Joseph Krist

Publisher

CHICAGO PUBLIC SCHOOLS

CPS projects a budget of $8.43 billion for FY 2026, with $5.8 billion in personnel costs and $2.6 billion for operations and funding charter schools. The district spends $817 million a year in loan repayments alone. Without cuts and revenue boosts, CPS projects a $1.3 billion deficit by 2030.

Three main factors are driving the deficit, according to CPS: Costs to serve students with disabilities, which have grown by $450 million since 2019. Building expenses that include $14 billion for backlogged repairs, and costs for more engineers and maintenance that have boosted spending by $100 million since 2019. Growing pension payments, including the $175 million CPS took over from the city.

CPS must present a balanced budget to the board by Aug. 28.

PENNSYLVANIA BUDGET

Pennsylvania has become a regular when it comes to being unable to make a budget before the start of the fiscal year. Pennsylvania’s 500 school districts face particular fiscal uncertainty. Cash reserves vary from district to district and may be earmarked for capital expenses like new school buildings, rather than operating expenses like staff salaries and utilities.

Pennsylvania’s Department of Education said it would not be able to make payments for adult basic education and the Early Intervention, Pre-K Counts, and Head Start programs on July 21, which is when payments for these programs are made each month. If there’s no deal by July 31, PDE will also miss payments for special education and community colleges. And if there’s no deal come Aug. 28, more substantial payments will be missed, including for basic K-12 education.

The state’s university system announced its first tuition hike in seven years, citing the unfinished budget.  SEPTA, serving Philadelphia and its suburbs, and Pittsburgh Regional Transit, serving Allegheny County — have approved budgets that will reduce service if no deal to raise transit funding comes through. State payments are due in August for county services like child welfare, mental health, and substance use disorder programs.

FIRE

Fire has been on everyone’s mind after the fire disaster in greater Los Angeles to start the year. While the area continues to attempt to recover and/or rebuild, wildfires are becoming a real concern nationally. So far this year, there have been 41,069 wildfires reported in the United States and a total acreage of 2,892,545 has burned. This is higher than the 10-year-average number of fires, but lower than the average number of acres burned. 

As this is written, three new large incidents have been reported for a current total of 83 large incidents nationwide. Nearly half of the active fires are in Alaska which had its first heat advisory ever. California, Colorado, Oregon, and Washington all are the site of six fires.

OREGON TRANSPORTATION FUNDING UPDATE

Gov. Tina Kotek will call lawmakers into a special session in late August to take up the issue of road funding in the state. In the meantime, the Governor will delay nearly 500 layoffs at the Oregon Department of Transportation, ensuring 12 maintenance facilities throughout the state remain operational. Those layoffs were scheduled to take effect July 31. (See MCN 7.14.25). They will instead be delayed 45 days.

The current estimated funding shortfall for ODOT for fiscal 2026 is $354 million. A variety of proposals have been offered ranging from expense cuts to a significant gas tax hike. The process is complicated in that the ODOT budget fixes will be part of the state’s overall transportation funding plan. Any increased revenues from a higher gas tax would be shared with cities, counties, transit agencies, and bicycle group.

A 6-cent hike to the state gas tax is estimated to be enough to forestall ODOT layoffs and send money to city and county road departments that are also strapped for cash.  a 0.1% tax on Oregonians’ paychecks that goes to public transit. Transit agencies have warned that funding shortfalls will lead to future service cuts if that isn’t increased. Democrats proposed increasing the tax to 0.18% during this year’s session.

MILEAGE FEES

The move to use mileage fees as a base source of user funding for roads is about to receive a potential boost politically. In testimony before Congress, the American Trucking Association said “We’re looking seriously at advocating for a registration fee that applies to everybody – trucks, cars, electric vehicles,”. “You already register your vehicle at the state [motor vehicle agencies], you simply pay for what you normally would pay in fuel costs at the pump. You get rid of the gas tax, the tire tax, and put it in a registration fee.”

There is less unanimity in the industry among the small carrier and owner operator segments. Their trade group supports a registration fee to capture electric vehicles while actually advocating for a rise in the federal gas tax.

HE’S NOT DOING THE WIND THING

The Trump administration has canceled a $4.9 billion loan guarantee for the Grain Belt Express. (See 7.7.25 and 7.21.25 MCN). The Energy Department said Wednesday that its Loan Programs Office has terminated a commitment for the first phase of the Grain Belt Express project. The loan was issued by the Biden administration in November 2024.

When it approved the project, the Missouri Public Service Commission found that Grain Belt would save Missourians $17 billion in lower electric bills. The private developer of the project, Invenergy says it has obtained the vast majority of those easements through voluntary negotiations with landowners. For the rest, the project was granted the right of eminent domain. That is what opponents of the project seized upon to stop the project. As is the case with carbon pipelines, eminent domain has emerged as a primary source of opposition.

We find it interesting that the announcement of the cancellation of the loan highlights that it is at the request of Missouri Senator Josh Hawley. Initially, opposition was driven by the fact that so little of the power being transmitted was to be available to Missouri utilities. Overtime, the project has contracted with 39 municipal utilities in Missouri, including Columbia Water and Light. 

PUERTO RICO SOLAR

A private provider has been selected to install and maintain Energy Resilience Hubs in five Puerto Rico communities in 2025. Each site will feature solar generation and battery storage to maintain electricity for essential services during outages caused by natural disasters or grid failure. The 2025 effort is funded through a cooperative agreement with the U.S. Department of Energy and is expected to be completed by September.

