal law overrides state law on air pollution that crossed state lines. The court blocked such lawsuits from proceeding and accused the plaintiffs of trying to use litigation to regulate greenhouse gas emissions.

TotalEnergies has signed settlement agreements with the U.S. Department of the Interior to “relinquish” two offshore wind leases worth nearly $1 billion off the coasts of North Carolina and New York and “will no longer develop offshore wind projects” in the U.S. Concurrently, Dominion Energy’s Coastal Virginia Offshore Wind project, or CVOW went online and began supplying power to the grid.

The failed effort by the Trump administration to stop construction only caused a  monthlong pause on construction which cost Dominion some $230 million from equipment storage, contractual penalties, an idle workforce and delays in using time-sensitive vessels.

FUEL TAX HOLIDAYS

Georgia on Friday become the first state in the U.S. to suspend fuel taxes due to the impact of the war with Iran on gasoline prices at the pump. Gov. Brian Kemp signed into law a 60-day suspension of the state’s 33-cents-per-gallon tax on gas and 37-cents-per-gallon tax on diesel. Officials estimate Georgia will forgo $360 million to $400 million in fuel taxes. The state may be an outlier this time.

Gov. Ron DeSantis said he has no plans to suspend Florida’s 23.5-cent gas tax, adding there is no “simple fix.” Proposals in Maryland and Connecticut to declare gas tax holidays have not been well received. This contrasts with the experience in 2022 when the last surge in gas prices occurred. At that time, state fiscal positions had been bolstered by federal pandemic aid. In 2022, Connecticut, Florida, Maryland and New York adopted holidays. Illinois and Kentucky delayed scheduled gas tax increases.

GREEN MOUNTAIN MILEAGE FEES

The Vermont Legislature is considering legislation to establish mileage fees. Under the bill, H.944, EV owners and lessees would be assessed 1.4 cents per mile on their annual travels. An odometer reading would be recorded during their car’s annual inspection and reported to the state Department of Motor Vehicles. Drivers could choose to pay their bill all at once or in monthly or quarterly installments. The bill addresses concerns about cost as the mileage-based fee would replace the current fee of $89, on top of the cost of a vehicle registration, that EV drivers have been charged since that fee was established in 2024.

Economists from the Joint Fiscal Office also estimated that the new fee would cost the average EV driver in Vermont $154 a year, based on an annual mileage of 11,000 miles. The resulting revenue could amount to between $350,000 and $1 million in the 2028 fiscal year, which runs from July 2027 to June 2028, and some $2.5 million in the year after. A new 1% tax on the total cost people pay to rent a car, if that car is a fully electric vehicle would be established. EV rentals otherwise would not be subject to the mileage-based fee. 

TRI STATE EXIT FEES

The 10^th Circuit Court of Appeals in Washington D.C. issued a decision that sides with the Federal Energy Regulatory Commission in a case involving Tri State Generation and Transmission and its exit dispute with United Power. FERC’s numbers favor United. As such, United must pay about $331 million (and it already has). That’s somewhat north of the $235 million that an administrative law judge in Colorado had recommended in 2020. It is far less than the figures of $1.3 billion and more that Tri-State early in the negotiations had said would be fair.

Colorado based Mountain Parks Electric is no longer a customer. Durango-based La Plata Electric will be on its own as of Wednesday, April 1. It will, however, continue to buy some power from Tri-State. Three public power districts in Nebraska in November also gave their two-year notice of plans to leave. Last week, Jemez Electric of Espanola, N.M., also announced its plans to leave within two years. In 2028, Tri-State will be down to 34 members compared to 44 a decade ago.

HOUSING EMPLOYEES

The San Diego Unified School District is moving forward with a plan to build nearly 3,000 units of workforce housing. The District board set a goal of developing housing for 10% of its staff by 2030 in an effort to boost retention of its 13,559 employees amid the region’s housing affordability crisis. Private developers would enter into a joint-use agreement to lease the district’s land, and finance construction through a combination of private loans, tax credit programs and tax-increment financing, depending on the project.

