Joseph Krist

Publisher

WESTERN WATER

According to Arizona state water officials, the federal government has proposed a plan for the drought stricken Colorado River that could cut up to 40% of current supplies to Arizona, California and Nevada. Under the 10-year plan, which will be finalized in June, the annual amount of water delivered to Arizona, California and Nevada could be reduced by as much as 3m acre-feet.

The actual level of water cuts across the three lower-basin states would be based on the “priority of the law of the river”. That law, the 1922 Colorado River Compact, gives California the highest priority for water use. Two weeks ago, California, Arizona and Nevada announced their own proposal for voluntary water reductions up to 3.25m acre-feet through 2028. Under their offer, Arizona’s water flow would be slashed by 760 acre-feet, California by 440 acre-feet and Nevada by 50 acre-feet.

Hoover Dam is receiving approximately $52 million for investments in critical infrastructure. A significant portion of the funding will be used to purchase and replace up to three older turbines with wide-head turbines, which are designed to operate at lake elevations below 1035’. These turbines are expected to restore at least 160 megawatts of hydropower capacity and will help mitigate impacts caused by the ongoing drought. Due to the unprecedented drought, generation has decreased by about 30 percent.

The impacts of the drought are not only impacting human demand for water. In order to preserve endangered fish populations downstream, Glen Canyon Dam in northern Arizona is proposing to do what is known as a “cool mix flow,” where cold water is released from deep in its reservoir to cool the river downstream. If the cool water release is approved, it would likely happen from June to October through jet tubes, bypassing the turbines near the warmer surface.

Significant power generation is lost during the cooling process. During the cool water releases in 2024, nearly 900,000 acre-feet of water bypassed the generators, costing $19 million in replacement energy costs, according to the Bureau of Reclamation. Those costs are spread among a customer base of some 155 electric utilities across the Southwest and California.

ALASKA TAX PROPOSAL

In Alaska. a special legislative session is underway to consider tax incentives for a long-proposed pipeline to carry natural gas from the North Slope to Gulf of Alaska ports. The governor has called lawmakers into a special session to pass a bill imposing major changes in the property tax system that has been the main source of revenue for several Alaska local governments.

Under his proposal — which lawmakers took up but failed to approve before the end of the just-concluded regular session — the state and local governments would eliminate 90% of the property tax that would be levied on pipeline-related infrastructure. In exchange, the bill would replace state and local petroleum property taxes with an “alternative volumetric tax” on natural gas that would eventually flow through the pipeline.

The proposal is being driven by one corporate interest – a pipeline developer. The project is presented as being a quite profitable venture but that is only if the project does not have to pay the taxes. The claim is that potential investors would not be attracted if the project had to pay property taxes. What is glossed over is the shift of risk to the local governments in that if the tax is paid based on flow volumes and there is no flow, there are no revenues. It replaces a level of certainty with real risk to the governments.

DATA CENTERS

In 2024, a state sales tax exemption for data centers cost Ohio about $555 million in revenue. For facilities that cost $100 million or more to build, the exemption allows developers to avoid up to 100% of Ohio’s 5.75% sales tax for up to 15 years. It had been previously estimated that the amount of revenue foregone would be $136 million. Now, data centers are multiplying across the state. In 2025, the exemption cost $1.6 billion. That is according to the state Department of Taxation.

In the most recent budget legislation, lawmakers voted to end the data center tax break to help finance another round of income tax cuts. Gov. Mike DeWine vetoed the proposal, insisting the tax exemption is needed to lure data center developers to the state.  After the veto, the Governor suspended the tax exemption for new data centers. He directed the chair of the Ohio Tax Credit Authority to temporarily halt consideration of new data center tax exemption requests while the Ohio General Assembly “studies the growth” of data centers in the state.

Use of the exemption started in 2016. It was in a period when states thought they were taking care of the problem. Unfortunately, development at this scale and volume was not anticipated. Local sales taxes – another $166.8 million in lost revenue in 2024 – are a direct hit to host localities. Many states facing efforts to limit these tax breaks fall into that category or to declare a moratorium on new data center approvals.

BAY AREA TAX BALLOT

A proposed regional sales tax measure for public transit collected 305,895 signatures across five Bay Area counties. That is well in excess of the 186,000 required to place it on this year’s ballot. Voters in the counties of Alameda, Contra Costa, San Mateo, San Francisco, and Santa Clara will vote this November on the sales tax measure Senate Bill 63 — more commonly known as the Connect Bay Area Act.

In California, a voter-approved regional measure for a new sales tax would normally require a two-thirds majority approval if the Legislature directly places it on a ballot. Transit advocates, however, chose to collect signatures to make the sales tax a citizen-initiated ballot measure that would lower the threshold to a simple majority of votes cast.  

FLORIDA PROPERTY TAXES

The Florida legislature has been considering a series of bills to limit, if not lower, local property taxes. Final legislation has been difficult to enact so now the Governor is asking for a special legislative session to consider his proposals to lower property taxes. As proposed by Governor DeSantis, the Save Our Homes proposal includes five major components to provide immediate and permanent relief.

The plan exempts the first $250,000 of a homestead’s value from taxation and requiring, through law, a schedule for full elimination; requires local governments to use remaining property taxes solely for core public needs including public safety, education and schools, infrastructure, and natural resources.

It also limits future property tax assessments on businesses and creates a more stable tax environment for local businesses; requires any person who establishes Florida residency after January 1, 2027, to maintain Florida residency for up to five years prior to receiving the increased homestead exemption; establishes a trust fund to provide grants to local governments to assist with the continuation of core local services.