For the past two weeks, LUMA Energy, Puerto Rico’s grid operator has relied on tens of thousands of batteries scattered across the island to overcome energy shortfalls and help deliver power. It is the first operational behind-the-meter virtual power plant in Latin America and the Caribbean. In May, Puerto Rico’s Energy Bureau, which regulates utilities, approved an emergency expansion of the “customer battery energy sharing” program in anticipation of a projected generation shortfall during the summer.

The Puerto Rico Energy Public Policy Act of 2019 codified the role of solar and storage in the island’s energy system and set a 100% renewable energy target by 2050. There are about 175,000 households with solar, and at least 160,000 of those also have storage. Puerto Rico’s Republican governor, Jenniffer González Colón

recently expressed support for maintaining the existing net metering system. Unsurprisingly, Puerto Rico Electric Authority opposed that. PREPA is seeking to add a fixed charge to net metering program participants. 

LAND PORTS

There has rightfully been emphasis on levels of activity at the country’s marine ports in the ever changing tariff environment. We don’t know how this will all play out by the latest deadline of August 1. We do know where to look for potential impacts on cross border land traffic between the U.S., Mexico, and Canada.

Detroit, Port Huron, and Buffalo are the top truck ports for U.S. freight flows with Canada, while Laredo, El Paso, and Otay Mesa are the top truck ports with Mexico. Detroit, Port Huron, and International Falls are the top rail connection ports for U.S. freight flows with Canada, while Laredo, Eagle Pass, and El Paso are the top rail connection ports with Mexico.

Chicago, Port Huron, and Minneapolis are the top pipeline connection regions for U.S. energy freight flows with Canada. El Paso, Hidalgo, and Laredo are the top pipeline connection regions with Mexico. Port of Boston, Arthur, and Portland are the top water port connections for U.S. energy flows with Canada. Port of Houston, Arthur, and Texas City are the top water port connections for U.S. energy flows on the Southern border.

REBUILDING L.A.

Some 800 homeowners who lost homes in areas affected by wildfires applied for rebuilding permits as of July 7, according to the Los Angeles Times. Fewer than 200 have received the permits, however. The City of Los Angeles takes about 55 days on average to approve a wildfire rebuild, and the broader Los Angeles County takes even longer.

Insurance companies in California have been dropping some of their customers in high fire-risk areas, leaving them no option besides the FAIR Plan, the state’s high-priced, limited-coverage insurer of last resort. As the result of the scale of the fires, the FAIR Plan had to collect levy additional assessments totaling an additional $1 billion from its member companies, a move that will raise property insurance prices.

The realities of the current situation are that a combination of underinsurance, inflated construction costs, competition for skilled workers and pressure on the general unskilled workforce in the region resulting from the immigration crackdown. All of those factors are driving an increased fear that many victims will move rather than rebuild. 

COAL

The U.S. Energy Information Administration reports that coal-fired power plants will remain relatively well-stocked through the end of next year. Power plants in the United States had 124 million short tons of coal on-site at the end of June for them to consume that coal at a rate of about 1.3 million short tons per day, meaning they had about 93 days’ worth of fuel on-site. 

Days of burn is calculated by dividing coal inventories held at power plants by a seasonal consumption rate. EIA forecasts days of burn will range between about 90 and 120 days between now through the end of 2026, or about a month’s worth of coal more than power plants had on-site between 2019 and 2022. The clear impact of policy changes including the mandated operation of coal generation is showing up.

Coal inventories held at U.S. power plants have fallen since early 2024, coal consumption in the U.S. electric power sector has also fallen since then, so the supply measure of days of burn remains relatively high. Coal shipments to power plants have declined in line with coal consumption in the U.S. electric power sector.

The electric power sector accounted for more than 90% of U.S. coal consumption in 2024. U.S. coal consumption in the first quarter of 2025 was 18% more than in the first quarter of 2024. In its short-term forecast, EIA expects coal’s share of U.S. electricity generation to increase from 16% in 2024 to 17% in 2025 and then decrease to 15% in 2026. It’s clear that the use of coal does correlate with the price of natural gas. As natural gas prices increased in the first quarter of 2025, coal became more competitive driving an estimated 6% increase in 2025 consumption.

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

PORTS AND TARIFFS

The Port of Los Angeles handled 892,340 Twenty-Foot Equivalent Units (TEUs) in June, 8% more than last year. It was the busiest June in the 117-year history of the Port of Los Angeles. According to the Port “Some importers are bringing in year-end holiday cargo now ahead of potential higher tariffs later in the year,”. “July may be our peak season month as retailers and manufacturers bring orders in earlier than usual, then brace for trade uncertainty. 

June 2025 loaded imports came in at 470,450 TEUs, 10% more than last year. Loaded exports landed at 126,144 TEUs, a 3% improvement from 2024. The Port processed 295,746 empty container units, 7% more than last year. After six months in 2025, the Port of Los Angeles has handled 4,955,812TEUs, 5% more than the same period in 2024. The latest delay in the trade war has extended the period of lower tariffs to August 1.

The negative impacts of tariffs are already being felt in the Port of Oakland. Port of Oakland June container volume declined, as shippers and carriers adjust to softening demand and ongoing tariff uncertainty. The Port handled 168,460 TEUs (twenty-foot containers), down 10.1% from May, and 12.8% from June 2024, when 193,158 TEUs passed through Port facilities. Year-to-date container volume remains higher than the same period last year. Total volume registered 1.14 million TEUs, marking a 0.6% increase over June 2024.

