Joseph Krist

Publisher

DID SOMEONE MISS SOMETHING?

Moody’s downgraded Holy Redeemer Health System’s (HRHS)(PA) issuer and revenue bond ratings to Caa3 from B1. The ratings are under review for further downgrade. Previously, the outlook was stable. Which raises some questions given that the move was spurred by “HRHS’ unexpected failure to make scheduled debt service payments and the acceleration of approximately $87 million of obligations under its master indenture.”

HRHS is a Catholic provider, serving southeastern Pennsylvania and New Jersey. It operates home health, private duty, hospice, senior living, short-term rehab, multi-specialty ambulatory sites, a medical group, a 239-bed acute care hospital with specialized services. It reported approximately $128 million of unrestricted cash and investments as of March 31, 2026 (about $75 million at the obligated group).

Moody’s notes that “however, the subsequent payment default suggests a material deterioration in financial flexibility or constraints on the availability of liquidity.” Ya think?  

SOUTHERN SEWER PROBLEMS

The legacy of years of policies which ignored the wastewater disposal needs of poorer, usually minority residents has reared its ugly head again.  We have seen those policies help to bankrupt the Birmingham AL water and sewer systems and left in the Mississippi capitol Jackson without safe water for extended periods. Now we see another example of those policies eventually resulting in financial distress.

Moody’s has downgraded the City of Shreveport, LA’s Water & Sewer Sr lien revenue debt rating to Ba1 from Baa3 and downgraded the Jr lien revenue debt rating to Ba2 from Ba1. “The downgrade of the revenue debt ratings reflect additional, unexpected spenddown of cash in fiscal 2025 (December 31 year-end) with further narrowing of liquidity projected in fiscal 2026. Infrequent rate increases have been insufficient to match growing expenditures and provide minimal capacity to absorb future debt.”

The Ba1 senior lien revenue debt rating reflects the utility system’s continued narrow debt service coverage and elevated debt levels that will remain as the city continues negotiations with the EPA related to the sewer consent decree. EPA compliance requirements have largely driven increased debt issuance while management has not been able to raise rates to cover increased debt service requirements.

SPITTING IN THE WIND

In January 2024, the Rhode Island-based group anti-wind group Green Oceans brought suit in federal court to challenge the Department of Interior’s final approvals of both Revolution Wind and the operator Ørsted’s other U.S. offshore wind project, South Fork Wind, which came online in early 2024. Revolution Wind received its federal and state permits after a more than nine-year-long process spanning multiple agencies. Green Oceans claims that the federal government ​“shortcut” regulatory procedures and violated environmental protection laws by approving the two projects.

The Interior Department asked a federal court for permission to remand the agency’s 2023 approval of a construction and operations plan for the 704-megawatt Revolution Wind offshore wind farm. The wind farm began generating electricity in March, and its developer Ørsted installed the last of 65 turbines in September. The filing comes amidst negotiations in Congress to update and reform permitting procedures for energy projects. Ironically, the legislation is geared to protect permitted projects from the sort of political interference the Administration is engaging in.  

All of this comes as the positive contribution of wind power to the grid has become clear.

COAL

An Indiana representative has introduced legislation that would curtail the federal government’s ability to interfere with electric grids across the country. The DOE has issued executive orders requiring several coal-fired generating plants – including two in Indiana: NIPSCO’s R.M. Schahfer Generating Station in northwest Indiana and CenterPoint Energy’s F.B. Culley Generating Station on the Ohio River – to continue to operate in spite of ownerships’ market based decisions to close costly facilities.

The Utility Affordability and Transparency Act would prohibit the DOE from using these orders to delay retiring power plants or to require electricity generation from power plants that have already been closed. Under the legislation, the DOE would need to publish cost estimates and study alternatives to keeping plants open. Utilities would also be required to create a transparent line item on customer bills noting additional costs associated with complying with federal emergency orders.

Last month, the United States Court of Appeals for the District of Columbia Circuit issued a ruling against the DOE’s effort to interpret the word emergency to keep a coal plant in Michigan alive in the first of such cases to reach a decision. 

MEDICAID MESS

Minnesota is concerned that the state could lose hundreds of millions of dollars for claims it’s already paid out under Medicaid. The state has been the number one target of Dr. Oz’s campaign against “waste, fraud and abuse”. The Centers for Medicare and Medicaid Services has frozen more than $550 million in Minnesota Medicaid funding since February. It all has to do with accusations of fraud in state housing programs which have nothing to do with medical care.

Of that $550 million, CMS withheld $259 million in federal funding from Minnesota for its share of the claims for the last quarter of 2025. It claims that the charges were the result of fraud. If CMS never pays Minnesota, the state may have to ask providers to give the money back. In the interim, CMS is not providing information which would enable it to research and resolve fraud claims.

In Nebraska, the effort to be a leader in the effort to reduce Medicaid spending is beginning to be reflected in registration numbers. Nebraska rolled out new Medicaid work requirements in May and beginning enforcement in July, well before their mandated Jan. 1, 2027 start. Some 1,000 enrollees saw their coverage terminated under the new rules.

It is especially meaning full in states with significant rural populations. Funding for rural hospitals is a pillar of the healthcare sector in Nebraska, where many of the institutions typically receive between 60% to 80% of their funding from government payers — namely Medicare and Medicaid. At the same time, hospitals will see lower utilization as changes to funding for the ACA will drive more unfunded demand.

Enrollment in plans offered under the ACA and state marketplaces continues to decline. Enrollments fell from 25.2 million in 2025 to 20.5 million in June 2026, an 18 percent drop — the largest year-to-year decrease since 2015. The decline coincides with the expiration of COVID-era enhanced premium tax credits as well as other Trump administration policy changes.  Data on the individual market — which is comprised mostly of ACA plans — suggests enrollment fell 16 percent as of March and 18 percent as of June.  

WASHINGTON  STATE

Moody’s maintained a Aaa issuer rating for the State of Washington and Aaa ratings on the state’s over $25 billion General Obligation (GOs) bonds outstanding. The outlook is negative. The state’s declining budgetary reserves are a primary cause. It was noted that the General Fund and Budget Stabilization Accounts are projected to weaken to around $1.9 billion (4.9% of Near General Fund – State revenue) by June 30, 2027 given continued operating deficits. 