DETROIT

S&P Global Ratings raised its long-term rating to ‘BBB+’ from ‘BBB’ on Detroit’s previously issued unlimited tax general obligation bonds. The outlook is stable. The stable outlook reflects a view that Detroit’s strong fiscal discipline and robust planning efforts, coupled with its strong budget position, capacity to cut costs, and substantial reserves, will help sustain the city’s credit conditions in line with the ‘BBB+’ rating against a backdrop of an uncertain federal policy and geopolitical environment that could lead to weaker economic trends over the outlook period.

Moody’s has upgraded the City of Detroit, MI’s issuer and general obligation unlimited tax ratings to A3 from Baa1. The outlook was maintained at stable. They said the upgrade to A3 reflects the city’s strengthened financial resilience on par with A3 peers, supported by consistently solid operating performance, strong reserves, low leverage and good governance practices. These characteristics will provide financial flexibility amid slow revenue growth in fiscal 2026 and heightened economic uncertainty.

Both ratings also acknowledge the continuing trend of population declines and high levels of poverty. They also cite concerns about the auto industry. Those have been highlighted by the federal efforts to slow if not halt electric vehicle production. Nevertheless, the improvement in the City’s financial condition continues.

NEW YORK STATE BUDGET

Some 57 days into the 2027 New York State fiscal year, a budget has finally been enacted. It includes record spending of some $269 billion. The budget includes a tax on second homes in NYC with values in excess of $1 million market value. It also includes pension funding changes which will cost NYC more in the future than is saved currently. It effectively reverses pension reforms enacted some 15 years ago.

It is clearly a budget which reflects the reality that 2026 is a particularly contentious election year in NY. Lawmakers set aside $1 billion to send relief checks to New Yorkers in order to help residents cope with the state’s high gas and electric bills this past winter. They also eliminated the income tax on tipped wages and created a 100 percent property tax exemption for disabled veterans.  

Lawmakers agreed to scale back some of the state’s climate mandates under the Climate Leadership and Community Protection Act. It comes after the State’s difficult winter where substantially lower daily temperatures drove spikes in customer bills. A bill would eliminate regulatory mandates related to New York’s 2030 emissions goal and it would push previously set deadlines to enact additional clean energy requirements.

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

Joseph Krist

Publisher

NYC BUDGET – THE GAMES BEGIN

The realities of governance appear to be slowly dawning on the Mayor. He has not, so far been able to convince the State Legislature to provide the level of new tax revenue he desires. He also does not appear able to understand that there is another way to balance a budget besides increasing revenues. Unable to show a real ability to find savings on expenses, the willingness of the State to provide more funding is weakening.

This has culminated in the delay of the release of the Mayor’s proposed FY 2027 budget beyond the required May 1 date. The demands for more money from the State have contributed greatly to the month long delay in the formal adoption of the State budget for the FY 27 which began on April 1. Over that period, the Mayor has proposed reducing pension funding contributions to provide revenue for other spending such as universal child care.

As we go to press, a preliminary summary state budget has been agreed to in Albany. The City will get funding for universal child care which is not available to other State residents. The tax on second homes valued at $5 million and above has made the cut. It will deliver an estimated $500 million but that is only some of the budget gap. The Mayor now is expected to issue what is being referred to as a “placeholder” budget while efforts continue to obtain more revenue for the City.

PUBLIC POWER SOLAR

Salt River Project (SRP) in Arizona announced an agreement with NextEra Energy Resources to develop 3,000 megawatts (MW) of new solar generation by the end of 2034. The agreement calls for the construction of 500 MW of solar per year from 2029 through 2034. SRP has more than 3,000 MW of carbon-free resources currently serving its customers, including more than 1,500 MW of solar and more than 1,570 MW of battery storage supporting its grid.

Colorado Springs Utilities issued a competitive solicitation for up to 300 megawatts of utility-scale wind, solar and energy storage projects. 

Responses are due by June 5, 2026.

The launch of California’s first-of-its-kind solar-covered canal was announced. The pilot project is a public-private and academic partnership between the California Department of Water Resources, Turlock Irrigation District (TID), solar development firm SolarAquaGrid LLC, and the University of California, Merced. It will support a test of the technology. The overall project – Project Nexus – will measure how much clean energy the solar panels generate, how much water is saved by reducing evaporation, whether water quality improves, and whether covering canals reduces the cost of maintaining them.

ILLINOIS BUDGET

The Civic Federation in Chicago has released its view of the executive budget proposed by Governor Pritzker. Governor Pritzker’s FY2027 State of Illinois budget proposal balances the books amidst a $2.2 billion budget gap, offering a “maintenance” budget that yields a modest general funds surplus of $24 million. The report notes that the State’s core tax base—personal income, corporate income, and sales taxes—has been growing more slowly than spending on core (non-Medicaid) services. 

The State’s Budget Stabilization Fund (“rainy day fund”) remains underfunded and has seen little growth since FY2023. At 4.5% of general funds expenditures, reserves remain well below the recommended 8% threshold (one month of operating expenditures) and far below the national average. 

BIG BEAUTIFUL MEDICAID

Nebraska, on May 1, became the first state to require certain Medicaid enrollees to work, train, or go to school under a rule mandated by congressional Republicans’ One Big Beautiful Bill Act. Under the Act, requires the 42 states, along with the District of Columbia, that fully or partially expanded Medicaid under the 2010 Affordable Care Act to implement a work requirement starting in 2027. In Nebraska, which is implementing the provision eight months before the law requires, about 70,000 Medicaid enrollees will need to meet the requirement.