The district has set aside $205 million in bond funds to fill any critical funding gaps that arise during the construction process. The district has also put in place other contingency plans, such as agreeing that if their preferred contractor has any funding issues, they can begin negotiations with their competitor, and spreading out the housing plans among six sites, allowing them to bypass extensive environmental reviews and approvals that would be required for larger projects.

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

STATE BUDGET GRIND

The annual state budget process has been a difficult one in many states. Economic uncertainties and federal policies on aid to states and immigration were already issues in an increasingly partisan environment. Add to that the economic impacts of the war with Iran and the ground has shifted underneath legislatures to the extent that late budget adoptions are already occurring.

In Florida, the legislature failed to pass a budget in the regular session. Now, a special session will be held to address the budget on its own. Strong pressure to reduce property taxes across the state have complicated matters. The lack of consensus around both revenue and spending levels between the two houses of the legislature has been a significant stumbling block. And there is that matter of the gubernatorial election in November and ballot initiatives on property taxes which is a real source of uncertainty.

Virginia lawmakers could not reach a budget agreement during the regular session of the legislature. This will force a special session in late April. Data centers are at the center of the process. The Commonwealth is considered to be one of the most impacted states because of the large and growing presence of data centers in Virginia.

New York has only one week to go before the end of fiscal 2026. Two issues have come front and center in this debate. One is the negative economic impact of the state’s climate and energy policies. This winter has been a disaster for residents who have faced 25% higher electricity costs. That according to the utilities, not off the cuff estimates by consumers. Given the fact that the Governor is up for reelection, there is significant pressure to adjust the State’s climate policies.

An additional factor is the pressure on New York City’s budget and bond ratings resulting from Mayor Mamdani’s refusal to acknowledge current political realities. Increasing taxes is not apolitically practical option. The Mayor seems oblivious to the reality that he has three plus more years of his term but that the entire state political structure is on the November ballot. We believe that as much as anything, the four negative outlooks assigned to the City’s bonds reflect a lack of confidence in the Mayor’s executive abilities.

PUERTO RICO AND OIL

One big loser from the impacts of the war in Iran is Puerto Rico, where oil-fired plants make up about 60% of generating capacity. Puerto Rico relies on fossil fuels for more than 90% of its electricity, with liquefied natural gas as its next-biggest source after oil. It gets most of its LNG from Trinidad and Tobago and from a facility in Mexico that is fed by U.S. pipeline imports.

Every three months, the island’s electricity regulator adjusts prices for fuel costs, a process that is set to happen next at the end of March. That means higher rates would kick in starting in April.  Jenniffer González-Colón, the Trump-allied governor of Puerto Rico elected in 2024, has supported plans to boost the island’s gas generation and weakened a 2019 law that commits it to ending the use of fossil fuels by 2050.

HOSPITAL MERGER

Minnesota’s Allina Heath announced it’s being acquired by northern California’s Sutter Health.  Allina Health would become the Upper Midwest Division of Sutter Health, maintaining the Allina Health name, brand and regional headquarters in Minneapolis. Allina Health includes 12 hospitals across Minnesota and western Wisconsin, including Abbott Northwestern in Minneapolis, United Hospital in St. Paul and Mercy Hospital in Coon Rapids. The health system also includes hospitals in Buffalo, Cambridge, New Ulm, Owatonna and Shakopee, along with more than 80 clinics and urgent care centers across the region.

The combined organization, including Sutter Health’s California operations, would have 18,000 aligned physicians and 88,000 team members serving more than five million patients. The system will include 39 hospitals and more than 400 primary and specialty care sites. Allina, rated A1 negative by Moody’s, has been looking to invest in its system but it has had trouble generating sufficient cash to do so. This deal is designed to fund some $2 billion of investment by Allina.

Sutter is rated A1 stable and this is a non-cash transaction. We see that as minimizing the potential ratings impact of the proposed transaction.

SOUR NOTE AT THE OPERA

We have previously noted the operating difficulties of the nation’s most famous and prominent opera company as it navigates changing economic and cultural realities. (MCN 2.2.26). Those issues have now taken their effect on the outstanding debt ratings of the company. Moody’s has downgraded the Metropolitan Opera Association’s (NY) debt rating to Caa1 from B3.  As of July 30, 2025, total debt outstanding was $178 million. The outlook is negative.