One of the hoped for revenue improvements is the recently enacted income tax on high-earners. While it is a key part of the strategy to help address General Fund structural imbalance, is not expected to generate revenue until fiscal 2029. It is the subject to both voter repeal efforts and ongoing legal challenges.

The negative outlook reflects the increased likelihood that the state will rely on sizable one-time budget-balancing measures over the next 12-18 months, continuing a trend of General Fund expenditures outpacing recurring revenues. The persistent operating imbalances and projected narrowing of budgetary reserves amid still solid economic and revenue conditions underscore the depth of the state’s structural budget challenges and reduce its financial flexibility to absorb unexpected revenue or expenditure shocks.

COLLEGE MERGER

One way for the private college sector to confront and manage the economic and demographic headwinds facing small colleges is to find ways to maintain or achieve scale. The belief is that this sort of transaction will better position the resulting entity to weather these fiscal storms. What that might look like?

In July 2026, Willamette University, OR (Baa3 stable) and Pacific University, OR (unrated) signed a binding agreement to merge into a single legal entity with an anticipated corporate merger closing in the first half of calendar year 2027. The subsequent institutional merger will require additional regulatory approvals and is anticipated to be complete in 2028.

The transaction would create the largest private university in Oregon. The schools intend to keep current campuses and programs and operate as a comprehensive collegiate university offering liberal arts and sciences, law, business, health professions and optometry, education, arts, design, and computing and data science in both undergraduate and graduate level studies. an estimated combined $250 million in operating revenues, $460 million in total cash and investments, and serving approximately 6,000 students (based on fiscal 2025 figures). 

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

Joseph Krist

Publisher

CLIMATE LITIGATION

Supreme Court Justice Samuel Alito recused himself from the SCOTUS review of Boulder, Colorado’s suit against the fossil fuel industry. Alito had faced calls to recuse himself from Suncor v. Boulder over his financial interests in energy companies, specifically from two oil companies. Alito did recuse himself when the court turned away an appeal from the companies in the Colorado case in 2023.

Arguments were held this week. It was the first case to be argued to start the court’s year and it presents some thorny issues to be sorted out. On one hand, justices appeared reluctant to endorse the argument that climate change lawsuits brought by state and local governments against fossil fuel companies are constitutionally prohibited. At the same time, they appeared concerned about whether such lawsuits can be sustained.

On the other hand, the justices seem to try to weigh the risks of far-reaching fallout whether they allow or restrict burgeoning lawsuits targeting oil companies, acknowledging fears of near-limitless litigation but also struggling to distinguish climate torts from famous legal battles involving tobacco and opioids. Both of those industries operated under federal as well as state/local regulation as do the energy companies.

MEDICAID

January 1, 2027 is when the bulk of changes to the safety net including reductions in Medicaid eligibility take effect. Three states – Montana, Nebraska, and Arkansas, and – have already begun the process of implementing those changes which include significant reporting requirements and work rules for many recipients. The evidence so far indicates that the fears of many regarding the effort to reduce the rolls are justified.

Much of that disruption comes from a combination of complex documentation requirements and a lack of infrastructure to support and manage the work rule enforcement steps. Those steps include ownership and/or access to a computer which remains a real issue in poorer rural areas. Many states will likely not have staffed up to handle the expected paper flow.

Montana has been the focus of much attention as it began its rollout of work rules on October 1. The state admits that its compliance function for Medicaid is inadequate and understaffed. It has hired only one third of the projected needed workforce and it has not yet installed systems to process the required documentation. This will force students who are exempt from work requirements to document their compliance for one year via paperwork.

The uncertainty raises issues for not just the hospitals and doctors in a state but also for state governments who are the last layer of funding for indigent care. The enactment of the Affordable Care Act – whatever one thinks about it – did relieve some of that pressure which had become source of pressure for the states. The proposed changes may indeed save some money on one side of the Medicaid equation but that benefit will be mitigated by increased funding for indigent care.

NEW TEST FOR TRANSIT FUNDING

The Federal Transit Administration is currently seeking to issue revised guidance for the award of Capital Investment Grants. Under the FTA’s revised proposals, the average birth and marriage rates of the corridor in which the project under review is situated would be taken into account at this juncture. Regions whose rates meet, exceed or are just below the nationwide threshold will be essentially rewarded for promoting fertility by making them eligible for having a further 10 percentage points of their costs covered. Support for a given project is currently capped at 60 percent for new developments and at 80 percent for pre-existing ones simply being upgraded or expanded.

It’s a clear example of ideology warping policy making. Many of the populations which benefit from the program historically and currently won’t meet the criteria.

NUCLEAR

Constellation Energy on Tuesday announced a that it had entered into a 20-year power purchase agreement with Google. It will support the addition of 890 MW of new nuclear generation, to be added through uprates of 11 existing units in the PJM Interconnection. The units are located at a half dozen locations in Illinois, Pennsylvania, and New Jersey, with the first uprate expected online in 2028.

The nuclear deal will be backed by $4.3 billion in new investment by Constellation. The two companies also entered into a 15-year supply agreement for another 2,700 MW across the PJM market. This announcement follows a similar 690-MW deal which Constellation announced with Amazon. That plan is centered around a $3-billion, 190-MW expansion of the Calvert Cliffs nuclear plant in Maryland. That new capacity is expected to come online between 2030 and 2032.

ANN ARBOR UTILITY VOTES

Voter approval of a public power proposal on the Nov. 3 ballot in Ann Arbor, MI may not be the final word on efforts to establish a municipal utility in the city. City Council voted 10-1 this week, to direct the city attorney to challenge the legality of Proposal E and its revisions to the city charter “at the appropriate time.” In the interim, the Council and Mayor are undertaking an unusual effort to defeat the proposal.

The proposal states the board shall have powers to construct, acquire, expand, operate, study and maintain a utility system, enter contracts and acquire property. It also states the board shall recommend and the council shall authorize the borrowing of money for it. This has raised objections from the Mayor and Council that the transfer of ratemaking and financing approval to the proposed utility board is an unlawful diminution of the Council’s power.