The law’s “medical frailty” exception created a long list of health conditions that can be considered for the exemption. It was posted last week by the state and includes many types of cancers and mental health and heart conditions. Georgia has had a work requirement under its partial Medicaid expansion since 2023. Only about 8,000 people signed up for the coverage in its first two years — far fewer than the 25,000 that state officials predicted for the first year alone — and many have been denied benefits because of paperwork issues.

Only two other states plan to implement the work requirement early: Montana, which plans to launch in July, and Iowa, which plans to go live in December. The Congressional Budget Office estimates that work requirements will reduce federal Medicaid spending by about $326 billion over 10 years. The agency also estimates that 4.8 million more people will be uninsured in 2034 because of the work requirement. While 28 states and Washington, D.C., will offer hardship exemptions, three of those states won’t adopt all four exemptions allowed by the law and two — Iowa and Indiana — don’t plan to adopt any.

Six states plan to use AI to assist with the work requirement implementation in some way, such as for document processing or comparing beneficiary data from different sources, KFF found. Two states, Maryland and New Mexico, plan to use AI to analyze claims data. Three states — Arkansas, Missouri, and Oklahoma — plan to use AI to interact directly with people on Medicaid and assist them with identifying and uploading verification documents and data. Adults on Medicaid will have to reverify that they’re working, or that they’re exempt from the requirement, at least every six months. Some states plan to check quarterly.

BRIGHTLINE’S CLOUDY OUTLOOK

Brightline “has stated that it does not currently have the liquid funds necessary to service its debt and meet such other obligations as they become due.” Brightline has delayed its interest payments that were due earlier this year. Its grace period expires June 15. “However, substantial doubt remains as to the ability of the Company to continue as a going concern,”. Yes, the dreaded words have been uttered.

It is supposed to pay $117 million in interest this year, payments which have so far been deferred as it scrambles to raise cash. Sales totaled $214 million last year, a 14% increase, but only about half the growth expected. The train service operating loss totaled $127 million last year, an improvement from the $153 million operating loss a year earlier. The company’s total loss, made worse by interest payments, was $233 million. 

Rides between Orlando and South Florida increased 16%. Regional rides between its five stations in South Florida grew 8%. It reconfigured its fleet and schedule in October to offer more frequent service for South Florida commuters. the average fare per person on its short haul routes fell and stayed about the same for its long distance service. While ridership was up, Brightline has found it difficult to raise average fares 

HOSPITAL M & A

University of Pittsburgh Medical Center (UPMC) and Common Spirit Health have signed a definitive agreement to transfer ownership of Trinity Health System, including Trinity West, Trinity East, Trinity St. Clairsville Neighborhood Hospital, Trinity Twin City Medical Center, and associated clinics, to UPMC. The transaction, if finalized and approved by regulators, would allow UPMC to expand into Ohio, where it currently has virtually no presence.

Currently, the academic health system has more than 40 hospitals primarily in Pennsylvania, with locations in Virginia, Maryland and New York.

It has yet to be announced if the official Catholic affiliation and name will be maintained once the transaction is complete. Trinity serves a patient population of some 200,000 people at its four hospitals.

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

PUERTO RICO ELECTRIC

A new electricity rate structure has been approved by the Puerto Rico Energy Bureau (PREB). The new structure includes an increase in the fixed charge—which will initially double from $4 to $8 per month for residential customers and continue to rise in subsequent years—along with a reduction in consumption charges, thus redistributing the cost of the electricity bill.

PREB determined that contributions to the pensions of retirees from the Puerto Rico Electric Power Authority (PREPA) will be included in the base electricity rate starting July 1 and will continue until 2028. The changes come as the electric market has diversified in the wake of Hurricane Maria in 2017. The base rate has not been reviewed since 2017, while labor, parts, and other costs have increased by 30%. Demand has fallen by 17% due to the integration of solar energy.

NYC PENSIONS

The Mamdani administration is looking to reduce the annual pension payments required to keep the City is compliance with the goal of fully funding the City’s pension liability by 2032. Those plans have been in effect since 2013. The higher required payments under that plan reflect the reduction in estimates of annual returns from 8% to 7%. The Mayor hopes any savings derived from a pension funding maneuver will help fund his social appending agenda. He estimates that the move would save some $1 billion.

The city’s total obligation to the five municipal pension systems for existing benefits, through 2032, amounts to $38.9 billion, according to data from the Citizens Budget Commission. Pension funding has long been a strong point supporting the City’s credit. Unlike Chicago, the City has not used pension funding lapses to fund current operating expenses. Like Chicago, it does not control all of its revenues. That puts enormous pressure on the Mayor to control spending. The problem in New York is that this Mayor does not appear able to make real cuts. His initial efforts produced about 15% of the cuts he claimed were easily available.

He is already pulling back from many of his promises. No free buses. He is asking that class size reductions mandated under state law be relaxed. A proposed tax on second homes worth $5 million or more is being considered. The threats of property tax increases and potential reserve withdrawals still overhang negotiations with the State.

All in all, it’s a package of bad tactics if you want to maintain the City’s credit. Chicago shows where the ideological path leads to. That path has consequences.

DATA CENTER VETO

Legislation was passed in the Maine legislature which provided for a moratorium on new data centers in the state until November 2027. The moratorium would have made Maine the first state in the nation to create such a hurdle. Now, the Governor (and US Senate candidate) has vetoed the bill. It isn’t because a moratorium isn’t popular and it isn’t because she is against a moratorium. Her problem is that the law would hold up the development of a data center in her hometown Jay, ME.