Loaded imports were up 1.5%, while loaded exports experienced a 1.3% decrease. Loaded imports totaled 70,334 TEUs, marking an 11.3% decline from May, and a 16.3% drop from June 2024, when 84,040 TEUs transited Port facilities. Loaded exports registered 59,593 TEUs, marking an 11.5% month-over-month decline, and a 10.3% decrease from June 2024, when the Port handled 66,424 TEUs. 

RURAL AMERICA

The ongoing uncertainty with the prosecution of the tariff trade war is taking its toll in many ways on the rural economy. Commodity pricing has not been favorable. Program changes at the federal level are closing long established outlets for commodities especially grain. Input and capital costs are rising. Now with the enactment of the BBB, more changes are coming October 1.

The 2002 Farm Bill created the program now known as REAP; it was given its current name under the 2008 Farm Bill. For over two decades, the federal Rural Energy for America Program has provided grants for solar, wind, energy-efficiency upgrades, grain dryers, biodigesters, and other projects in rural America. The most common use case for REAP grants is helping farmers install solar.

The 2022 Inflation Reduction Act funded REAP with some $2 billion, but those funds will soon run out. Under the Trump administration, A U.S. Department of Agriculture document outlined its Make Agriculture Great Again agenda. Going forward, REAP ​“will disincentivize funding for solar panels on productive farmland.” The program will likely revert to the lower funding level of $50 million per year ensured by the current iteration of the federal Farm Bill.

VIRGINIA TOLL REBATES

The Virginia Department of Transportation (VDOT) is set to cancel US$36m in unpaid toll debt accumulated by drivers who used the Midtown and Downtown tunnels in the city of Portsmouth, as part of a targeted effort to address long-standing concerns about the potential impact of tolls on working commuters with limited means. The Midtown and Downtown tunnels are operated under a 58-year public-private partnership (PPP) between VDOT and Elizabeth River Crossings (ERC), a private concessionaire owned by Spanish infrastructure group Abertis. The PPP includes tolling, maintenance and operations across both tunnel facilities.

Although ERC remains contractually entitled to pursue unpaid tolls under the PPP, the firm agreed to waive collections in exchange for reimbursement from the state.

The state will cover the full cost of the US$36m debt write-off using funds from its Toll Relief Program, introduced in 2022 under then-governor Ralph Northam to support frequent tunnel users earning less than US$50,000 per year. To qualify, drivers must reside in eligible ZIP codes and make a minimum of eight trips per month through the Midtown or Downtown tunnels.

FOLLOWING UP

In Los Angeles, MTA estimated a ridership count of roughly 23.7 million last month on its bus and rail systems — a 13.5% drop from May and the lowest June on record since 2022, when numbers had started to rebound since the pandemic emergency, according to Metro data. Metro’s numbers fell to its lowest levels of the year in June after the immigration raids throughout Los Angeles County. The large immigration sweeps began June 6.

Senator Josh Hawley, Republican of Missouri, said he had secured a commitment from Energy Secretary Chris Wright to cancel a conditional loan guarantee that the federal agency had granted to the developers of the Grain Belt Express. (See MCN 7.7.25)

The New York State Public Service Commission has terminated its offshore wind transmission planning process due to stalled federal permitting. The commission cited recent federal actions halting new offshore wind leasing and permitting, which it said make short-term project execution unfeasible.

The Maine Governor’s Energy Office was supposed to issue its first solicitation for energy generated by offshore turbines at the beginning of July, according to a 2023 law. But last month the Maine Public Utilities Commission agreed to the office’s request to extend that deadline indefinitely the extension was due to “recent changes in the energy landscape that have caused significant uncertainty in the offshore wind industry, including shifts in federal energy policy and market conditions.”

STADIUM NEWS

The Tampa Bay Rays may be poised to finally play home games in their own stadium in Tampa. A sale of the team had been in the works since talks with the City of St. Petersburg over the replacement of the existing but damaged stadium that had served as the Rays home since their inception. A sale was reported this week to a group led by a Jacksonville developer for about $1.7 billion. It is believed that new ownership would have the team play in a stadium in Tampa.

The battle over the future location of Kansas City’s Royals and Chiefs is heating up. A bipartisan council of Kansas lawmakers voted Monday to extend by six months the deadline for the Missouri-based Kansas City Royals or the Kansas City Chiefs to accept economic development incentives from Kansas for construction of sports stadiums. The 2024 law that established procedures for issuance of STAR (Sales Tax and Revenue) bonds to cover 70% of construction costs for one or both stadiums and support structures had a deadline of June 30, 2025. The statute gave the LCC authority to add another year to the timeline.

Missouri offered to finance up to 50% of the cost to renovate or build new stadiums for the Royals and Chiefs. Missouri’s legislation authorizes bonds covering up to 50% of the cost of new or renovated stadiums, plus up to $50 million of tax credits for each stadium and unspecified aid from local governments.

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

Joseph Krist

Publisher

NEW ORLEANS 20 YEARS AFTER

Researchers at Tulane University and the Jet Propulsion Laboratory released a study highlighting emerging areas of risk from subsidence in the City of New Orleans. The report comes as the 20^th anniversary of the Hurricane Katrina disaster nears this August. Reductions in ground elevation relative to sea level due to historic and recent subsidence likely not only played a part in levee failure in Hurricane Katrina but also accounted for the extreme post-storm flooding depths in parts of the city. While the US Army Corps of Engineers conducted a significant project to repair and enhance seawalls and levees, there are still risks to the system as the result of natural activities.