STADIUM VOTES

Plano, TX voters will decide Nov. 3 whether to authorize up to five different taxes to help finance a proposed Dallas Stars (NHL) arena. They include a short-term tax on vehicle rentals in Plano at 5% of rental receipts; a hotel tax would be increased in Plano by an additional 2% of the room price, bringing the combined hotel tax rate to 15%. Taxes directly attributable to the arena include event parking at the venue at $3 per vehicle; event tickets at the venue at 10% of the ticket price: $5,000 per game on each member of a major league team playing a professional game at the arena.

The Kansas City, MO City Council is moving forward on legislation supporting a city contribution to the new KC Royals (MLB) stadium in downtown KC. Committee approval has been gained for a plan which recommended the issuance of approximately $600 million in bonds to pay the city’s portion of the $1.9 billion stadium. The plans rely on sales taxes and tax increment revenues derived from the stadium and surrounding area. The exact boundaries of the proposed tax increment district have not been finalized. The policy in that area will allow the city to use half the hotel tax and all of the food and beverage, earnings, public safety and parks sales taxes to help pay off the debt from stadium bonds.

TAR HEEL GAS TAX PAUSE

State lawmakers in NC voted nearly unanimously for a suspension of the state’s 41-cents-a-gallon tax. It will last until Nov. 30. The suspension is expected to lower direct transportation revenues by an estimated $360 million. Legislative leadership said the state will backfill that shortfall from an inflation reserve fund to avoid any disruption to road projects and maintenance. Previous efforts to enact such a suspension in the spring were decried as a “feel good” tactic by legislative leadership. What changed?

U.S. Bureau of Transportation (BTS) released September data showing that in September 2026, the average price for regular motor gasoline was $4.36 per gallon; up 7.3% from August 2026 and up 37.6% from September 2025. The average price for diesel no. 2, at $6.29 per gallon, reached a new all-time high in September 2026, up 9.3% from the previous all-time high reached in June 2022, up 15.2% from August 2026, and up 67.8% from September 2025.

WIND

A new report from the University of Missouri’s Center for Rural Energy Security shows wind and solar farms can bring economic gains to rural communities. The release comes as the siting and operation of renewable generation resources continues to be a hot-button political issue. The study compared economic factors in counties with renewable power plants and those without from the years 2001 to 2023.

The economic advantage of solar energy development in rural counties came to the utilities, construction and transportation sectors, which each saw 10% to 20% increases in employment and wages. The communities hosting wind energy infrastructure saw an increase in gross domestic product, or GDP, by approximately 7%. The report states that neither wind nor solar development were associated with declining agricultural GDP, employment or wages.

PORT OF LOS ANGELES

The reductions of tariff pressures since their peak earlier this year continue to show up in trade activity. One of our favorite economic indicators is activity at ports and there is no better indicator than the Port of Los Angeles. The Port of Los Angeles handled 1,042,652 Twenty-Foot Equivalent Units (TEUs) in September, the busiest month in its 118-year history and more than 20,000 units more than the previous monthly record set in July 2025.

Those shipments closed out a productive quarter for the port as well. Reflecting a trend which began in June, nearly 3 million TEUs moved across its docks from July through September. From June through September, the Port handled nearly 4 million TEUs, the strongest four-month stretch on record. During the first nine months of 2026, the Port handled nearly 8.1 million TEUs, more than 3% ahead of the same period last year.

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

CHICAGO BUDGET

The budget process in Chicago was already frought with issues related to the upcoming mayoral election in 2027. As expected, the Mayor has announced that he will run for a second term in spite of very low approval ratings. Those factors and the history of fractious budget negotiations between this Mayor and the City Council had already contributed to increased pressure on the Mayor to deliver a budget.

Now an additional pressure comes from this week’s announcement by S&P that is had lowered its outlook on the City’s general obligation bond rating to negative. The negative outlook reflects S&P’s view that there is at least a one-in-three chance of a lower rating within the remaining year of the outlook horizon. They will wait to see what the Mayor proposes and what the resulting budget looks like before making their assessment.

The factors which will influence the decision are those we have grown accustomed to. They include a lack of structural balance, delays in pension funding, reliance on overoptimistic revenue projections and increased short-term borrowing needs. Property value trends have seen modest growth in overall values. The real issue is the decline in commercial/industrial values while residential values continue to sharply increase.

The City’s budget process will play out against the impacts of optimistic budgeting on the budget at Chicago Public Schools (CPS). The Civic Federation has commented on the school budget for the FY which began on July 1. “The budget closed a $748 million deficit. However, it did so in part by assuming $150 million in State revenue that has not yet been secured or pledged.

This may lead to a mid-year budget gap that will necessitate greater cuts than would have otherwise been required under the CEO’s original proposal. Further complicating the situation, the City of Chicago released a lower TIF surplus projection than anticipated after the Board of Education adopted the FY2027 CPS budget, which could widen the budget gap by another $100 million.”  

Amazingly, the budget includes $61 million increase in expenditures, driven primarily by contractual increases in salaries and benefits. In spite of steadily declining enrollments, headcount at CPS shows an increase of over 1,000 despite citywide cuts to balance the budget.

MBTA

The Federal Transit Administration (FTA) has closed its final directive to the Massachusetts Department of Public Utilities (DPU), which had been operating under federal oversight of its safety supervision of the Massachusetts Bay Transportation Authority (MBTA) safety oversight for seven open federal directives. This effectively places safety supervision clearly in the Commonwealth’s hands.

In August 31, 2022, the FTA released the findings of a 2022 safety management inspection at the Massachusetts Bay Transportation Authority (MBTA). It set the DPU nine required actions under four findings. They covered the regulator’s use of resources for field inspections and its independence from the MBTA. The findings also dealt with its review of MBTA fatigue management and its ability to act on the inspection’s results.

The closure does not cover the directives addressed to the MBTA itself. Seven of them are still open, including issues of track maintenance, securing disabled trains, the MBTA Operations Control Center, workforce demands, safety management information, safety communication and operating conditions, procedures and training.

THE WIND BLOWS

The $6.2 billion Revolution Wind farm has installed its 65th and final turbine. It will be able to deliver up to its full 704-megawatt capacity ​“later this year”. It is one of the projects that President Trump tried to stop in-progress projects in the Atlantic. The Interior Department issued a stop work order to Revolution Wind in August 2025 due to unspecified national security threats. That order was vacated by a federal judge one month later.