She did sign legislation prohibiting data center projects from participating in certain state tax incentive programs. The mill in Jay had been severely damaged by an explosion in 2020. A plan to repurpose the site for a board manufacturing business failed when new tariffs set by the Trump administration drove up the cost of needed equipment.

TEXAS AND ICE

Gov. Greg Abbott of Texas gave the leaders of Houston, Dallas and Austin until Wednesday to amend many of their local policies and law. Those laws restrict cooperation by local law enforcement with ICE. The Governor supports cooperation. He is threatening some $150 million total in public safety funding, including millions dedicated to providing security at World Cup matches this summer.

This month, the Houston City Council passed a new ordinance clarifying when its officers could detain people wanted by immigration agents. The Governor then threatened aid to the city. Mr. Abbott expanded the fight to Dallas and Austin after he said both had policies that also broke a contract with the state requiring the police to cooperate with immigration agents in exchange for funding.

The governor has warned, the state would take back about $110 million in World Cup safety spending and other grants from Houston, $32 million in grants from Dallas (plus the city’s portion of another $55 million for World Cup security in the area, with games being played in Arlington), and more than $2 million from Austin.

CALIFORNIA WATER

The California Supreme Court has denied review of a landmark opinion issued by the Court of Appeal. The Court’s opinion, first issued on December 31, 2025 and finalized with minor modifications when rehearing was denied the next month, unanimously affirmed a trial court decision holding that the State Department of Water Resources (DWR) exceeded its authority when it approved bond resolutions to finance DWR’s proposed Delta tunnel.

In 2020, DWR unsuccessfully sought to validate detailed bond resolutions and pledges to collect revenue from water contractors, which would charge ratepayers for an uncapped amount of additional debt to meant to finance DWR’s proposed Delta tunnel – the Delta Conveyance Project (DCP). The DCP, if built, would divert up to half of the average flow of freshwater from the Sacramento River with massive new intakes near the town of Hood in the Sacramento-San Joaquin Delta, for export chiefly to portions of the South San Joaquin Valley and Southern California.

DRAMA AT THE OPERA

We have documented the ongoing financial problems which are pressuring the credit of the Metropolitan Opera. Now, the Opera has suffered a significant blow to its plans for a cash injection. Saudi Arabia has cited damage to the country’s economy caused by the war in Iran and the blockading of oil passing through the Strait of Hormuz as the reason for cancelling its plans to provide some $200 million to the Opera.

The Saudis were to have provided the Met with as much as $200 million over the next eight years. In return, the Met would hold a residency in Saudi Arabia for three weeks each February at the Royal Diriyah Opera House on the outskirts of Riyadh. With the collapse of the deal, Gelb said, the Met faces a $30 million shortfall that it needs to fill by the end of this fiscal year, on July 31.

A previously announced plan to sell the naming rights to the Metropolitan Opera House was moving ahead. Art in the lobby remains on sale. The Met hopes to strike a residency deal in another location. The Met has a $62 million line of credit that is due in February 2027 and its endowment is now valued at $216 million, down from $340 million in 2022.

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

SOUTH CAROLINA NUCLEAR

Santee Cooper reached an initial agreement in December with Brookfield Asset Management for the purchase of the two partially built nuclear reactors at the V.C. Summer nuclear plant in Fairfield County. The utility company hopes to know by the first half of 2028 whether the $2.7 billion deal to revive the state’s failed nuclear expansion will officially go through. Santee Cooper will maintain an ownership interest in the reactors of up to 25%. Santee Cooper’s share of the debt associated with the plant was $3.6 billion, which customers so far continue to pay for on their monthly bills. The Brookfield deal could erase all but $1 billion of that.

KEY BRIDGE SETTLEMENT

The State of Maryland has reached a settlement in principle with Grace Ocean Private Limited and Synergy Marine Pte Ltd., the owner and operator of the M/V Dali, resolving a portion of the State’s claims arising from the cargo ship’s March 26, 2024 collision with the Francis Scott Key Bridge. The State’s claims, filed in U.S. District Court for the District of Maryland in September 2024, alleged that the disaster was the result of negligence, mismanagement, and the reckless operation of a vessel that was not seaworthy and should never have left port.

The State sought damages on behalf of its agencies for the destruction of the bridge, harm to the Patapsco River and surrounding environment, lost revenues, and the wide-ranging economic losses sustained by Maryland and its residents. This settlement does not resolve any claims the State may have against the shipbuilder, Hyundai.

WESTERN WATER

The US Bureau of Reclamation will release extra water from Flaming Gorge Reservoir — potentially 1 million acre feet, which is more than a quarter of its storage capacity of 3.8 million acre feet. An initial release from Flaming Gorge, which will begin on or before May 1, is a certainty, according to Wyoming water officials. Among four storage reservoirs in the upper basin, Flaming Gorge has the most — and the most legally unrestricted – water to send downstream to Lake Powell. Colorado River authorities released an extra volume of some 465,000 acre feet of water from Flaming Gorge in 2023.

MTA FUNDING

The federal government agreed to release nearly $60 million in withheld funding for New York City’s Second Avenue subway extension. The U.S. Department of Transportation had told the Metropolitan Transportation Authority (M.T.A.) that the funding had been held up because of a review of the authority’s race- and sex-based criteria for working with disadvantaged businesses. MTA sued for breach of contract over the delayed reimbursements. The Trump administration suspended the funds in October, at the same time that Mr. Trump was pressuring Chuck Schumer, the Senate minority leader and a New York Democrat, to end a government shutdown.

DATA CENTER TAX BREAKS

Last week we noted moves in Texas to reexamine the state’s policies supporting tax incentives to the data center industry. The latest state to look at the issue is North Carolina. Gov. Josh Stein is asking a state energy policy task force to recommend overhauling or repealing a data center sales tax exemption. Under North Carolina state law, data centers that invest at least $75 million within five years are eligible for exemptions from sales and use tax. 

