Joseph Krist

Publisher

REALITY BITES

The Center for New York City Affairs, a nonpartisan research organization affiliated with the New School, recently estimated that the Mayor’s proposed free child care system for all New York City children under 5 would cost about $9 billion annually. That represents an average cost per child of around $27,000. The city currently offers free pre-K for 3-year-olds and 4-year-olds, with limited seats for 2-year-olds starting this fall. That program had an FY 2025 cost of $5 billion.

When originally proposed, the Mayor gave a cost estimate of $6 billion. New York State has given the Mamdani administration $1.2 billion to jump-start its program for 2-year-olds in some neighborhoods. City Hall currently has no plan to fund the expansion after next year, besides asking the state for more money. At the same time, the center’s report points out that it could be simpler and less expensive to incorporate child care vouchers for low-income families, which are already funded mostly by the state and federal government.

The report happens to coincide with the announcement that a deadline to appeal the applicability of the new pied a terre tax to many properties. That’s the tax which was supposed to fund programs like this.

TRANSIT ON THE BALLOT

Seattle is another jurisdiction which is asking voters to approve extensions and increases in the rate of taxes to support mass transit. Seattle voters will be asked in November whether they want to double the city’s current sales tax in exchange for more bus service. The proposal from Seattle Mayor Katie Wilson would renew the Seattle Transit Measure, raising the transit-dedicated sales tax from 0.15 percent to 0.3 percent. The proposal to enact a 0.3 percent tax for ten years is the maximum amount allowed under Washington state law.

The measure would allow the city to purchase more bus service from King County Metro, the regional public transit authority, and offer more free transit passes to low-income residents. According to the city, the measure would add 100,000 bus trips and 12,000 free passes per year. That would be in addition to the 180,000 bus trips and 10,000 passes funded by the existing measure, which voters approved in 2020. If the sales tax were to remain at the current rate, the city would actually end up having to cut service because of rising costs.

It is an example of a focused approached based on locally generated funding. It is very likely to pass given the city’s history of widespread support for tax-based transit funding.

CLIMATE LITIGATION

In Michigan, a new provision in the state’s 2027 budget prevents the state attorney general from “joining a multistate lawsuit or taking part of a lawsuit against the federal government or an oil or gas entity” without legislative approval. The budget language would also block Michigan’s attorney general from participating in lawsuits against the federal government. Two immediate predecessors sued the federal government without the Legislature’s permission so it is not clear what the actual impact of the language might be.

Michigan initiated a lawsuit earlier this year which accuses four of the largest producers and the American Petroleum Institute of breaking federal and state antitrust laws by acting as a “cartel” to restrict the development of renewable energy and electric vehicles. The Trump administration earlier this year unsuccessfully sued to block Michigan from filing its case.

FLORIDA PROPERTY TAX AMENDMENT SPEED BUMP

The proposed property tax amendment that is supposed to go before voters in November is misleading, A Florida state judge ruled that the proposed property tax amendment that is supposed to go before voters in November is misleading. The judge ordered the Florida attorney general to rewrite the ballot measure. The judge cited the use of multiple “political taglines” that do more to make the amendment appealing for voters than actually tell them what the amendment will do.

The judge identified several specific instances where the “descriptive” language actually contradicts the actual language of the amendment. The Attorney General has to submit any revised ballot language to the Florida Department of State within 10 days. Anyone challenging the new ballot language has 10 days to do so once it’s submitted to the Dept. of State. At least 60% of voters must approve the amendment on the November ballot for it to pass.

CHICAGO GOVERNANCE

The Mayor has less than one year until the end of his term. The City budget process begins in earnest after Labor Day. That means the focus should be on developing an executive budget which might have a chance of passage. So, it is not a good sign for Mayor Johnson’s final budget that the two primary fiscal officers of the City – the CFO and the Budget Director – have both resigned in the last week.

It is not clear who now speaks for the City to market participants. An annual presentation to institutional investors will now be conducted by, who knows, which will worsen an already poor perception of the City’s credit. Mayor Johnson said his team remains prepared to introduce a 2027 budget proposal in October. The most recent negotiations that led to a budget being passed over the mayor’s objections for the first time in 40 years.