In late December, the Trump administration issued new stop work orders intended to put a halt to all of the five projects underway. Project developers and state attorneys general challenged each one in court, and beginning in January, judges consistently vacated the orders on a case-by-case basis. Along with Revolution Wind, two other large-scale offshore wind projects are fully complete in the U.S.: the South Fork Wind project near New York and Vineyard Wind 1 off the coast of Martha’s Vineyard. The Coastal Virginia Offshore Wind installation — a 2.6-GW project — began to deliver power to the grid in March of this tear and expects construction to be complete next year. Two others, Empire Wind and Sunrise Wind, are both expected to be fully operational in 2027.

ELBOWS UP

Canada is the largest foreign buyer of American wine. In 2024, Canada represented 36 percent of U.S. wine exports, with $460 million in annual shipments. According to a report by the Wine Institute, that percentage is more than the total combination of E.U., U.K., and Chinese markets. the cumulative estimated loss in export value since the restrictions began is now roughly $522 million.

The news follows on the heels of continuing trends decreasing consumption of wine. It is leading to significant disruptions in the California wine economy. Even scale isn’t enough to overcome the trend. Gallo earlier this year shared plans to lay off more than 90 employees by the end of January 2027 and close a major Napa Valley winemaking facility.

In February, Constellation Brands announced plans to lay off 212 workers at its Mission Bell Winery in Madera. The company, which owns Robert Mondavi wines and Modelo and Corona beers, has set a goal of $200 million in cost savings by 2028 and is shifting away from wine to focus more on its growing beer business. That month, Santa Rosa-based Foley Family Wines & Spirits wound down operations at its Chalone Vineyard in Monterey and laid off the facility’s entire winemaking staff.

So, it was no surprise when the oldest family-owned vineyard in the state filed for Chapter 11 protection it was no surprise.

SMALL COLLEGE DOWNGRADE

Allegheny College, founded in 1815, is one of the nation’s oldest private liberal arts colleges. Located in western Pennsylvania, the college has several unique programmatic characteristics, including a senior project and a requirement for students to declare a minor from a different division of knowledge than their intended major. In fiscal 2025, Allegheny generated operating revenue of $77 million and enrolled 1,053 full-time equivalent (FTE) students as of fall 2025.

Moody’s has revised Allegheny College’s (PA) outlook to negative from stable. It also affirmed the Ba1 issuer and revenue bond ratings. The rating reflects the college’s difficult student market, incorporating a highly competitive landscape and unfavorable demographics. Absent ongoing significant fundraising, financial operations remain unbalanced, and strained student demand poses further challenges with suppressed pricing power.

Though the college missed Fall 2025 enrollment targets, the improved Fall 2026 class will increase total FTE around 8% year-over-year. Rising discounting will continue to pressure net tuition revenues, which are expected to decline in fiscal 2026 and could extend, increasing Allegheny’s timeline of elevated endowment spending to fund operations. Although unrestricted liquidity remains adequate, deficit operations and endowment spending will place pressure on liquidity over time.

PHILADELPHIA OUTLOOK

Moody’s announced that it was maintaining the city’s A1 issuer rating and the A1 ratings on its outstanding general obligation bonds. The outlook is positive. Moody’s called the City’s financial position “at its strongest level in many years.” The city’s available fund balance of 14.3% in fiscal 2025 was close to the level it has cited as a potential upgrade trigger, so sustained reserves at that level could apply upward pressure on the rating in the near future.

Philadelphia’s biggest credit weakness is its challenging demographic profile, and it lags most other big cities in economic growth and income levels (resident income is 75% of the US median, the third-lowest among the 20 biggest cities by revenue). The dynamic of an employment hub with a significant eds and meds presence that also faces a challenging demographic profile will persist for the city indefinitely.

Moody’s also highlights Philadelphia’s commitment to funding its pension plan which has contributed to the city having among the lowest leverage burdens of any big city.

PUBLIC POWER VOTE?

A coalition of environmental and youth groups, Public Power St. Pete is collecting signatures to place a proposed city charter amendment on the November 2028 ballot that would allow voters to decide whether St. Petersburg should establish its own municipal electric utility and replace Duke Energy as the city’s electricity provider. In January, St. Petersburg issued a request for proposals for a feasibility study examining the financial and legal implications of establishing a city-owned utility.

The city is currently served under interim agreements established after its long-term power supply agreement with Duke expired over the summer. Unsurprisingly, a preliminary analysis commissioned by Duke Energy and released in September estimated that acquiring Duke’s operations within the city could cost between $2.75 billion and $4.1 billion, depending on the assumed transaction date. The Florida Municipal Electric Association reported in June 2025 that average bills among Florida’s public-power utilities were $33.79 lower than the average bills of other utilities at 1,000 kilowatt-hours

Some updates:

BRIGHTLINE RESTRUCTURE

Brightline announced that it has reached an agreement on financial restructuring that will bring $490 million in new financing commitments while significantly reducing debt. Under the Restructuring Support Agreement, Brightline will receive $140 million in additional senior debt and $350 million in new junior debt from existing stakeholders. Brightline Trains Florida LLC, which operates the train service, will not file for bankruptcy and will continue normal operations.

The pre-packaged bankruptcy plan includes $258mn of financing to fund the case, which will be provided in part by Assured Guaranty, a municipal bond insurer. Brightline has separately secured $490mn of post-emergence funding from some existing bondholders. The company did not immediately disclose how much of its debt balance it would cut in the case.

FLORIDA AMENDMENTS

Amendment 1, which would increase the amount of money lawmakers can put into the state’s key reserve fund. It increases the cap on the balance of the budget stabilization fund from 10% of the previous year’s general fund revenue to 25%. Amendment 1, which would increase the amount of money lawmakers can put into a key reserve fund. It increases the cap on the balance of the budget stabilization fund from 10% of the previous year’s general fund revenue to 25%. Amendment 1 needs 60% of the vote to become law.

Amendment 3, the effort to reduce and limit property taxes is under some heavy fire. In spite of carveouts in the proposal to account for “essential services” like schools and public safety, many uniformed service groups are opposing the amendment. It is emerging that the cost of property insurance is a bigger issue for some 2/3 of voters as opposed to property tax rates.