As is the case in many of the states, laws enacted in the 2010s were not designed in anticipation of the speedy expansion of these facilities. This tax break was enacted in 2010 and then expanded in 2015. When the incentives were created and then overhauled, the state did not require recipients to track what they would have otherwise paid in taxes. There are 37 data centers that have received the incentive in North Carolina since lawmakers re-crafted the sales tax exemption in 2015.

The N.C. Department of Commerce used publicly available date to estimate that existing data centers aren’t paying between $45 and $57 million in sales taxes annually. That includes between $25 and $37 million for equipment and about $20 million for electricity. If all of the expected data center expansions in NC be completed, North Carolina would not receive between $1.5 and $2.3 billion in sales taxes during the construction process. Once those data centers are operating, North Carolina would not receive sales and use taxes of about $450 million.

CLIMATE LITIGATION

In a unanimous decision, the US Supreme Court ruled that energy companies facing lawsuits over environmental damage to Louisiana’s coast from oil and gas production can move the challenges from state courts into friendlier federal venues. The 8-0 decision (Justice Alito recused) found that the oil company had sufficiently cleared the requirements to move the case into federal court because the lawsuit dealt with oil production in Louisiana dating back to World War II, when Chevron refined crude oil into aviation gasoline for the U.S. military.

The decision found that Chevron had shown that its wartime production of crude oil related to its wartime aviation-gasoline refining for the military, a federal priority. On that basis, the companies were found to acting as “authorized federal agents” when they produced products pursuant to the war effort. The federal officer removal statute authorizes lawsuits against federal officers or people “acting under” them “for or relating to” the officers’ official duties to be moved from state to federal court.

Earlier in the week, a U.S. District Judge dismissed a Trump administration lawsuit seeking to stop Hawaii from ​suing fossil fuel companies in state court over ‌climate change, citing a “longstanding” policy against federal intervention in state court processes. The Justice Department sued both ​Hawaii and Michigan in April of 2025, seeking to stop them from ‌filing ⁠planned lawsuits against major oil companies over climate change, cases the administration said would imperil domestic energy production.

A different federal judge in January dismissed a similar suit ​that sought to block the state of Michigan from suing major oil companies. The judge in Hawaii ruled that the Justice Department lacked standing ​to ⁠sue Hawaii because its case was too speculative. The Justice Department’s “attempt to predict the outcome of a yet-to-be-filed lawsuit ⁠and ​how it could possibly injure the ​federal government in the future is not a concrete injury-in-fact,”.

Now, a state court judge in California has temporarily stayed proceedings in cases being brought by the State of California and many other governments in the state against the fossil fuel industry. The pendency of SCOTUS review of issues in the case of Suncor Energy (U.S.A.) Inc. v. County Commissioners of Boulder County, et al. was cited as a basis for a stay. The state judge noted that on February 23, 2026, the Supreme Court granted the petition for a writ of certiorari in Boulder. Its order specified that in addition to the question presented by the petition (quoted above), the parties are directed to brief and argue the following question: “Whether this Court has statutory and Article III jurisdiction to hear this case.”

KC STADIUM

The city of Kansas City has proposed a $600 million plan to build a new downtown stadium for the Royals baseball team. The plan includes development in the area around Washington Square Park and Crown Center modeled after successful baseball district developments in St. Louis and Atlanta. A proposed implementing ordinance would set the ground rules for the stadium, offices, and infrastructure, committing the city to issuing bonds and seeking substantial state funding. The overall project cost including public investment is projected at $1.9 billion.

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

The Muni Credit News is taking next week off. The next issue will be dated April 20, 2026. Maybe by then there will be a NYS state budget. And that will enable much of the focus directed towards the New York City budget. One thing we know is that busses will not be free this year in the City. We expect that this is but one of several retreats we will see from campaign promises made by Mayor Mamdani as his aspirations collide with reality.

__________________________________________________________________

PUERTO RICO SOLAR

Rooftop solar generating capacity in Puerto Rico totaled 1,456 megawatts (MW) at the end of 2025, 20% of the overall capacity mix. Rooftop solar capacity has increased faster than other sources over the past decade. Between 2016 and 2025 rooftop solar installations accounted for 81% of the new generating capacity in Puerto Rico. In 2025, rooftop solar became the second-largest capacity source, after petroleum liquids (oil) capacity (3,671 MW), and surpassed natural gas capacity (1,391 MW).

In addition to rooftop solar capacity, distributed battery storage has also increased in Puerto Rico. According to data from the Puerto Rico Energy Bureau (PREB), 171,372 households and businesses had a distributed battery storage system at the end of 2025, with a total energy capacity of 2,864 megawatt hours.

NUCLEAR

The Nuclear Regulatory Commission renewed Diablo Canyon’s license to operate, ensuring that California’s last remaining nuclear facility will continue to run through at least 2030. The license renewal from the commission allows the plant to remain running for 20 years, although extending it past 2030 would require additional action from the California Legislature. The plant was originally slated to close in 2025, but lawmakers extended the deadline by five years in 2022, citing ongoing need for power from a plant that provides more than 8% of the state’s electricity.

New Jersey has enacted legislation which had effectively prevented the development of new nuclear generating assets in the state. The bill eliminates the need for a permanent waste-disposal strategy to come before a new reactor can be built. Intermediate storage disposal has a three decade track record. Ironically,  many intermediate storage containers are produced in New Jersey, at manufacturer Holtec International’s factory in Camden.  