One issue for the next budget fight already: how much of a tax increment financing surplus Johnson will declare. That question has been pushed to the forefront as the hybrid Chicago Public Schools board voted to approve a budget that assumed $150 million in additional revenue from Springfield. That money would have to be approved by the legislature during its fall session.

Should state leaders not heed the mayor’s and the Chicago Teachers Union’s calls for the funding, the city will likely either need to find additional money or risk painful midyear cuts at the district. CPS is already counting on the city to pull $285 million from the special property tax districts to help balance this school year’s budget.

MISSOURI AND BALLOT INITIATIVES

Missouri voters rejected an attempt by the Republican-controlled Legislature to make it harder to pass citizen-sponsored amendments to the state’s constitution. The measure would have amended the state’s constitution to require a majority in each of the state’s eight congressional districts, rather than a simple majority statewide, to pass citizen-sponsored amendments. Those requirements would have been the most restrictive against voter initiatives of any of the 18 states which permit them.

The Legislature had been upset because voters approved citizen-sponsored amendments that expanded Medicaid, legalized marijuana and sports betting, established a right to abortion, raised the minimum wage and required paid sick leave. All of these issues had been rejected by the Legislature. This measure would have amended the state’s constitution to require a majority in each of the state’s eight congressional districts, rather than a simple majority statewide, to pass citizen-sponsored amendments. None of the four amendments Missouri voters have passed since 2020 have won in all congressional districts.

INDIANA GAS TAX SHUFFLE

When we last reported on gas tax suspensions it appeared that the most recent such action in Indiana was the last authorized by law. In fact, Gov. Mike Braun was the one who said that he didn’t have the power to extend the tax break without the Legislature coming into special session and authorizing another extension. The emergency conditions attributed to the war in Iran no longer applied. That caused the need for new legislation. Or did it?

This week, the Governor said he was declaring a new emergency under the state’s energy emergency law. Rather than the U.S. war with Iran, the emergency is disruptions to global oil shipping lanes from the four-year-is old Russian invasion of Ukraine. He also pointed to troubles the Canadian wildfires have caused in the Alberta Oil Sands Region – blame Canada!

The Braun administration projected a revenue decrease of $533 million from the initial four months of the tax suspension. State officials began the process last month of reimbursing local governments from the State Highway Fund for their lost revenue.

TEXAS DATA CENTER COST FOLLOW UP

Last week we commented on the rising total of revenues being given up annually in Texas through tax incentives for data centers. While legislation will not be taken up in the Texas legislature until next year, action can be taken elsewhere. This week, Gov. Greg Abbott on announced a moratorium on the approval of data centers until regulatory agencies can audit proposed data centers seeking connection to the state’s electric grid. 

Those audits will require significant amounts of data. Gov. Abbott is directing the Public Utility Commission of Texas and the Electric Reliability Council of Texas to ensure data center developers provide information on tax breaks they will receive; power use and generation; water use and cooling operations; efforts to reduce impacts on local communities; and ownership of the facility.

Abbott’s letter to the PUCT and ERCOT directs them to conduct the audit on all data centers advancing through ERCOT’s interconnection queue, or the line for energy intensive projects seeking connection to the electric grid. ERCOT is currently tracking more than 1,800 projects in the queue, representing over 474 gigawatts of electricity, or more than five times the grid’s record for peak demand, according to ERCOT. Approximately 90% of the new power requests are data centers, Abbott said. 

PUERTO RICO UTILITY NEWS

The U.S. Department of Energy’s (DOE) Office of Energy Dominance Financing (EDF) announced it has closed a $489.4 million loan to Amanecer Puerto Rico LLC, a subsidiary of Pattern Energy. The loan is intended to fund 220 megawatts of battery energy storage systems in Arecibo and Santa Isabel using American-manufactured battery technology and secure domestic supply chains. Battery storage capable of providing backup electricity for more than 100,000 customers during power shortages and helping avoid approximately 13 million customer interruption hours based on 2025 operating data.

On the negative side, the Commonwealth’s water utility (PRASA) is facing serious operational issues. For the past year, the San Juan region has been affected by the outages. That impacts some 1 million residents. Reliability is poor as evidenced by increased water interruptions and issues with low water pressure. In June, more than 120,000 clients of the Puerto Rico Aqueduct and Sewer Authority (PRASA) had their taps run dry after three major ruptures were found in a key pipeline. 