The primary reason is reliance on non-recurring revenues to balance its operations. The organization’s liquidity position is minimal, leaving it vulnerable to operational volatility and includes full reliance on a bank line that has remained drawn for several years. Extraordinary endowment draws have totaled $120 million. Absent a material cash infusion-such as through the major licensing agreement or the receipt of a sizeable bequest that are currently anticipated -the Met is likely to confront a substantial budgetary shortfall in fiscal 2026, potentially requiring further unsustainable endowment draws.  

ELECTRIC ECONOMY

The new Lansing-area plant originally built to supply EV batteries for General Motors in Michigan will soon supply battery cells for massive Tesla batteries capable of storing power for utilities. The plant is now producing no batteries for GM which sold its ownership share of the $2.5 billion, 2.5 million-square-foot Delta Township facility in late 2024. LG Energy Solutions, the original partner with GM. LG Energy Solutions – the original partner with GM – has recently signed a $4.3 billion deal to build batteries for Tesla’s grid-scale energy storage systems at the plant.

The changes throw into question the status of the $120 million of tax incentives provided to the plant. Those incentives included headcount requirements. To fulfill the terms of its state subsidy agreement, LG needs to hire 1,360 workers at the Delta Township site by 2031. So far, hiring stands at 408. The US Department of Interior this week made an announcement that falsely claimed the two companies would build a $4.3 billion facility in Lansing. LG said that the company will establish “dedicated production lines” at its existing Lansing area facility to produce the Tesla battery cells.

LG has shifted focus from EVs to battery energy storage systems at several of its North American facilities. GM ⁠and LG, through their joint venture Ultium Cells, will recall 700 laid-off ​workers to start production of lithium-iron phosphate batteries at their plant in Tennessee in ​the second quarter. Ultium in January laid off workers at the Tennessee plant and at another facility in Ohio through mid-2026 due to slower EV sales.

COLLEGE RATINGS

Moody’s has downgraded The New School’s (NY) issuer and revenue bond ratings to Baa1 from A3. The outlook is changed to stable from negative. For fiscal year 2025, The New School recorded total outstanding debt of $1 billion. Multi-year enrollment declines and deficit operating results that will continue through at least fiscal 2026. A comprehensive restructuring plan that involves significant workforce reductions, a gradual shift from leased to owned space and academic reorganization aimed at better aligning the cost structure has been developed.

Like so many other niche institutions, The New School continues to have a high dependence on student charges, an elevated leverage position and increased short-term borrowing. Those pressures are offset somewhat by ownership of highly valuable and marketable real estate in a prime Manhattan location. The Parsons School of Design remains a core draw for students.

WIND

Under proposed settlements, the Interior Department would cancel the leases for two offshore wind projects, while the Justice Department would pay more than $928 million to the developers to reimburse them for their winning bids in lease sales. settlement agreements that would pay nearly $1 billion to TotalEnergies, the French energy company behind two wind farms off New York State and North Carolina. The Interior Department would cancel the leases in federal waters for the two projects, known as Attentive Energy and Carolina Long Bay.

In exchange, TotalEnergies would abandon its plans to begin building the wind farms. It would also commit to investing in natural gas infrastructure in Texas. If the company refuses the offers, the Trump administration would still cancel the leases, the documents show, leading to costly litigation that both sides might be eager to avoid. Given its track record in court on these matters, the funding offer reflects the failure of the Administration’s policies and legal tactics in the wind energy sector.

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

POWER

Hydro – Seattle’s municipal electric utility has announced a landmark agreement with Tribes and federal agencies to guide the future of the Skagit River Hydroelectric Project (Skagit Project). This settlement, after it is reviewed and approved by the City Council and signed by the City, will become part of the City’s formal license application to the FERC for a new 50-year license to operate the Skagit Project, which provides about 20% of Seattle’s electricity.