New Jersey is the second state- along with Illinois – to end moratoria on nuclear generation development this year. They joined Wisconsin, Kentucky, Montana, West Virginia in having done the same over the last decade.

FLORIDA CLIMATE DENIAL

HB 1217, all government entities are banned from pursuing any “resolution, ordinance, rule, code, or policy” to support a net-zero policy. That includes levying charges based on greenhouse gas emissions or implementing a cap-and-trade program, which states like California and Washington have used to curb emissions. The bill also bars local governments from paying “dues, membership fees, subscription fees, or charitable contributions” to any organization that has a net-zero policy.

The bill also prevents governments from procuring vehicles or equipment based solely on the type of fuel source used in order to advance net-zero goals. Miami-Dade County estimated that it’s electric bus procurement program — on which the county has already spent over $70 million on — could take a significant hit, though the county is still reviewing exact impacts of the bill.  If signed into law, the bill will go into effect July 1.

DATA CENTER VOTES

Voters in the Milwaukee, WI suburb of Port Washington approved a measure limiting the ability of local government to grant tax breaks by a roughly 2-to-1 margin. The Port Washington referendum requires city leaders to obtain voter approval before awarding developers lucrative tax incentives. The issues behind the vote: transparency, noise pollution, freshwater use and increased energy costs. The same issues driving opposition in Wisconsin are driving opposition across the country.

In New Mexico, Dona Ana County approved the issuance of $165 billion of bonds (not a typo) to finance development of a massive data center for Oracle. The project was the result of a range of negotiations about which information was limited. The perception that the County vote was a fait accompli after closed door negotiations drives legal efforts to stop the bond issue. The bond vote will be challenged in court.

In Maine, the House and Senate have both passed LD 307, a bill that would pause construction on new datacenters until November 1, 2027. It specifically targets datacenters of 20 megawatts or more and calls for the creation of a Maine Data Center Coordination Council to better plan and facilitate the massive construction projects. 

Residents in Monterey Park, California, will decide in June on a measure seeking to indefinitely ban new data center construction within city limits. In August, Augusta Township in rural Michigan will decide whether to override a local ordinance that cleared the way for a data center project. In November, Janesville, Wisconsin will vote on a measure that could scuttle plans to redevelop a former General Motors assembly plant into an AI factory. It was the closure of the GM plant that led to a chain of events leading to the ill-fated Foxconn development undertaken during Trump 1.0.

EVERYTHING IS BIGGER IN TEXAS

Texas legislators are indicating that tax breaks for data centers are proving too successful. Early in the last decade, Texas legislators approved tax breaks to support data centers. At the time, these facilities were smaller and required fewer resources. From 2014 to 2022, the exemption amounted to between $5 million and $30 million in lost state revenue per year. By 2023, that lost revenue amounted to more than $150 million. The AI stampede now sees that this year Texas is forgoing at least $1.3 billion based on state projections.

Texas is one of 37 states offering tax exemptions for data centers, most of which are sales tax exemptions tied to local economic growth requirements. There are currently 121 data centers receiving the sales tax break, according to a comptroller’s office database. Three years ago, the comptroller’s office projected the tax break would be valued at about $180 million in the 2027-2028 biennial budget. In 2025, the projection was revised upward to more than $3 billion.

Under existing law, qualifying data centers are exempted from paying the state’s 6.25% sales taxes on purchases related to building and maintaining the facility — including servers and other data storage hardware, software, office equipment, the cooling system, emergency generators and plumbing. Data centers are also exempted from paying state sales taxes on the cost of electricity. It is a significant benefit given the enormous energy demand of the facilities. 

A recent Quinnipiac poll found 65% of Americans oppose the construction of a data center in their community.

PUBLIC POWER SOLAR

Pasadena Water and Power is launching a pilot program offering new rebates for residential and commercial solar installations and battery storage. Eligible PWP residential electric customers can receive a rebate of $0.60 per watt for the purchase and installation of a new, permanent rooftop solar system, or for the expansion of an existing system. Customers enrolled in one of PWP’s income-qualified bill assistance programs are eligible for a rebate of $1.00 per watt. Battery energy storage incentives are also available and offer up to $550 per kilowatt-hour.

Qualifying commercial customers may receive rebates of up to $80,000 per meter for installing new, permanent rooftop solar systems or expanding existing systems. Tiered rebates for battery energy storage are also available up to $80,000 per meter. It is one possible response to changes in the State’s net metering scheme which effectively reduced the financial benefits to residential solar customers.

ENERGY IDEOLOGY AND REALITY

Over the course of March, the nation got more electricity from renewables than it did from natural gas, which is typically the single-largest source of energy on the U.S. grid. Emissions-free sources, a category that includes both renewables and nuclear, produced more than half of the nation’s electricity. Solar, batteries, and wind together will once again make up the overwhelming majority of new energy capacity added to the grid this year. 

Craig No. 1, the coal unit scheduled for retirement in December, 2025 is scheduled to resume operation as we go to press and possible several more days. The plant did not operate at all in 2026 prior to now even though it was ordered to do so by Energy Secretary Chris Wright. The resumption of electrical generation was not ordered by Sec. Wright, but instead by the Southwest Power Pool. SPP cited resources outages and load and intermittent resource uncertainty in telling Tri-State Generation and Transmission, the operator and part owner of the unit, to resume operation.