Gov. Jenniffer González-Colón declared a state of emergency on July 31 and activated the National Guard to help distribute and transport water – the second time the Guard was activated this summer due to water issues. Reservoir levels are so low that water rations are in place for the San Juan region beginning as we go to press.

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

EXECUTION MATTERS

The state and city budgets have been adopted for FY 2027 and the big events in NYC (World Cup, Pride Parade, America 250) are over. Now people can focus on what is actually being done. Rents have been frozen, the buses are not free, school class sizes are not being reduced after all and the Mayor has stepped away from several of his campaign policy pledges. There is already a realization that this year’s budget was not a blue print for achieving structural balance.

Less than a month into FY 2027, the Mayor has already asked agencies to find expense reductions of 2.5%. At the same time efforts to achieve pay raises for school employees have raised budget questions with implications for other agency employees. These are the sort of issues which require some skill at governance. That is especially true when the ideology or policy being executed face significant opposition.

That is what makes the rollout of the pied a terre tax so disappointing. The Mayor sold the tax as something that would impact some 30,000 properties which were clearly not primary residences. You can understand the outcry that has occurred over the fact that the rollout includes the release of name and address information of the owners of some 1 million properties. You can support the policy of the tax but the clumsy rollout of the collection process and needless release of information does not generate the trust needed to support some of the Mayor’s other initiatives.

In the meantime, the mundane day to day details of city governance continue to get in the way. The efforts to convert office space to housing are being slowed by issues with repair inspections and structural soundness. The recent federal housing legislation did not provide any funding for new public housing. That will leave the City on its own to fund truly affordable housing. The bill for maintaining the current NYCHA stock is $40 billion and growing.

Amidst all of the debate, Moody’s reaffirmed its negative outlook on the City’s credit at mid-month. The negative outlook reflects New York City’s updated spending projections, which give rise to larger multi-year budget gaps than previously forecast. That the city projects large and persistent imbalances under still-favorable economic and revenue conditions highlights the extent of its underlying structural budget challenges. Over the next 12 months, the outlook will be influenced by the city’s ability to narrow projected gaps through recurring measures and demonstrate progress toward restoring structural balance.

BRIGHTLINE

Fitch Ratings has downgraded Brightline Trains Florida LLC’s (Brightline/OpCo) $2.219 billion senior secured private activity bonds (PABs) to ‘CC’ from ‘CCC’. Fitch has also affirmed Brightline East LLC’s (BLE) $1.119 billion senior secured taxable notes rated ‘CC’. Fitch has removed both the OpCo and BLE from Rating Watch Negative.

The rating reflects a very high probability that both issuers will be unable to fully fund the next debt service payments due on or before Jan. 1, 2027. The OpCo and BLE reserve accounts were both substantially depleted to meet the July 1, 2026, interest payments. Despite the upward ridership and revenue trends that continue through the first half of 2026, the ramp-up profile remains slow, and cashflows on a net income basis are at or near breakeven. Therefore, Fitch expects the OpCo to have insufficient funds to fully service its debt obligations.

CHESTER BANKRUPTCY

The U.S. Court of Appeals for the Third Circuit ruled that the bankrupt City of Chester, Pennsylvania can retain control of revenue streams tied to a local casino and a waste-to-energy plant, finding that creditor liens on those revenues did not survive the city’s 2022 Chapter 9 filing. The decision affirms a 2023 bankruptcy court ruling and hands Chester continued access to funds it says are essential to exiting bankruptcy, while also sending part of the dispute back for further review.

It determined that the liens were not “statutory liens,” and did not survive the bankruptcy filing. The creditors argued their liens arose automatically from two city ordinances authorizing the debt, and therefore counted as statutory liens, a category of lien that can survive a bankruptcy filing without further action. The Third Circuit disagreed, finding that the liens only took legal effect because of language in a separate contribution agreement and trust indenture, not the ordinances themselves. Because the liens depended on contract language rather than arising purely “by force of a statute,” they didn’t qualify for statutory-lien protection.

Casino revenue is a “fee,” not a tax, and doesn’t qualify as protected special revenue. The creditors also argued the gaming revenue pledged to their bonds counted as a “special excise tax,” a category of revenue that can remain pledged to bondholders even in municipal bankruptcy. The court rejected this too, holding that fees tied to a specific licensed activity (operating slot machines and table games) function differently than a broadly imposed tax, and therefore don’t carry the same protected status.