GAS LITIGATION

The state Supreme Court on Thursday delivered the final blow to a controversial 2024 ballot measure pushed by builders and passed by voters that sought to halt Washington’s shift away from natural gas. In a 6-3 decision, the justices affirmed a lower court ruling, finding Initiative 2066 “unconstitutional in its entirety” because it runs afoul of a provision limiting such citizen initiatives to no more than one subject.

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

CARBON CAPTURE

Summit Carbon Solutions is abandoning two-thirds of its planned project to store carbon dioxide underground in North Dakota. The company, which had been granted permits to store CO2 in three designated areas in central North Dakota, has requested permits for two of the areas to be canceled. A North Dakota district court voided permits for all three areas earlier this year. Summit and the state are appealing that decision. Summit is now asking the Supreme Court to limit the appeal to one of the storage areas.

The company’s original proposal involved transporting carbon dioxide from ethanol plants in five states to central North Dakota where it could be injected into rock layers deep underground. The resistance to the project in North Dakota and Iowa has rendered the timing and potential return unfavorable. The company now plans to transport carbon dioxide to a storage site in Wyoming for injection underground.

The company’s storage permits from the Industrial Commission, the state law authorizing the Industrial Commission to issue those permits, and the pipeline route permit from the Public Service Commission are all the subject of litigation in North Dakota. District court judges have voided the storage permits and struck down the underlying law; both cases are on appeal to the Supreme Court. A decision in the third case is pending from the district court.

IOWA GAS TAX REALITIES

Gov. Mike Braun’s administration has asked lawmakers to tap into state cash reserves to cover losses from Indiana’s gas tax suspension. The Indiana Department of Transportation reported projected losses to local governments and the State Highway Fund will reach a combined $1.1 billion should the gas tax suspension continue through Dec. 4.

The State Highway Fund finished the fiscal year with $500 million in its own reserves, though the fund is projected to reach a $427 million deficit by the end of fiscal year 2027 if gas tax losses are not replenished. Braun has directed his administration to make local governments whole from the State Highway Fund, but would need legislative approval to use state reserves to do the same for INDOT.

NUCLEAR

The Energy Department announced that it would lend up to $1.9 billion to help restart the Duane Arnold nuclear power plant in Linn County, Iowa, which had ceased operating in 2020.  NextEra, one of the nation’s largest power companies, in 2025 revealed plans to refurbish the plant’s reactor and seek regulatory approval to restart operations by the spring of 2029.

Duane Arnold came online in 1974 and shut down in 2020 after a storm damaged one of the plant’s cooling towers. It is considered to be the last nuclear plant which could be realistically restarted. Google has agreed to buy a portion of the plant’s electricity to help power data centers for artificial intelligence.

This after the California Legislature last month passed a bill to commission a study on partly lifting the ban on new reactors. California is considering extending the life of the currently operating Diablo Canyon Power Plant. Diablo Canyon’s two reactors began operations in 1985 and 1987 and they generated more than 8 percent of the electricity produced in California last year.

Solar, wind, hydropower and geothermal energy accounted for 70 percent of the electricity generated last year in the state, according to the Energy Information Administration, up from about 49 percent in 2020. That doesn’t mean the 70% of the power used in the state is from renewables. California obtains approximately 25% of the electricity it uses from out of state sources.

TEXAS MUNICIPAL POWER CHALLENGE

The Governor has proposed that the public utility systems serving San Antonio and Austin be privatized. Statewide, electric rates have risen about 40% on average since 2020, up from an average residential rate of 11.50¢ per kWh in 2020 to 16.11¢ per kWh in 2026, according to data from independent electricity marketplace. 

The proposal reflects pressure from the state’s business sector and suburban retail customers of those utilities. They resent what they believe is a lack of input to the ratemaking process. The issue isn’t really the cost of power. The issue is the generation of revenue surpluses which are used to support the general funds of those cities. The argument isn’t new. Electric utility revenues transferred to local general funds to reduce individual property taxes are a long-standing issue especially for southeastern municipal utilities

 In San Antonio, the city faces a $158 million deficit over the next two years and Austin faces a structural deficit that could grow past $100 million by the start of the next decade. Stripping cities of their utility ownership could exacerbate budget woes. Austin Energy transferred about $125 million to the city of Austin in 2025, according to Austin Energy. CPS Energy has budgeted a payment of $559.7 million to the city of San Antonio for fiscal year 2027.

A study of federal data undertaken in 2024 by the American Public Power Association found customers of a public utility on average pay 14% less than customers of other utility types. The Houston region however, experiences some of the highest electricity rates on the ERCOT grid. 

COAL

A federal appeals court struck down an order from the Trump administration that forced the J.H. Campbell coal plant in West Olive, Michigan, to keep running despite its plans to close in May 2025, citing an “energy emergency.” Campbell is one of five plants operating under such orders. The only thing that this tactic has accomplished is higher rates to support the higher cost power.

Consumers Energy has recently reported in a financial release that it cost $259 million to comply with the emergency orders through the end of June. The Energy Department has also issued emergency orders to keep coal plants open in Washington, Indiana, Florida and Colorado. This mirrors the experiences of the other utilities operating coal plants under the federal orders.

UP IN SMOKE

On November 3, Massachusetts voters will decide Question 8, a ballot measure that would repeal the state’s licensed adult-use cannabis market. If it passes, the vote would mark the first time voters anywhere have rolled back an existing state cannabis legalization law. Question 8 would repeal Chapters 94G and 64N of Massachusetts law, ending licensed adult-use retail sales, cultivation licensing, home cultivation rights and the state’s marijuana excise tax. Medical cannabis and simple possession (up to two ounces, with a civil penalty above one ounce) would remain legal. If voters approve it, the repeal takes effect January 1, 2028.

The state’s Cannabis Control Commission currently oversees more than 230 licensed dispensaries, roughly 150 cultivation operations and close to 90 product manufacturers; under Question 8, those businesses would need to convert to medical-only licenses, sell off inventory or close.  In April, the Justice Department moved medical marijuana from Schedule I to Schedule III of the Controlled Substances Act. In June, bipartisan lawmakers reintroduced the SAFE Banking Act, again aiming to give financial institutions clearer legal footing to serve state-licensed cannabis businesses.