Although most of New Orleans is generally stable, rapid elevation loss occurs in parts of the city (up to −20 millimeters per year) and on flood protection walls constructed following Hurricane Katrina (up to −28 millimeters per year). One area of concern with potential credit implications involves the City’s airport. Localized areas of greater elevation loss (<−15 mm/year) are present at the Louis Armstrong International Airport. That area of elevation loss at rates of <−20 mm/year around New Orleans International Airport as due to the soil disturbance associated with construction of a new terminal in 2016–2019.

HIGH SPEED RAIL

The State of California has responded to the effort by the US Department of Transportation to terminate two grants made to finance a portion of the proposed high speed rail line from LA to SF. California officials said the project was in compliance with federal grant requirements and would indeed meet the 2033 deadline to start limited passenger operations within the Central Valley.

The federal government claims that the state had made only minimal progress on construction. Across an initial 119 miles of construction, 54 structures and 70 miles of rail bed — 59 percent of the total — had been completed. The state also notes that an electrified rail system between San Francisco and San Jose was also in place, with infrastructure currently used for the commuter rail system but intended for future high-speed operations. And it noted that environmental reviews

were now complete for the entire expanse between the Bay Area and Southern California.

On the funding side, the project has used up nearly all of a $9 billion bond approved by voters in 2008. There is an estimated $4 billion in funds remaining from the project’s share of greenhouse gas fees that the state collects. It will continue to collect $1 billion per year in those funds, leaving the state with an estimated $6 billion to $8 billion to continue construction over the next three years.

CARBON CAPTURE

In June (6.2.25 MCN) we commented on legislation under consideration in Illinois to prevent carbon sequestration to limit impacts on an aquifer serving some 800,000 with drinking water. In 2024, legislators enacted a two-year moratorium on new carbon sequestration pipelines through the SAFE CCS Act, which also addressed loopholes in federal regulations. Now, a new bill also requires that the state conduct a five-year study on carbon sequestration to determine any additional risks. It awaits the Governor’s signature.

ROAD FUNDING IMPACTS

In Oregon, the state legislature considered but did not pass increased transportation funding. The money was needed to close a $300 million budget shortfall in the Oregon DOT. Now, the lack of increased funding is having a direct effect. Some 483 Oregon Department of Transportation employees will be laid off in what is being called the largest round of layoffs in the state government’s history.

The layoffs are the first of two rounds of cuts. They include road maintenance crews, technical support staff and operations staff. The Department has estimated that the total of layoffs could be 700. 100 more employees could lose their jobs in a second round of layoffs expected to take place in early 2026, absent legislative action. Planned and existing infrastructure projects will be canceled or delayed. The agency is also eliminating 449 vacant positions. In total more than 900 positions at the state transportation agency will be gone.

In Illinois, a bill proposing a pilot program for a mileage-based tax on drivers failed to pass the state senate. The trial would have tested the reliability, the ease of use, cost, and public acceptance of technology and methods for counting miles. The program would have looked at the enforceability of the road usage charge and considered how drivers could have evaded or manipulated the fee. Illinois has the second highest gas tax in the U.S.

MASS TRANSIT FUNDING

The major mass transit agencies have been dealing with the fiscal impact of the pandemic and its aftermath. Now, they have to operate in an environment of hostility to federal financing for mass transit. This state budget cycle saw the issue of aid to mass transit move to the fore. The responses across the country have varied.

New York’s early budget cycle saw the State harden its stance against efforts by the US DOT to somehow stop congestion pricing. The federal opposition focused attention on mass transit funding which resulted in a new plan for state monies to cover the costs of the ongoing capital needs of the MTA. The agency had been looking at a significant financing shortfall given federal hostility to funding. We will see if pending lawsuits can be settled to remove any uncertainty about congestion pricing.

In California, the state budget includes more than $1 billion in funding and a $750-million loan for Bay Area transit. The loan is interest free. The funding intended to support current service levels at BART and the SF Muni system until a more permanent funding source can be established.

Existing law creates the Metropolitan Transportation Commission as a local area planning agency for the 9-county San Francisco Bay.  Legislation is pending to establish the Transportation Revenue Measure District with jurisdiction extending throughout the boundaries of the Counties of Alameda and Contra Costa and the City and County of San Francisco.

The legislation would authorize a retail transactions and use tax applicable to the entire district to be imposed by the board of the district or by a qualified voter initiative for a duration of 10 to 15 years, inclusive, and generally in an amount of 0.5%, subject to voter approval at the November 3, 2026, statewide general election. 

In Massachusetts, the budget authorizes $470 million for the Massachusetts Bay Transportation Authority in fiscal 2026. The MBTA will also receive some $548 million from fiscal 2024’s Fair Share revenue. That is a “millionaire’s tax”, an additional tax imposed on those with incomes over $1 million. Those funds were applied to fund a portion of the T’s budget gap. In June, the agency’s board of directors approved a $3.24 billion budget for the 2026 fiscal year, narrowing its deficit from $307 million in 2025 to a projected $168 million in 2026.

In Illinois, the legislature was not able to solve the riddle of funding the mass transit system serving greater Chicago. The issue of control is the primary impediment to resolving funding issues in the legislature.

SOVREIGN IMMUNITY TEST

The US Supreme Court agreed to hear two cases involving NJ Transit, which is being sued in Pennsylvania and New York state court after its buses allegedly hit people outside the borders of its home base of New Jersey. At their core, the two suits are basic personal injury suits. The SCOTUS gets involved because in 2019, it ruled 5-4 that one state cannot be sued in another state’s courts without the first state’s consent.