The Skagit Project includes three power-generating facilities—Ross, Diablo, and Gorge dams—located in the upper Skagit River Watershed in the Cascade Mountains. The current license, issued in 1995 by FERC, expired in 2025. City Light is now operating under annual licenses while seeking a new long-term license.

Solar – The U.S. solar industry installed 43 gigawatts (GW) of new capacity in 2025, remaining the dominant source of new capacity added to the grid for the fifth consecutive year. Solar accounted for 54% of all new electricity-generating capacity added to the US grid in 2025. Combined, solar and storage made up 79% of new capacity in this timeframe. Over two-thirds of all solar capacity installed in 2025 was built in red states.

Wind – Coastal Virginia Offshore Wind, a 2.6-gigawatt project near Virginia Beach, Virginia, is expected to begin delivering power to the state’s energy-hungry grid by the end of March, according to its developer, Dominion Energy. It is now more than 70% finished. Near Martha’s Vineyard, Massachusetts, the 800-megawatt Vineyard Wind is effectively complete. The 704-MW Revolution Wind near Rhode Island, said the project was expected to begin generating electricity ​“within weeks” .

The 924 MW Sunrise Wind project was nearly halfway complete as of last month’s earnings call. The Empire Wind just saw a federal judge reject the Trump administration’s latest effort to further delay construction on the 810-MW wind farm off the coast of New York. The project is more than 60% complete.

Coal – A measure signed by the Governor of Washington makes it prohibitively expensive to generate electricity from burning coal. TransAlta operates the Centralia generating station in the state. It has been operating the plant under terms of a coal phaseout deal between TransAlta and the state executed some 15 years ago. The new tax scheme does so by removing tax and regulatory exemptions agreed to as part of that deal.

The measure follows in the wake of an US Energy Department order that the plant remain open in spite of TransAlta’s desire to convert the plant to natural gas. It was scheduled to stop generation and begin the conversion in this first quarter. The real irony is that this fight is over a plant that is not operating and which does not have coal on site. It is the second non-operable coal facility to be forced to remain open under the Energy Department’s scheme.

NEW JERSEY BUDGET

New Governor Sherrill issued her first proposed budget. The $60.7 billion budget includes a proposed surplus of $5.4 billion, while redirecting over 74 percent of the total budget back into our communities in the form of grants-in-aid for property tax relief, social services, and higher education, as well as state aid to schools, municipalities, and counties. this budget is 1.6 percent above the FY 2026 adjusted appropriation.

The FY 2027 budget proposal includes $7.3 billion for the State’s pension system, marking the sixth consecutive full payment. Her plan also finds money by dipping into the state’s surplus account, dropping it from $7.2 billion to $5.4 billion. The proposal anticipates $1.57 billion in additional revenue over the next fiscal year, projecting the state will take in 25% more from sales and corporate business taxes. The proposal includes more than $1 billion in state subsidies for NJ Transit, the state’s rail and bus system — up $215.3 million from the current budget.

CARBON CAPTURE

A North Dakota judge has revoked Summit Carbon Solutions’ permits for underground carbon dioxide storage, ruling parts of the state law they were issued under is unconstitutional. The law authorizes regulators to permit the storage of carbon dioxide beneath the property of nonconsenting landowners. The decision is the second this winter in which a North Dakota judge has reached the conclusion that the 2009 state law violates the state’s constitution.   

The latest decision found that the law violates two protections afforded to private property owners when the government decides to take their property for public use. The North Dakota Constitution guarantees property owners the right to have compensation determined in a jury trial and also requires the compensation be paid before the property is taken. 

NEW YORK STATE BUDGET

The Governor has presented her budget proposal for fiscal 2027. Now, the State Assembly has come up with their proposal. The lower house would increase the personal income tax on New Yorkers earning more than $5 million a year – a hike that would impact 14,000 taxpayers, and raise $2.9 billion in Fiscal Year 2027-2028. There is also a proposal to increase the corporate franchise tax as well as a new tax on crypto mining, which, together, would raise just under $2 billion.