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

AFTER THE FIRE

The Los Angeles County Assessor’s Office has released its FY 2027 assessment roll. It provides an opportunity to view the impact of the January 2025 fires on the tax base. Under California’s Misfortune and Calamity program, damaged properties can receive temporary assessment cuts that lower tax bills during reconstruction, with values restored after rebuilding is finished.

Through that relief, more than $9 billion in taxable value was reduced for owners whose homes were destroyed in the fires. Redevelopment is occurring albeit at a relatively slow pace. As of May 19, 2026, 49 homes in Altadena were complete, and more than 1,400 were under construction. By that same date, the county had received more than 3,300 permit applications and issued more than 2,300 residential permits in the fire zones.

In spite of the impact of the fires and recovery, The Los Angeles County Assessor reported that the roll totaled $2.272 trillion in net taxable value, up $96 billion, or 4.42%, from the 2025 roll and marking the county’s 16th consecutive year of growth. Growth reflected property transfers added $49 billion, the largest increase of any category. The Proposition 13 inflation factor contributed another $43 billion, and new construction added more than $12 billion.

CORPUS CHRISTI WATER

In Corpus Christi. The City Council has ordered that a public referendum be held on a citizen-led petition that would sharply increase the price of water for industrial facilities during drought. The Fair Water Amendment would implement a 70 percent water rate increase for Corpus Christi’s largest industrial water users when reservoirs dip below 30 percent capacity. It would implement an increase of 140 percent when reservoirs dip below 20 percent, and a 280 percent increase if the city declares a water emergency. 

The region’s main reservoirs fell from 30 percent full in March of 2024 to less than eight percent full in May 2026. Above expectation rains in the spring and summer replenished its main reservoir system, currently 42 percent full. 

CONGESTION PRICING

The NYC Department of Health has released the results of its first study of the environmental impacts of the congestion pricing zone in Manhattan. When the plan was enacted, one of the prime drivers of public comment was the potential for air quality to increase in Manhattan while the Bronx in particular would see negative air quality impacts. That issue has generated some surprises.

Generally, pollution at all locations held steady or improved slightly. This continues the trend of improving air quality in NYC over the past 20 years. Inside the CRZ, pollution decreased slightly or stayed the same in 2025 compared to 2024. Measured pollution levels were not significantly different because of congestion pricing.

At Environmental Justice neighborhood sites, congestion pricing didn’t increase pollution. This is good news. It didn’t worsen air quality near major routes around the CRZ. At one location (BQE) levels of one pollutant didn’t improve as much as would be expected in comparison to changes at the control site.

Traffic in the CRZ was lower. Entries to the CRZ, the FDR Dr, and the West Side Highway were 11% fewer in 2025 than before tolling began. In New York City, traffic produces only 10 percent of fine particulate matter. The report did not measure greenhouse gas emissions, which drive global warming. Buildings are responsible for about 70 percent of the city’s greenhouse gas emissions.

There are at least two pending research studies on the subject from non-City sources. One also found that congestion pricing had had “little effect on air quality.” Another relying on data from 19 sensors across the South Bronx, detected an overall increase of 2 per cent in fine particulate matter between 2024 and 2025. To address these issues, the City will apply some $105 million out of its slice of $330 million of congestion pricing revenues.

PUERTO RICO POWER ISSUES

On Aug. 5 the Puerto Rico Supreme Court accepted Puerto Rico government lawsuits (from a lower court) regarding annulment of the contract with the private energy distributor LUMA and granted a 30-day period for the submission of arguments for the annulment. In addition, the Puerto Rico Oversight Board revoked its approval, provisionally granted in early June, for a contract to three
private companies to provide temporary power generation units for 10 years. The parent company of one of the three private companies said it hadn’t given its OK to the subsidiary to agree to the contract and on this basis the board said the contract was no longer valid. The contract was for over $5 billion over 10 years.

In mid-July the Puerto Rico Energy Bureau ordered PREPA to transfer $100 million to LUMA and the private generating entity Genera. But PREPA didn’t do it, saying in late July it didn’t have the money and was getting perilously low on cash.

It’s hard to see how the bankruptcy can be resolved without resolution of the contract issue with LUMA. How do you develop a reasonable plan to emerge from bankruptcy? How is it credible given LUMA’s operational track record on the island? Given all of the operational hurdles, cash
pressures should not be surprising.

As for other pressures, it is pretty clear that the current structure isn’t working. Reliability, repair, maintenance all seem to be beyond LUMA. A long-term solution to electric service in PR needs a serious
private partner, a viable customer base and investor capital. Those aren’t present right now. And the lack of reliability will continue and increase without investment.

COLORADO RIVER

The U.S. Bureau of Reclamation released its plan to address declining water volumes in the Colorado River. Under the Bureau’s plan, California, Nevada and Arizona will collectively reduce water use by 1.25 million acre-feet (about 1.54 billion cubic meters) annually during that period, with the possibility of larger cuts depending on conditions. Arizona will see the biggest cuts. Meanwhile neighboring Mexico will reduce its intake by 250,000 acre-feet (about 310 million cubic meters) under a U.S.-Mexico treaty.

The biggest initial impact will be on the Central Arizona Project. Congress funded construction of the aqueduct in 1968. Funding for the project was contingent on the willingness of the Project to accept subordinate water rights. In times of severe drought, CAP facilities would receive lower volumes to allow California to maintain its usage levels. Phoenix gets about 40 percent of its water from the canal which began distributions in 1985.

In 2022, the canal project cut off most of its deliveries to the region’s nontribal agricultural fields, which have lower priority rights than cities. Those reductions would continue under the proposed federal framework.

The states upstream — Colorado, Utah, Wyoming and New Mexico — do not face any for now.

FLORIDA TOURISM AND CANADA

Tourism numbers in Florida declined for a second consecutive quarter in 2026. The drop reflects lingering domestic inflationary conditions and a backlash from Canadian visitors over President Trump’s’s rhetoric and trade policies. An estimated 34.01 million second quarter visitors visited Florida in the spring, bringing the number of tourists over the first half of the year to 73.5 million, according to numbers posted by the state’s tourism marketing arm.