VW informed employees in Chattanooga and the United Auto Workers union that it will cease production of the electric ID.4 at its plant in Chattanooga, TN. It will instead produce the Atlas and the Atlas Cross Sport, gas powered vehicles. The ID.4 saw an increase in sales in 2025, rising from 17,000 in 2024 to 22,400. Those figures were skewed by buyers seeking to purchase an electric vehicle before federal tax credits for the automobiles expired Sept. 30. The impact of that policy change showed up in January of this year when the electric VW SUV was the slowest-selling vehicle in the United States. 

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

Joseph Krist

Publisher

NEW YORK STATE

The confluence of election year pressures, an uncertain economy, rising housing and utility costs are delaying the enactment of a budget for the State. Not to mention the holidays as well. The passage of an extension bill to fund operations was not unexpected. The immediate issues include a potential tax increase, energy policy and immigration.

The tax increase proposed on millionaires has been supported by New York’s Mayor who seeks the funds to deliver free buses and childcare in the City. The impact of the State’s 2019 climate legislation is a major sticking point. Massive increases in electric costs were felt across the state. Delaying the deadlines in the climate legislation are seen as a way to increase supply and lower costs. The immigration issues are policy-based rather than an issue of funding.

That actually means that the process is likely to extend well into the month. There will be little financial pressure to reach agreement, and these policy issues usually require prolonged negotiations. It could be a while

HOSPITAL MARKETS AND COMPETITION

It isn’t your imagination. Americans continue to be served by the most expensive healthcare system in the world. Charges continue to go up, insurance companies balk and medical bills are still the leading cause of individual bankruptcies. This comes in the wake of the consolidation of the hospital industry. That process has unfolded over the last decade and a half. The theory was that consolidation would lead to efficiencies which should have slowed the incessant growth in medical care inflation.

A recent study from the Kaiser Family Foundation (KFF) has shown that the reality of a consolidated hospital market has not generated cost savings while reducing choice. KFF finds that nearly one in five (19%) metropolitan statistical areas (MSAs) were controlled by a single health system, and more than one in four (27%) markets were controlled by two systems in 2024.

In more than four of five metropolitan areas (83%), one or two health systems controlled more than 75 percent of the market. These markets all met the definition of highly concentrated markets based on thresholds in current antitrust guidelines. One health system controlled at least half of the market in about three out of four MSAs (76%) and at least a quarter of the market in nearly every MSA (98%). These markets tend to be outside of the big cities and that data shows the relationship between population and service area choice.

In 79% of MSAs with a population of less than 200,000, one or two health systems controlled the entire market for inpatient hospital care in 2024. Virtually all (54 of 55) MSAs with a population of at least one million people had at least four health systems. Diversity does not necessarily lead to less concentration. In fourteen of these relatively large MSAs with four or more health systems, the two largest health systems controlled at least 75% of the market, and in 44 of these areas, they controlled at least 50% of the market. 

As for rural providers, the outlook remains negative. A $50 billion federal Rural Health Transformation Program was created under the OBBBA last July. It was intended as a bit of a bone thrown to rural areas to offset the planned Medicaid cuts under the bill. It will cut $911 billion in federal spending on Medicaid and CHIP over the next 10 years, according to estimates from the Congressional Budget Office. 

We came across the example of how the bill would impact small providers in the rural West. Montana rural hospitals can receive payments for implementing recommendations, “including right-sizing select inpatient services” to match demand. In Wyoming, any facility that receives funding must agree to “reduce unprofitable, duplicative or nonessential service lines,”. Colorado and Oklahoma health departments said no facility will be forced to end services. Mandates from the state in those two jurisdictions as to which services are “appropriate” in a small rural facility, however, can be just as effective in driving decisions to cut services or close facilities.

Almost half of the at-risk hospitals have special Medicare payment designations that are typically associated with hospitals that are rural or financially vulnerable and play a critical role in the communities they serve, including Critical Access Hospital (19%), Rural Referral Center (16%), Sole Community Hospital (9%), and Medicare Dependent Hospital (4%). Five states now have over a quarter of all their hospitals at risk: Connecticut, California, New York, Massachusetts, and Washington.

All of this is just another reason to approach the healthcare sector with caution. It’s not an accident that municipal analysts have cited the sector as one of primary concern for 2026. The merger gun has just about run out of bullets as costs continue to increase – especially for labor – while reduced choice for consumers has not necessarily led to bottom line growth.

WESTERN WATER

Nearly every snow basin in the Mountain West had one of its warmest winters on record and is well behind normal for water supplies. Denver Water announced Wednesday that it is seeking a 20% cut in water use, asking people to turn off automatic watering systems until mid-May and restricting the watering of trees and shrubs to twice a week. It is the earliest in the year that Denver Water has ever issued a restriction.

It follows a very dry winter in Colorado. There was much attention paid to the lack of snow and the impact that had on the ski industry and tourism. Now, the even more important impacts of that dry winter are clear. Snowpack is some 40% below historic levels and the lowest since 1981. Denver Water gets about half of its water from the Upper Colorado River Basin and the South Platte River Basin where snowpack was at about 42% of normal. The Upper Colorado River Watershed was at 55%.

Salt Lake City officials, preparing for drought, have temporarily banned the opening of any large non-residential developments that consume significant amounts of water. city facilities have been ordered to cut their water use by at least 10%, and residents and businesses have been asked to voluntarily conserve 10 million gallons. In the northern Colorado city of Erie, officials warned residents and businesses to halt any irrigation until early April, and they warned they could shut off water access to anyone caught wasting water on their lawns.

In California, state measurements on April 1, the closely watched date when snow levels historically reach their peaks show that snowpack in the Sierra Nevada, southern Cascades and Klamath Mountains is 18% of average. State water officials say the snowpack was at its largest point in February, more than a month before it has historically peaked.