The ruling did not directly address the issue of which state entities get such immunity, leaving open a question about things like state hospitals, student loan servicers and public transit providers. The plaintiffs argued NJ Transit isn’t actually entitled to a state’s immunity, even though the transit agency was created by the state. NJ Transit said lawsuits should be brought against it in New Jersey state court because that’s where it is based.

NJ Transit, which considers itself an arm of state government, argues that it is protected from lawsuits in other states because of sovereign immunity. It won a sovereign immunity argument in the Pennsylvania Supreme Court. In another state the New York Court of Appeals, that state’s highest court, said immunity didn’t apply and allowed another man to sue NJ Transit after he said he was hit by a bus crossing an intersection in Manhattan.

NUCLEAR

TerraPower, the company founded by Bill Gates to develop new nuclear generation plants was notified that the Nuclear Regulatory Commission will follow the shorter time line for approvals backed by the Trump administration. The Commission intends to complete its environmental and safety review process by December 31 of this year.

TerraPower was the first ever to submit a construction permit application for a “commercial advanced reactor” in March 2024. The approval process was expected to extend into mid to late 2026. The $4 billion project, backed by $2 billion from the Department of Energy, was already under a streamlined review process through the NRC’s Advanced Reactor Demonstration Program. The NRC did admit that there may be “unresolved items” related to any “substantive” public comments to address after the December deadline. 

The plant will be operational in 2030, according to TerraPower. The proposed reactor will use liquid sodium for cooling, which requires less water and provides more energy efficiency. The plant will also use a different type of radioactive fuel referred to as high-assay, low-enriched uranium (HALEU), which is more potent than traditional nuclear fuels. The NRC did admit that there may be “unresolved items” related to any “substantive” public comments to address after the December deadline. 

ELECTRIC VEHICLES

Ford Motor said this week that a $3 billion plant it is building in Marshall Mich., to produce batteries for electric vehicles will still qualify for federal tax credits. Some last minute language in the BBB eliminated language in earlier versions which would have excluded the project because it will use technology licensed from a Chinese company, Contemporary Amperex Technology Ltd., known as CATL. Ford has already begun hiring for the factory and expects to employ 1,700 people there.

The factory will produce batteries whose principal ingredients are lithium, iron and phosphate, referred to as LFP. Most of the electric cars produced in the United States use batteries made of lithium, nickel, cobalt and manganese, or NCM. LFP batteries are heavier than NCM batteries, but substantially less expensive and less likely to catch on fire. 

Nissan announced a delay in the launch of two new electric crossovers scheduled to be built at its Canton manufacturing plant in Mississippi. Nissan cited a recent slowdown in electric vehicle demand in the U.S. as a key reason for the postponement. The company is now targeting November 2028 for the Nissan crossover and March 2029 for the Infiniti version. The Canton facility, which has been operational since 2003, currently builds gasoline-powered vehicles but is slated to be a major hub for Nissan’s U.S. EV production.

Panasonic Holdings will postpone its plan to bring its new U.S. electric vehicle battery plant to full capacity by March 2027 as Tesla, its main customer, is experiencing sluggish sales. The Kansas plant, Panasonic’s second large-scale battery plant in the United States after one in Nevada, is scheduled to start mass production soon.

SMALL COLLEGE PRESSURES CONTINUE

Allegheny College, founded in 1815, is one of the nation’s oldest private liberal arts colleges and is 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. Moody’s has downgraded Allegheny College’s (PA) issuer and revenue bond ratings to Ba1 from Baa3.

The downgrade of the issuer rating to Ba1 is driven by persistent operating deficits. The rating reflects the college’s difficult student market and the hurdles of   a highly competitive landscape and unfavorable demographics. Financial operations remain unbalanced, and student demand remains strained.  poses further a with suppressed pricing power. While first-year enrollment in Fall 2025 is expected to rise, total FTE will decline. Failure to improve operating performance and meet fall 2025 enrollment targets could lead to credit pressure.

Moody’s has affirmed the Caa1 issuer rating and revenue bond rating of Hartwick College (NY). Hartwick College is a small, tuition-dependent private liberal arts and sciences college with fall 2024 enrollment of 1,070 full-time equivalent students and fiscal 2024 operating revenue of $43.5 million. The affirmation of the Caa1 issuer rating reflects the college’s structurally imbalanced financial operations, challenging student market conditions and very thin liquidity profile. 

Sizable operating deficits over a multi-year period have created a reliance on elevated endowment distributions to support operations.  

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

BIG BUT NOT SO BEAUTIFUL

The Big Beautiful Bill has stumbled across the finish line and as far as municipal credit sectors are concerned, two stand out especially. The first is higher education which was already facing demographic headwinds. Now a combination of culture war politics and immigration law are combining to result in some serious hits to revenues. The sector really under the gun will be healthcare. The expected loss of medical insurance by some 12 million people is incredibly negative. Many of those were enrolled under the ACA in time to receive care during the pandemic.

Then there is the issue of Medicaid provider taxes. These taxes the state levies on various health care providers, such as hospitals, nursing homes, managed care organizations and even ambulances. Cutting the rate of the tax is good, right? These taxes are considered to be a contribution to a state’s total spending on Medicaid. The federal government matches state spending at a rate between 50% and 80%, with no upper limit, higher provider taxes can mean higher state spending, which results in a higher federal contribution. That money can then ultimately go back to providers in the form of increased Medicaid payment rates.