Domestic, overseas and Canadian travel into the state was all slightly down in the April through June period, compared to the same period a year earlier. The overall domestic and Canadian numbers for the first half of the year were also lower than in the same period of 2025. An estimated 721,000 Canadians traveled to Florida in the second quarter, 4.2% fewer than in the same period of 2025.

For the first six months of the year, there were 1.68 million Canadian travelers, a 13.9% drop from the same time in 2025. In 2019, second quarter numbers of Canadian travelers were 848,000, and for the first half of the year it was 2.29 million.

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

REALITY BITES

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

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

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

TRANSIT ON THE BALLOT

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

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

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

CLIMATE LITIGATION

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

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

FLORIDA PROPERTY TAX AMENDMENT SPEED BUMP

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

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

CHICAGO GOVERNANCE

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

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

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

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

MISSOURI AND BALLOT INITIATIVES

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

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

INDIANA GAS TAX SHUFFLE

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

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

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

TEXAS DATA CENTER COST FOLLOW UP

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

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

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

PUERTO RICO UTILITY NEWS

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

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

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

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

Joseph Krist

Publisher

EXECUTION MATTERS

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

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

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

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

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

BRIGHTLINE

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

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

CHESTER BANKRUPTCY

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

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

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

VIRGIN ISLANDS

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

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

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

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

UTILITY RATINGS

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

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

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

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

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

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

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

LAUSD ON THE DECLINE

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

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

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

TEXAS DATA CENTER COSTS

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

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

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

Joseph Krist

Publisher

STATE BUDGETS

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

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

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

MASS TRANSIT CUTS

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

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

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

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

PORT OF LOS ANGELES

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

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

MILLIONAIRE TAX ON THE BALLOT

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

WESTERN WATER DEAL

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

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

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

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

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

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

Joseph Krist

Publisher

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ROADS AND TAXES

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

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

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

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

I-81 VIADUCT

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

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

QUIET RESURGENCES

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

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

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

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

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

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

NUCLEAR

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

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

ONE MORE WESTERN WATER FIGHT

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

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

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

OHIO PUBLIC LAND FRACKING

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

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

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

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

IDEOLOGY AND ORLANDO UTILITIES

The U.S. Department of Energy, ordered Orlando Utilities Commission to continue running its 465-MW, coal-fired Stanton Unit 1 instead of placing it in “cold shutdown” to address what the department deems to be an energy emergency in Florida. That puts OUC in the position of being the first municipal electric utility to be impacted by President Trump’s ideological approach to electric utilities. OUC plans to fully comply with the order and will delay placing its Stanton Unit 1 in cold shutdown. No cost estimates of either operation or fuel procurement were provided by OUC.

One of the whole points of public versus investor owned electric utility credits is the freedom from regulation especially of rates. While we don’t see this phenomenon ultimately diminishing ability to pay, it is a troubling one nonetheless. The continued use of coal for generation is increasingly difficult to justify especially in light of the increasing non-competitiveness of coal generation.

ILLINOIS BUDGET

The Illinois legislature passed an FY 2027 budget. The $55.9 billion budget does not increase state income taxes or sales tax. The spending plan included an $830 million supplemental current-year spending plan, meaning the upcoming fiscal year 2027 budget is essentially flat. The measure freezes corporate net operating loss and enacts taxes on social media companies, digital assets, fantasy sports, tobacco and sports betting on prediction market websites. There is also a sales tax holiday on school supplies when families go back-to-school shopping in August, and pauses a previously planned increase to the state gas tax.

Now the State can turn its attention to the truly pressing issue facing the State and its largest city – getting the Bears to stay in Illinois.

MEDICAID WORK RULES PRESSURE STATES

Regulations issued June 1 by the Centers for Medicare & Medicaid Services dictate many granular details about how the new work requirements mandated to roll out under the OBBBA will play out. They cover how states should check whether Medicaid enrollees are following the rules, and how people can claim an exemption so that their health benefits don’t hinge on work, community service, or going to school. The rules take effect beginning July 1.

The impact is to cause states to have to spend much more on certification as these functions are largely carried out by private vendors. The first example of the problem is Nebraska. Nebraska launched its Medicaid work requirement on May 1. Nebraska handles decisions on medical frailty differently than the Trump administration does. It’s not for lack of effort that this conservative state administration has tried to comply.

State officials had already released an extensive 300-odd page list of medical conditions that qualify as exemptions, such as types of cancer, dementia, autism, epilepsy, HIV, and Parkinson’s disease. The state currently relies on government workers to check Medicaid eligibility, and doesn’t require a person to prove how sick they are. That is not atypical for states. But under Trump’s rules, people will have to show their qualifying illness is impeding their ability to work.

ACA CREDITS AND INSURANCE 

Another source of uncertainty facing states is the ultimate impact of the end of federal tax credits which offset ACA premiums. The concern was that the end of the credits would make ACA coverage too expensive. This would lead to people dropping coverage which would ultimately put pressure on states to increase financial support for indigent care.

A study from Georgetown University has shown the initial effect of the changes. Federal regulators have so far released data on initial sign-ups during open enrollment, which include people whose coverage was automatically renewed at the end of 2025. However, enrollment is not complete until the first month’s premium is paid.

Unprecedented net premium hikes in 2026 have prompted some people who signed up for coverage to drop it. This year, sign-ups during open enrollment declined by an estimated 1.2 million, a 5 percent drop from the prior year, the largest decline in any year since the marketplaces opened in 2014. Sign-ups dropped in 41 states, declining by 1 percent to 22 percent. 

Several state-based marketplaces have released early data indicating that plan cancellations rose sharply between January and March this year — up 24 percent above last year. Maryland, for instance, saw a 13 percent drop between January and April, compared with 3 percent last year. Arkansas saw a 16 percent decrease, double the amount from 2025. Massachusetts experienced a 14 percent decline, compared with 6.7 percent last year, while New Mexico experienced a more than 8 percent decrease, compared with just 0.5 percent in 2025. 