VIRGIN ISLANDS

HUD is suspending funding to the Virgin Islands Housing Finance Authority, claiming that the agency misused disaster relief funds that were supposed to be used to rebuild housing and other infrastructure damaged by two major hurricanes in 2017. HUD allocated $1.9 billion to VIHFA to help rebuild following Hurricanes Irma and Maria.

VIHFA was slated to bring 1,643 multifamily facilities online via rehabilitation and new construction as part of its direct recovery efforts using some of the disaster relief funds. However, only 319, or 19%, have been completed in that time, and none of the single-family and multifamily housing that was supposed to be built as part of its mitigation effort has been built.

As for the economy, “The Trump administration would like to see refineries across the country reopen, especially the St. Croix refinery as it is in a strategic location and was built particularly to refine Venezuelan crude,”. Before Venezuela under Hugo Chavez managed to ruin a perfectly good relationship with the US oil industry, Venezuelan crude was refined at St. Croix. Now, the Administration is seeking foreign investors to fund refurbishment and operation of the old refinery.

The St. Croix refinery operated from 1966 until 2012 and briefly again in 2021. In 2021, just months after the plant reopened, EPA under the Biden administration ordered it shut down after a series of flaring accidents rocked the plant, leading to sprays of oily mist on nearby residents and triggering large releases of hydrogen sulfide and sulfur dioxide.

UTILITY RATINGS

Two significant utility debt issuers received positive rating news this week.

Moody’s has affirmed Long Island Power Authority’s (NY) (LIPA) A2 senior lien revenue bonds rating. The rating outlook for LIPA has been revised to positive from stable. The revision of the outlook to positive from stable reflects expectations for continued improvements in LIPA’s key financial metrics driven in part by the company’s stated policy goal of achieving 70% debt ratio by 2030. The outlook, however, could be revised to stable should the utility encounter material operational difficulties, including reconnecting customers in a timely manner after a major storm-induced outage.

LIPA is the retail supplier of electric service in most of Nassau and Suffolk Counties and the Rockaway Peninsula of Queens. Its assets currently consist of a transmission and distribution system that is used to serve approximately 1.2 million customers in an approximately 1,230 square mile service territory. This provides a diverse and relatively wealthy base to support revenues.

Moody’s also affirmed South Carolina Public Service Authority’s (Santee Cooper) A3 rated revenue bonds. The outlook has been revised to positive from stable. The change in Santee Cooper’s outlook to positive considers the expected improvement to the utility’s liquidity post bond issuance and its proposed retail rate increases for 2027 and 2028. 

Some of the credit’s sturdier supports remain. The affirmation of Santee Cooper’s A3 rating considers the return to traditional rate setting practices following the expiration of the rate freeze in January 2025, its broad service area directly or indirectly serving approximately 2 million people in South Carolina, ownership by the state of South Carolina (Aaa stable), and competitive rates.

The risks to the utility’s rating are those associated with the potential for political influence weighs on Santee Cooper’s operations including its rate setting, if new major disputes arise with Central, or if the utility undertakes any material risks associated with any resumption of construction at the partially completed Summer nuclear plants.

The A3 rating does not consider Santee Cooper’s memorandum of understanding (MOU) with Brookfield Asset Management (Brookfield) regarding the partially built Summer Nuclear Units 2 and 3. If this contemplated transaction were to be executed, it would likely be a substantial credit positive for the utility. That said, the transaction has material uncertainty around its likely execution.

LAUSD ON THE DECLINE

Moody’s has downgraded Los Angeles Unified School District, CA’s issuer rating to A1 from Aa3. The outlook is negative. The district has about $11 billion in long-term debt. Governance is a key rating driver, reflecting delays in reducing expenditures in response to declining enrollment and collective bargaining agreements that will drive significant cost growth.

The expectation is that reserves will decline materially beginning in fiscal 2026 and continue weakening absent meaningful expenditure reductions or additional recurring revenue. Fiscal 2026 projections (year-end June 30) show an operating deficit that will reduce available general fund balance to below 30%, down from 40% in fiscal 2025, largely because enrollment declines were nearly twice the budgeted level. 