By cutting the rate of the tax, the Federal government effectively makes a smaller payout to the state. That means that Medicaid reimbursement rates will decline while now uninsured patient numbers will likely increase. The math simply does not work if you want to strengthen balance sheets and liquidity. The rules date back to the Reagan administration. States have been taxing health care providers since the 1980’s to pay for the non-federal portion of Medicaid programs. Congress restricted the use of these taxes in 1991, establishing rules still in place today for how states implement them.

The must apply equally to all providers equally within a specific class, such as hospitals or nursing homes. States also must not directly or indirectly guarantee that the money will go back to providers — a concept referred to as “holding harmless.” However, the federal government currently exempts states from the hold harmless requirement on taxes up to 6% of revenues from treating patients. That limit is called the “safe harbor” limit and 38 states have provider taxes higher than 5.5%. Georgia is the only state with provider taxes below 3.5%, and Alaska is the only state that has no provider taxes.

The other component of the healthcare funding issue is the role of the industry as a major employer. Healthcare writ large is the largest source of employment in the U.S. going from 9 percent of the total workforce in 2000 to 13 percent today. In 38 states, the industry is now the biggest employer. In big cities, healthcare is a major entry level job provider to immigrants and non-college graduates. In rural areas, hospitals and physician practices are often the largest employers.

GRAIN BELT EXPRESS

The Grain Belt Express would carry electricity produced by wind farms in Kansas across Missouri and Illinois all the way to Indiana. The Missouri attorney general opened an investigation into Grain Belt Express and requested that the state’s Public Service Commission reconsider its approval. The AG claims that developers of the transmission line fraudulently inflated the number of jobs it would create, overstated cost savings to consumers, and misled landowners. He said his intention was “ultimately killing this project.”

The Biden administration in November offered a $4.9 billion conditional loan guarantee to help finance the project. And Invenergy awarded $1.7 billion in contracts to construction firms, saying work would begin next year.

CALIFORNIA

The California Environmental Quality Act, or CEQA, requires government agencies to review and disclose the environmental impact of any public project, including new housing developments. It is often cited as a significant contributor to the State’s housing shortage. Now several factors have come together to drive the legislature to approve the first major reform of CEQA after some four decades of its impact. The Los Angeles fires were just a final straw that turned CEQA into an obstruction to development.

This time, the Governor tied his signing the budget to the approval of the legislation required to relax CEQA rules. Those bills reduce the number of documents that projects must provide for their environmental reviews; eliminates the reviews entirely when cities rezone neighborhoods to meet their state-mandated housing goals, as well as for building farmworker housing, sewer systems in disadvantaged communities, broadband internet, public parks and trails, rural health clinics, food banks, advanced manufacturing facilities, day care centers and stations for the high-speed rail project.

ROAD USAGE FEES

The Hawai‘i Department of Transportation implemented its Hawaiʻi Road Usage on July 1. On the next registration renewal received after July 1, eligible EV owners will have the option to pay a state per-mile road usage charge (RUC) of $8 per 1,000 miles, capped at $50, or a state flat annual state RUC of $50. Both options replace the state’s current $50 EV registration surcharge. By 2028, the state per-mile RUC will become mandatory for EVs, and by 2033, the program is expected to expand to all light-duty vehicles.

NEWARK AIRPORT

Air traffic control problems that plagued Newark Liberty Airport were blamed for a 20% reduction in passenger volume this May than in May 2024. The reduction at Newark drove down the overall volume number at the three metro airports handled by the Port Authority. “May passenger volume at the airports overall was 7% below May 2024 which was driven by a sharp monthly decline at Newark Airport”.

The Federal Aviation Administration (FAA) ordered reduction in flights at the airport in May. The FAA mandated flight reduction brought the total to 56 flights an hour until a scheduled major runway repaving was completed. John F. Kennedy airport “broke a record set last year” for the busiest May on record at 5.54 million passengers, the PANY/NJ said. JFK topped the 2024 number by 1%. Volume at LaGuardia airport was “extremely strong” but slightly below the 3.01 million record set in May 2024.. May 2025 was the third busiest May on record at the airport.

CHICAGO PUBLIC SCHOOLS

Interim CPS CEO Macqueline King adjusted the district’s estimated deficit last week to $734 million, $200 million more than it was under her predecessor.  CPS announced it was laying off 161 employees, including 87 crossing guards, and cutting 209 open positions. CPS enrollment has dropped from 402,000 in 2010 to about 324,000 today in 634 schools. About 150 of those schools are half-empty and 47 operate at less than one-third capacity. A current CPS’ closure moratorium lifts in January 2027.

Chicago Public Schools’ budget for the 2025-26 school year, normally released in June, is delayed until at least late July. The district’s new fiscal year starts on July 1 and schools received their budgets for the coming school year in May, based on the assumption that the district would have just a $229 million deficit to close. It was assumed the school district would receive an additional $300 million in new revenue that did not materialize from the state and has not yet come from the city. Those projections also assume that the district will not reimburse the City $175 million to fund part of a City pension payment that covers some school staff.

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

Joseph Krist

Publisher

NEW YORK CITY

The results of this week’s mayoral primary in New York have the press hyperventilating over the potential for the City to have a socialist mayor. In the midst of all of the tumult, it is important to emphasize some of the security features supporting the City’s general obligation debt. Those features were adopted in the wake of the City’s 1975 financial crisis.

Primary among them is the procedure for securing the property tax revenues supporting general obligation bonds. Property tax revenues are accumulated monthly and can only be applied to general obligation debt service before any other use. Collections of those taxes are annually well in excess of the City’s annual general obligation debt service requirements.