The Assembly also proposes to provide a tax cut to low and middle-income New Yorkers earning below $323,200. The average tax cut is estimated to be $446. The cost to the state is estimated to be $2.1 billion in FY 26-27. Under the Assembly proposal, the personal income tax would be eliminated entirely for certain low and moderate-income New Yorkers with dependents.

ELECTRIC ECONOMY

The consequences of the Trump administration’s policies towards electric vehicles are beginning to impact local economies. Battery company SK Battery America Inc. laid off nearly 1,000 workers at a manufacturing plant northeast of Atlanta on Friday amid automakers’ changing electrification plans and uncertain consumer demand for EVs. The company said Friday marked the last working day for 958 plant employees, about 37% of its workforce, according to a Worker Adjustment and Retraining Notification, or WARN, notice filed by.

Impacted workers will be paid through May 6. The plant will continue to employ about 1,600 workers. SK opened the $2.6 billion battery plant in Commerce, Georgia, in January 2022. The Korean company notably supplied the Ford F-150 Lightning electric pickup truck. Ford announced plans to cancel the fully electric version of the truck in December. The City of Commerce and the Jackson County SK and Hyundai are still jointly building a $5 billion battery factory near Cartersville, northwest of Atlanta.

SHRINKING SCHOOL DISTRICTS

Declines in public school attendance due to the pandemic were not unexpected. The more permanent nature of those attendance declines was not anticipated by school district managers. Now, in addition to declines in per capita aid many districts are now left with a surplus of capital assets – school buildings and land – that become an albatross to carry in a time of tight operating finances. The result is a growing number of school facilities which are cash drains with no offsetting revenue capability.

It’s not just poorer districts. The Orange County, FL school board voted to close seven public schools. The San Jose Unified School District in CA is taking a bit more time to consider the potential closure of up to nine elementary schools. The Wichita, KS school board is moving forward with the closure of four elementary schools, with student enrollment cited as a primary factor in the decision.

Houston Independent School District’s Board of Managers unanimously approved a plan to close 12 schools. Even in the wealthy Houston, TX suburbs, Fort Bend ISD will close two schools. The nation’s sixth largest district, Florida’s Broward County Public Schools approved the consolidation of six schools after enrollment dropped 5% — or by 9,987 students — between the 2024-25 and 2025-26 school years. 

Buffalo Public Schools in NY confirmed the district intends to close two schools in the 2027-2028 school year. BPS has been running at a $60 million annual deficit for the last two years, and the district projects the same deficit for the 2026-2027 fiscal year. the school closures will come with significant teacher layoffs, expected to save around $7 million to $8 million per school.

The trend highlights the value of the programs in many states which provide for the timely payment of debt service by local school districts. Those programs provide for segregation and control of state funds if local funds are insufficient to meet debt service requirements. They serve as a source of slid support for local school debt service.

PORT OF L.A.

The Port of Los Angeles processed 824,323 Twenty-Foot Equivalent Units (TEUs) in February, marking the second-busiest February in the Port’s history and an increase of 3% compared to last year. February 2026 loaded imports totaled 433,812 TEUs, 5% higher than last year. Loaded exports reached 116,633, an increase of 7%. The Port processed 273,878 empty container units, 2% less than last year. Two months into the year, the Port of Los Angeles has handled 1,636,324 TEUs, 5% less than last year.

MILLIONAIRE TAXES

It’s a favorite idea of the Sanders/Warren wing of the political spectrum for some but now millionaire taxes are getting serious consideration in the current political environment. Lawmakers in Washington state this week approved a new income tax on residents making more than $1 million. The tax will be set at a 9.9 percent tax on those earners. It would be the first income tax in Washington, affecting an estimated 20,000 households. The action comes as state lawmakers are currently trying to close a budget gap estimated at $10 billion to 12 billion over the next four years.

A 1933 decision rendered by the Washington Supreme Court ruled that income counts as property. That decision has effectively blocked a graduated income tax in the state, whose Constitution requires property taxes to be “uniform.” It is expected that this will serve as the basis for litigation and/or a ballot initiative against the tax. The positive view is that this creates an opportunity for the Court and/or the voters to revisit the issue and settle it.

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.

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.