On July 2, 2026, the Los Angeles County Office of Education (LACOE) issued a “lack of going concern” determination for the district, noting that the district may be unable to meet its financial obligations in fiscals 2028 and 2029, resulting in an increased level of fiscal oversight. The designation automatically triggers a Fiscal Crisis and Management Assistance Teams (FCMAT) Fiscal Health Risk Analysis (FHRA) to determine the district’s risk level for fiscal insolvency.

TEXAS DATA CENTER COSTS

The Texas Senate Finance Committee held a hearing this week examining the state’s sales tax exemptions for qualifying data centers. Some incentives date back to 2013. In 2013, the Texas Legislature passed House Bill 1223, granting full sales tax exemptions to purchases by data center developers for electricity costs; cooling systems; emergency generators; various types of IT equipment. The demand wasn’t large. In the first two years, the legislature estimated a cost of about $14.6 million. Then in 2015, legislation expanded the program for large data centers. Those projects qualify for the same state sales tax exemptions, but receive them for a longer period and can also qualify for local sales tax exemptions.

Then development exploded. At the end of 2020, 10 data centers were receiving tax breaks in Texas. As of today, 138 data centers have been certified for the exemption, with five more applications pending. That has resulted in a lost revenue total associated with data center exemptions of some $3.3 billion. With the support of the Governor, Texas’ data center tax incentives will likely be a topic of debate when lawmakers return to Austin in 2027.

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 BUDGETS

We observed some trends resulting from the state’s budget processes away from the pure dollars and cents aspect. While there were expected efforts to lower state income tax rates, we also saw efforts to lower or eliminate property taxes. It’s not clear whether these efforts are purely fiscal in nature or rather a manifestation of the “starve the beast” philosophy championed by conservatives. Those efforts are concentrated in the South.

At the same time, New York passed a second home tax, Washington State’s millionaire’s tax will be on the ballot as will the billionaire’s tax in California. As is the case with the efforts to eliminate property taxes, it’s not clear whether these proposed taxes reflect fiscal concerns or policy concerns. All this is occurring while the Trump administration blatantly targets the budgets of states like Minnesota and California for political purposes.

Overhanging all of this are cutbacks in Medicaid funding and obstacles to enrollment. The impacts of the changes to Medicaid eligibility are only now becoming clear. A significant segment of the patient base will now rely on charity care in emergency rooms which will pressure both providers and states. We see Medicaid as a potential source of credit pressure for states as the health sector will look to the states to fill at least some of the federal gap.

MASS TRANSIT CUTS

Denver’s Regional Transportation District has proposed significant cuts to its budget as it faces an estimated $250 million budget shortfall. Those cuts would include staff reductions and service cutbacks. They would also eliminate some existing fare free service. An RTD spokesperson said, “Operating costs are increasing faster than total revenue, and federal relief funds that supported transit agencies in prior years are no longer available.”

RTD has identified dozens of routes it could eliminate to save up to $62 million. The options include discontinuing the 16th Street FreeRide around downtown. If RTD’s Board of Directors were to enact the full 20% service cut, the agency would save $62 million by eliminating 39 routes. Those routes combined for 5 million boardings last year. 

In Wisconsin, the Milwaukee County Transit System (MCTS) is planning to reduce service by 25% next year to stabilize the system. MCTS is at the edge of a budget cliff and does not have funding to preserve existing service levels. In March, the Office of the Comptroller forecast an MCTS budget deficit of $15.7 million in 2027, growing to $37 million by 2031. The system implemented major service cuts in 2026 to close a $9.3 million budget gap.

Here’s the rub. When MCTS implemented those budget cuts in 2026 they were focused on frequency. Across the system, bus frequency was reduced by 14%, but these changes led to an even greater loss of ridership, which declined 20%, according to MCTS data. 

PORT OF LOS ANGELES

The Port of Los Angeles moved 1,002,734 Twenty-Foot Equivalent Units (TEUs) in June, making it the busiest June in the Port’s 118-year history and the third time monthly cargo volume has ever exceeded 1 million container units. No other port in the Western Hemisphere has ever surpassed the 1 million container mark in a single month. June cargo was 12% higher than a year ago, driven by strong import demand as retailers and manufacturers continued advancing shipments while navigating evolving trade policy, rising fuel costs and global supply chain uncertainty.