The City could also lose control of its financial operations in the event that balanced budgets are not adopted. Should the City budget for a deficit of $100 million or more, a control board can be established by the State to oversee the City’s budget. There are powerful incentives for the City to keep its fiscal house in order and for a Mayor to keep control.

This will be one of the weirdest elections for Mayor the City has seen for some time. Currently, there are four candidates for the November ballot including the current mayor Eric Adams. How serious all of the candidates are is subject to debate. The next four months provides an opportunity for candidates like the socialist candidate to explain how they would implement policies consistent with their politics.

At the same time, the tumult around the election could create a buying opportunity. The situation is reminiscent of the first bond issue under the Dinkins administration. Many of the same concerns expressed then are being expressed now. When the City sold bonds in February, 1990 those concerns generated an 8% coupon on thirty year general obligations callable in ten years. The resulting 8% plus annual return over ten years from those bonds until they were refunded looked good in one’s portfolio.

ELECTRIC VEHICLES

Ford Motor said that it was committed to completing and opening a battery plant in Michigan, even if Congress and President Trump make the project ineligible for tax incentives. The $3 billion plant, in Marshall, Mich., 100 miles west of Detroit, is planned to use battery and manufacturing technology that Ford licensed from a Chinese company, Contemporary Amperex Technology Ltd., known as CATL. The announcement comes as Congress considers a budget plan which would eliminate or severely slash tax incentives of electric vehicle production.

If the credits survive, they could offset about a quarter of the cost of the plant. The House version of the Republican bill would eliminate credits for plants that were built with materials or technology from China, Iran, North Korea or Russia. In Georgia, U.S. battery plants use technology from suppliers based in South Korea or Japan, which are not targeted by the bill. The Michigan plant is scheduled to start production next year and is supposed to create 1,700 jobs. The plant has already been affected new tariffs that Mr. Trump has imposed. The manufacturing machinery for the plant is in transit from China and will be subject to higher tariffs.

This week, LG Energy Solution, a division of the major Korean battery manufacturer, is now producing battery cells for grid-scale energy storage at a site in Holland, Michigan. The company spent $1.4 billion to expand the factory, which previously made electric vehicle batteries. Lithium iron phosphate chemistry (LFP), offers fire-safety benefits, durability, and lower costs compared to the typical electric vehicle chemistries.

Until now, American battery customers had to rely on Chinese suppliers.. LG’s facility appears to be the largest giga-scale LFP production in the U.S. Japan’s AESC recently launched LFP production at its factory in Smyrna, Tennessee. The company initially intended to install these manufacturing lines in Arizona, but by shifting the LFP equipment to the space in Holland, LG could open commercial production a full year earlier than originally planned. The Holland manufacturing space covers the area of 42 football fields, and will employ 1,700 people when fully staffed. 

NUCLEAR REVIVAL

Governor Kathy Hochul announced that New York is planning to build a nuclear power plant which would produce half as much power as the Indian Point complex north of New York City that was shut down four years ago. Since then, that power has been replaced largely by natural gas as New York no longer has operating coal generators. New York derives about one-fifth of its electricity from three nuclear plants operated by Constellation Energy on Lake Ontario.

The plan articulated by the Governor is short on basic details – cost, schedule, location. The New York Power Authority will manage the project but the expectation is that it will be built through private entities. In January, Constellation and the New York State Research and Development Authority sought federal funding for their effort to obtain permits for one or more advanced reactors at the Nine Mile Point Clean Energy Center in Oswego.

The U.S. Supreme Court, by a 6-3 vote, reversed a federal appeals court ruling that invalidated the license granted by the Nuclear Regulatory Commission to a private company for the facility in southwest Texas. The licenses would allow the companies to operate the facilities for 40 years, with the possibility of a 40-year renewal. It is estimated that some 100,000 tons of spent fuel, some of it dating from the 1980s, has been held at current and former nuclear plant sites nationwide and growing by more than 2,000 tons a year. 

The NRC granted the Texas license to Interim Storage Partners, based in Andrews, Texas, for a facility that could take up to 5,500 tons (5,000 metric tons) of spent nuclear fuel rods from power plants and 231 million tons (210 million metric tons) of other radioactive waste. The facility would be built next to an existing dump site in Andrews County for low-level waste such as protective clothing and other material that has been exposed to radioactivity. 

STADIUM DEALS

It has been a busy Spring in the world of stadium deals as governments use the budget process to create financial support for professional sports stadiums. The legislation comes as two Major League Baseball teams play in minor league stadiums. One, the Tampa Bay Rays, may be sold to interests which may or may not wish to keep the team in greater Tampa Bay. In the interim, repairs to the existing stadium in St. Petersburg are underway with the hope of being ready in Spring 2026. The other, the A’s, broke ground on a new $1.75 billion stadium in Las Vegas, expected to be completed in time for Opening Day 2028.

The Arizona Diamondbacks (MLB) are in position to secure up to $500 million with extensions to existing state taxes to help fund renovations to Chase Field.

The Arizona legislature voted to approve the recapture of sales taxes from the stadium and other adjacent buildings over the next 30 years to update infrastructure at the retractable roof facility which has been home to the D-backs since 1998 and is owned by the Maricopa County Stadium District. The Diamondbacks say they will also contribute $250 million of the team’s money to help fund renovations. 