The U.S. Bureau of Reclamation, which runs the Central Valley Project and its flagship reservoir, Shasta Lake, announced last week that it expects to provide only 20% of the water requested by irrigation agencies in the San Joaquin Valley, the state’s farm belt. The State Water Project, which serves mainly urban communities, including spots in the Bay Area, is planning to meet just 30% of the water requests of most cities and towns.

TRIBAL SOLAR RIGHTS

Minnesota’s Upper Sioux Community constructed a solar array two years ago on tribal land with the intention of using that power for its casino and resort. It is  engineered so the power would stay on tribal land and off the local power grid.

As existing customers, tribal leaders expected to stay plugged into the larger grid and remain part of their local rural electric cooperative, Minnesota Valley Cooperative Light & Power Association even as they made their own electricity.

The utility, though, responded by threatening to shut off power to the tribe if it switched on the solar farm, arguing the project violated state law and the tribe’s obligations as a member of the nonprofit co-op.

Now, the dispute is in front of state regulators. An administrative law judge is reviewing the case and will make recommendations to the Minnesota Public Utilities Commission. Minnesota Valley Cooperative Light & Power has exclusive rights to sell electricity in its service territory. Like other state electric cooperatives, its board limits its members only to small energy projects up to 40 kilowatts, generally enough to power a small convenience store or a restaurant. 

Minnesota Valley says its rules require members who generate more than 40 kilowatts to sell their power to an outside buyer at a near-wholesale rate, pay the cooperative what’s known as a wheeling fee to transport it — and then continue buying all their electricity from the cooperative at the standard retail price. The solar array was designed to offset about 30 percent of the casino’s electricity consumption at lower cost economically and environmentally.

At the core is the reaction to past practices by the Cooperative. Minnesota Valley’s own 2024 study — commissioned by the cooperative to evaluate its rates and costs — showed that it was overcharging the Upper Sioux Community by as much as 11 percent for power. A 1995 federal court decision from North Dakota involving the Devils Lake Sioux tribe, in which a judge found that state utility service territory boundaries cannot be used to take away a tribe’s right to choose its own electricity provider for businesses on tribal trust land. The Upper Sioux have cited the same decision in their filings.

CARBON PIPELINES

Summit Carbon Solutions, the company facing regulatory hurdles to its construction of a pipeline for carbon sequestration has decided to use the carbon for fossil fuel extraction. Summit now says its pipeline will be used to drive domestic oil and gas production in a process known as enhanced oil recovery (EOR), which would inject the CO2 directly into wells. 

Carbon captured for use in enhanced oil recovery also qualified for tax credits—though slightly smaller ones, up to $65 per metric ton under the terms of the Inflation Reduction Act. The One Big Beautiful Bill Act of 2025 increased tax incentives for CO2 emissions captured and used in enhanced oil recovery. Now, whether a project captures carbon for permanent storage or to drive fossil fuel production, it receives the same credits.

This month a North Dakota judge revoked a permit issued to Summit that would have allowed it to store CO2 underground in the state. Summit is now considering destinations in Nebraska, Wyoming, Colorado and Kansas for sequestered carbon. Summit petitioned the Iowa Utilities Commission in September 2025 to amend the terms of its permit and remove mentions of a specific route or destination. 

MILLIONAIRES TAX

Washington Gov. Bob Ferguson signed historic legislation creating an income tax. The bill imposes a 9.9% levy on households with income above $1 million a year. Collections would begin in 2029 and generate around $3 billion a year from an estimated 21,000 filers. The state has historically been known for a high level of regressivity in its tax structure. This is an effort to address the issue in an era of affordability being top of mind.

It is also not unexpected that the conservative Citizen Action Defense Fund announced it plans to sue, arguing it is unconstitutional and conflicts with the state Supreme Court precedent set in 1933 when it invalidated a voter-approved income tax. Another conservative political committee – Let’s Go Washington – filed a referendum to give voters a chance to repeal the law this fall. However, because the new law contains a so-called “necessity clause” preventing a referendum, the Secretary of State’s Office formally rejected the filing this week.

Tax opponents will sue to remove the language and allow such a ballot challenge.

If the law stands, companies grossing less than $300,000 a year will be exempt from paying the state’s main business tax. Sales tax for diapers, personal care products, like shampoo and deodorant, and many over the counter drugs will be eliminated on Jan. 1, 2029. And most retail sales taxes lawmakers adopted last year on services will end on Jan. 1, 2029. 

CANADA

The impacts of the hostile environment towards Canada by the Trump administration are having real world economic consequences. North American Transborder Freight decreased 5.5% in January 2026 from January 2025 according to the US Bureau of Transportation Statistics. Freight between the U.S. and Canada: $52.8 billion, down 18.4% from January 2025.

Just look at the three primary methods facilitating Canada-US trade. Trucks moved $84.6 billion of freight, down 3.5% compared to January 2025. Railways moved $12.2 billion of freight, down 19.6% compared to January 2025. Pipelines moved $9.3 billion of freight, down 10.3% compared to January 2025.

Detroit, Port Huron, and Buffalo are the top truck ports for U.S. freight flows with Canada. Chicago, Port Huron, and Minneapolis are the top pipeline connection regions for U.S. energy freight flows with Canada. Port of Boston, Arthur, and Portland are the top water port connections for U.S. energy flows with Canada. Declines in tourism continued to impact communities like Palm Springs, CA and Las Vegas. In Las Vegas, a dismal 2025 saw the number of visitors decline 7.5 percent. That is the worst annual decline outside of the pandemic since the Great Recession of 2008-9. 

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

Joseph Krist

Publisher

NEW 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.