Loaded imports reached 530,558 TEUs, an increase of 13% compared with last year and the Port’s third-highest import month on record. Loaded exports totaled 126,365 TEUs, unchanged from a year ago. Empty containers came in at 345,811 TEUs, up 17% year over year as equipment returned to Asia to support continued demand. During the first six months of 2026, the Port handled 5,122,603 TEUs, 3% ahead of the same period last year.

MILLIONAIRE TAX ON THE BALLOT

Washington Secretary of State Steve Hobbs confirmed that Initiative 645, which would repeal the high-earner income tax, received enough signatures to be placed on the Nov. 3 ballot. Initiative 645 would repeal a 9.9 percent income tax on households earning more than $1 million annually that was signed into law earlier this year. The tax is slated to take effect on income earned by Washington state residents beginning in 2028, with the first payments due the following year. State officials projected it could generate more than $3 billion in tax revenue per year.

WESTERN WATER DEAL

The Metropolitan Water District of Southern California’s board of directors approved an agreement in which the U.S. Bureau of Reclamation will pay the agency to leave up to 200,000 acre-feet of water from the Colorado River in Lake Mead. By December, MWD’s deal will add three feet of water to the reservoir, according to MWD. Per the terms, the federal agency will pay MWD up to $65 million for the water, or $325 per acre-foot. Each acre-foot is about 326,000 gallons. 

MWD also approved agreements that will allow federal officials to pay the Quechan Tribe and Bard Water District to send up to 19,000 acre-feet of conserved agricultural water to the lake in 2027 and 2028. It is all part of an effort by the Lower Basin states – California, Arizona and Nevada – to achieve some 700,000-acre feet of increased water in Lake Mead. The lake sat at close to 1,043 feet above sea level this week, or only two feet above the record low set recorded in 2022.

Lake Mead has already cut Hoover Dam’s generating capacity by an estimated 5% to 8.5%. 

In the Upper Basin, the situation is more advanced. The Wayne N. Aspinall Unit, Colorado’s only stake in a federal hydropower system that sells power across the West, is on pace to generate nearly 30% less electricity than its historical average dating to 1978, according to the Bureau of Reclamation. The unit’s three dams on the Gunnison River — including Blue Mesa, Morrow Point and Crystal — make up Colorado’s only piece of the Colorado River Storage Project.

This Depression-era network of federal dams sells power to municipalities, cooperatives, tribes and irrigation districts across the West. Blue Mesa Reservoir, the largest body of water entirely within Colorado, is expected to end the year at just 17% of its live storage capacity. At its current elevation of about 7,446 feet, the reservoir’s generating capacity is approximately 18% below the amount for which it was designed. Electricity generation stops entirely at 7,393 feet, Blue Mesa’s minimum power pool.

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

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ROADS AND TAXES

Gov. Mike Braun has extended Indiana’s gas tax holiday for the fourth time. It’s the final 30-day extension Braun can order without approval from the legislature. Each month that the gas and excise tax are paused costs the state roughly $140 million, according to Braun. The governor also announced Tuesday that the state will ensure local governments still receive their portion of the gas and excise taxes as if they were being collected.

The proposal will still need to be approved by the State Board of Finance in late July. Local governments will see the reimbursement by November if approved. Between the localities and the state, the total foregone revenue loss is over $500 million.

In New Hampshire, the governor vetoed a measure which would have helped provide for more funding for the state’s highways by raising the price of tolls for all those without a New Hampshire EZ-Pass.

Georgia saw its gas tax holiday end in June after three months. It is estimated that it cost the state some $220 million in revenues.

I-81 VIADUCT

It’s the kind of project the current federal administration hates as it involves removing highway. At the same time, to have lived through the early years of the project is to understand the long term toll the existence of the viaduct placed on the local community. Efforts to have the viaduct removed – similar to other projects – have been long standing. Once a plan was adopted to do so, the only concern was sustained financing.

Now that the project is at the stage of demolition, funding has been announced. The I-81 Viaduct Project is the largest project ever undertaken by the New York State Department of Transportation. The project will remove a 1.4-mile stretch of elevated highway that has divided the City of Syracuse for decades. I-81 will now go around Syracuse rather than right through the heart of it. That work has been completed.  