GAS TAXES

In Illinois, the gas tax increases on July 1. On July 1, 2026, the tax was set to increase by 1.3 cents, but that increase will be paused for six months under the State’s budget agreement. Each year, the gas tax increases at the beginning of the fiscal year to provide funding for transportation and infrastructure projects around the state. This year’s increase will be paused for six months.

In April, Indiana Gov. Mike Braun suspended both its fuel tax and its sales tax on gasoline purchases, a move he said has saved residents nearly $0.60 per gallon in fuel taxes. Kentucky Gov. Andy Beshear has extended an executive order that reduced the state’s gas tax by 10 cents. The order was extended to 33 cities and counties that requested an extension.

Georgia is moving in the other direction. It reinstated the state’s gas tax as of this week. The suspension was giving motorists a tax break of 33 cent a gallon on gasoline and 37.3 cents on diesel. Governor Kemp’s initial suspension took effect in March and was set to last 60 days, but the outgoing governor extended it last month.

PROPERTY VS. SALES TAXES

In the Southeast, a major effort to reduce or eliminate property taxes has been underway in the region’s state legislatures. The latest comes from Georgia. SB 33 was designed to enact enacts broad property tax reform by establishing a new Local Homestead Option Sales Tax aimed at providing homeowner tax relief and improving local fiscal management according to sponsors. Many are concerned at the shift from a property to a sales tax base will increase the regressive nature of a non-income tax base.

HB 463 lowers Georgia’s state income tax rate from 5.19% to 4.99%, beginning Jan. 1, 2026. It includes provisions for further annual reductions of the state income tax rate as well as increases of the standard deduction. It raises the retirement income exclusion to $70,000 beginning in 2027 and introduces temporary tax exclusions for qualified overtime compensation and cash tips through 2028. It also repeals some tax credits and sales and use tax exemptions.

DATA CENTER BANS

The threat many see posed by the development of vacant land for data centers continues to generate intense opposition at their development at the local level. In many communities, local legislators have enacted moratoria against the issuance of permits and/or licensing for new data center developments. They are an effort to hold developers and their litigation at bay while regulations can be developed and appropriate legislation be enacted. Unsurprisingly, several wealthy southern California communities are among them.

For several months, the City of Monterey Park was among them. In January, the Monterey Park City Council passed a 45-day moratorium on data centers. The city unanimously extended its moratorium for 10.5 months in March. Residents there weren’t satisfied with a temporary limit. So, the city’s voters approved a ballot initiative which effectively bans data centers in the city. It was approved with over 70%of the vote. It is the first city to do so in California.

New York became the first state to enact a statewide moratorium on data centers. The Responsible Data Center Development Act would create a one-year pause on certain new permits for large data centers, defined as facilities with a peak demand of 20 megawatts or more. The moratorium would not apply to previously issued approvals or projects that began construction before the law takes effect.

The measure would also require large data center operators to hold at least one in-person public hearing in a host community at least three months before receiving state approval. Residents would have to receive at least 30 days’ notice, including information on the project’s location, expected energy use, water and wastewater impacts, and any state or local incentives sought or awarded.  Electric, gas, water and municipal systems would have to create separate service classifications for large data centers, assigning costs such as infrastructure upgrades and commodity price increases to those facilities.

Even in Texas, Gov. Abbot released regulatory recommendations on data centers for the Legislature to pass in the 2027 session. It is an extensive list – requiring new facilities to add power generation to the state’s power grid; requiring data centers pay for their own grid interconnection and infrastructure costs; mandating the use of “closed-loop” water systems, which draw a large amount of water at the start but reuse it over some period of years; require annual reporting by all data centers on electricity and water use; establishing best-practice standards to address community concerns like noise; repealing data center sales tax exemptions and “other outdated or unnecessary incentives for data centers”.

A Republican in the Pennsylvania House introduces a bill that would require data center developers to build or buy their own power supply to keep them from racking up charges for residential customers. Democratic Delaware state legislators are working on similar legislation that would mandate data center developers supply their own power and pay for necessary transmission upgrades. 

DALLAS

Moody’s has revised the outlook to stable from negative for the City of Dallas, TX issuer rating. The rating was affirmed at A1. The revision of the outlook to stable reflects Moody’s expectation that the city will make increases in pension contributions to its Police and Fire Pension System (DPFP) and Employees’ Retirement Fund (ERF) plans in line with its updated funding plan while maintaining structural balance. 

The city has begun to make annual pension increases to its DPFP and ERF plans in order to amortize the unfunded liability within 30 years, as mandated by state law. Dallas was one of several Texas cities which faced significant funding shortfalls in pensions for both uniformed and non-uniformed employees in the prior decade. Given Dallas’ economic strength, the issue of pension funding has become central to support for the City’s ratings.

It was made clear that weakening of the uniformed or non-uniformed plans’ non-investment cash flow on an actual or projected basis, and/or a decline in the funded status of either plan would put the ratings on a negative path. Multi-year execution of pension funding plan resulting in improved pension risk indicators, combined with balanced operations would put the credit on a positive path.

HOSPITAL MERGER

West Virginia University Health System (WVUHS) and Independence Health System (IHS) announced they signed a definitive agreement for Independence to join WVUHS and are currently awaiting regulatory approvals. The two systems currently are planning for approval sometime this fall.  Independence Health’s five hospitals would become part of WVUHS’s now 25-hospital system. The usual benefits of consolidation in healthcare are cited in support of this one. It does raise the overall level of care available to patients of IHS.

From a credit perspective, the merger is projected by Moody’s to only generate a benefit for the IHS credit while not hurting WVUHS’s rating.

ELECTRIC ECONOMY

Georgia has been at the center of the debate surrounding electric vehicles as the industry has found it to be hospitable to their industry. Several proposed manufacturing facilities designed to produce both batteries and vehicles hoped to operate there. As the Trump administration has undertaken its efforts to undercut electric vehicle production, it raised questions about the state’s approach to the emerging electric economy.

So, it was a piece of good news to see new manufacturing emerge in Georgia supporting clean energy. Qcells has officially begun commercial production of silicon solar cells at its factory in Cartersville, Georgia. The factory is the largest of its kind in the country. Qcells will be able to manufacture 3.3 gigawatts at its cell factory, which would more than double the current operational U.S. solar-cell capacity. It joins an existing facility in the state.

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.