QUIET RESURGENCES

Two cities with major roles in their state economies but perennially weak financial operations have recently seen improvement in their situations worth noting. Moody’s has affirmed the Baa3 issuer rating for the City of Hartford, CT. The rating acknowledges the city achieved material financial improvement and stability under state oversight over the past decade. The City’s Board of Education remains a financial problem as a significant projected deficit within the Board of Education (BOE) for fiscal 2026 presents a challenge to the city’s overall financial position. 

The current bond issuance is the city’s first in nearly a decade as it was precluded from issuing debt as part of the terms of it submitting to the oversight of the state’s Municipal Accountability Review Board (MARB). The role of the state in terms of both oversight and funding support is a key foundation supporting the investment grade rating.

Moody’s assigned a stable outlook to the rating. Oversight and funding assistance will continue to play a significant role in maintaining the city’s financial position going forward. The relationship between state and city is seen as collaborative. Without the intervention of the state, much greater negative pressure would have been applied to the rating.

That is not the case with the City of New Orleans. A new mayor took office in January and has implemented management and budget changes which are reported to have halved the anticipated deficit facing the city. While acknowledging improvement the City also knows that additional cuts must be made while the search for new revenues continues.

When the City elected a new mayor last fall, the result was a more business friendly and likely more efficient administration. It seemed that the pieces might be in place to support better collaboration between the state and the city. So, it has been disappointing to see that in spite of the improvement, the political vitriol being directed at the city continues and even increases.

The difference in approaches to financial issues in the two states largest cities is striking. While it has been difficult, Hartford has been supported. The opposite is true with New Orleans.

NUCLEAR

Holtec International announced that it completed all major renovations for its reconstruction of the Palisades plant’s single 800-megawatt reactor in Michigan. Under the Biden administration, the Department of Energy’s Loan Programs Office awarded Holtec a $1.52 billion loan to finance the renovations needed to relicense Palisades’ 54-year-old reactor, previously the oldest in operation in the U.S. fleet. Those loans were continued under the current administration.

It is not clear when actual operations at Palisades will be underway. When completed and operational, Holtec hopes to also develop small modular reactors (SMR) at the site. The company plans to build two of its SMR-300s, 300-megawatt pressurized-water reactors at Palisades. The effort to reopen decommissioned nuclear plants also includes Constellation Energy Generation’s Crane nuclear plant, (aka Three-Mile Island) in Pennsylvania and the Duane Arnold plant in Iowa. Microsoft is financing the Three-Mile Island rehab while Google is financing the effort in Iowa.

ONE MORE WESTERN WATER FIGHT

The U.S. Supreme Court has agreed to hear Nebraska’s lawsuit against Colorado over a proposed canal that would take water out of the South Platte River in Colorado and send it to a reservoir in Nebraska. The Perkins Canal would divert water from the South Platte River near Ovid. It is agreed that Nebraska has the right to do so. 

The South Platte River Compact, ratified by both states and Congress in 1923 authorizes Nebraska to build the canal and grants the right to use the power of eminent domain to acquire land on which to build it. The dispute focuses attention of the complexities of water management especially in Colorado. Already facing issues over use of Colorado River waters, the State of Colorado is fighting to hold onto Platte River water to offset other regional losses.

Nebraska contends that the very system regulating water use in Colorado is itself an obstruction of the Compact. That and actions to support Colorado landholders against eminent domain claims have driven the suit.

OHIO PUBLIC LAND FRACKING

It was a controversial decision to say the least but the State of Ohio decided to allow private energy development firms to lease land in state parks and other state landholdings. The first financial returns are in. Ohio’s new business of leasing about 22,000 acres of its publicly owned lands to the oil and gas industry has generated $314 million. The vast majority of that money comes from one-time provisions in state law such as signing bonuses paid to acquire the leases.

To date, several leases have been awarded but only one is producing revenues. That one producing facility has paid $11.3 million from 20% of royalties on gross production between the first payments in October 2025 and the most recent data from May 2026, according to the Ohio Department of Natural Resources. That’s about $1.4 million per month. By law, at least 30% of the money must go toward capital improvements at the park – things like campsites, lodges and bathrooms. 

It’s important to note that while the initial numbers are impressive, the longer term benefits to the public in general are much less clear. As has been the case for many other fracking projects, the long term economic benefits often underwhelm especially in terms of jobs and local economic growth. The income from many projects go to out of state entities whose interest in local economic development just isn’t there.  

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