Missouri lawmakers enacted legislation that includes hundreds of millions of dollars of financial aid intended to persuade the Chiefs and Royals to remain in the state. Lawmakers in Kansas voted to authorize bonds for up to 70% of the cost of new stadiums in their state. The Royals have bought a mortgage for property in Kansas. The offer from Kansas is scheduled to expire June 30. The Chiefs and Royals currently play at the Truman Sports Complex where Arrowhead Stadium and Kauffman Stadium share parking facilities. Their leases with Jackson County, Missouri, expire in January 2031.  

The Royals property acquisition comes in the wake of Jackson County voters’ defeat of a sales tax extension that would have helped finance an $800 million renovation of Arrowhead Stadium and a $2 billion ballpark district for the Royals in downtown Kansas City. That opposition led to the inclusion of items not related to stadium finance in the legislation. When Kansas Gov. Mike Kehoe called lawmakers back into session earlier this month to consider stadium legislation, he agreed to allow an amendment requiring most counties to put a hard cap on increases in property tax bills.

In 75 counties, tax bills would not increase more than 5% per year from a base amount, or the rate of inflation, whichever is less. In 22 others, no increase in the basic bill would be allowed. That has raised questions as to the constitutionality of the plan as the Missouri Constitution requires that property taxes be “uniform upon the same class or subclass of subjects.” That may require reconsidering of the plan in the legislature this fall.

Then there is the situation in Cleveland. When Cleveland was awarded a franchise to be reestablished as the Browns, state legislation was enacted which included provisions limiting where the franchise could relocate in the future out of its stadium. The Art Modell Law (he moved the original Browns to Baltimore) keeps the Browns from moving out of downtown Cleveland or so it was thought. The Browns are in the midst of purchasing a suburban Cleveland site for an enclosed stadium. There is pending litigation over exactly what the limits were under the law. Now, the state budget includes provisions which establish the law allows Ohio pro sports teams who play in tax-supported facilities to move within Ohio when their leases expire.

And oh yes, the legislation included $600 million in funding from the state for the Browns new stadium by creating a new Sports and Culture Facility Fund through the escheatment of $1.7 billion from the state’s unclaimed property fund, which has grown to $4.8 billion in size. The plan leaves an additional $1.1 billion for future stadium construction asks from Ohio’s other pro sports franchises.

The Hamilton County commissioners voted to approve the framework of a new lease keeping the Bengals downtown in Cincinnati through at least 2036. The new agreement calls for a $470 million renovation of Paycor Stadium, of which the county will contribute $350 million and the Bengals/NFL will contribute $120 million, as well as agreeing to begin paying rent for the first time. They will pay $1 million over the next three years and then $2 million each year of the final eight years of the agreement, as well as for any extension years. The improvements are expected to take two to three years and currently involve no state funding. 

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

PORT OF LOS ANGELES

The first tangible evidence of the impact of tariffs on international trade comes in the form of operating data from America’s busiest port. The Port of Los Angeles processed 716,619 Twenty-Foot Equivalent Units (TEUs) in May, 5% less than last year. After 10 straight months of year-over-year growth, overall cargo volume slowed due to the impact of tariffs on both imports and exports. Imports dropped 19% compared to April. May 2025 loaded imports came in at 355,950 TEUs, 9% less than the previous year. Loaded exports landed at 120,196 TEUs, a 5% drop from 2024. The Port processed 240,472 empty container units, 2% more than last year. After five months in 2025, the Port of Los Angeles has handled 4,063,472 TEUs, 4% more than the same period in 2024.

The Los Angeles Harbor Commission approved a 2025/26 fiscal year (FY) budget of $2.7 billion for the Port of Los Angeles, a 3.1% or $82.5 million increase over the previous fiscal year’s adopted budget. The proposed budget for FY 2025/26 anticipates cargo volumes of 8.2 million TEUs, a decrease of approximately 9.9% over the previous fiscal year’s adopted budget. In the FY 2025/26 budget, operating revenues are forecast at $657.6 million.  Approximately $470.3 million of those revenues are expected to be generated by shipping services at the Port. Operating expenses are estimated at $427.1 million.

The Port of Long Beach experienced a significant 8.2% decline in cargo throughput in May, processing 639,160 TEUs as tariffs continue to impact global trade flows. At Long Beach, imports fell 13.4% to 299,116 TEUs, while exports decreased 18.6% to 82,149 TEUs. The only positive movement came from unused containers being sent back to exporting countries, which saw a modest 3.2% increase to 257,895 TEUs.

Following the Trump administration’s implementation of a 145% tariff on Chinese goods in April, many retailers had suspended or canceled orders. However, activity has resumed after tariffs were reduced to 30% with a 90-day pause extending until August 12. Similar temporary pauses on reciprocal tariffs with other nations will last until July 9. Looking ahead, the National Retail Federation’s Global Port Tracker forecasts a mixed outlook for U.S. containerized imports. While June through August should see increased activity as importers take advantage of the tariff pause, volumes are expected to decline sharply in the latter part of 2025. September imports are projected to fall 21.8% year-over-year, with October showing a 19.8% decrease.

CARBON CAPTURE

The Iowa House approved a request to call a special session to override Governor Kim Reynolds veto of eminent domain legislation. Each house needs a two thirds majority. It seems as though the required two thirds of the Senate may not be achieved.

We have been highlighting the many targets of cutbacks announced by the U.S. Department of Energy in May. The agency cancelled some $3.7 billion of grants to a variety of public and private entities. The latest example is on in Wyoming. There a $49 million grant was made under the Biden administration for a “large-scale” carbon capture pilot project at the Dry Fork Station coal-fired power plant north of Gillette, WY.

It’s not clear whether there is support for private funding for the project. In 2020, the state passed legislation which was designed around the idea of keeping coal-burning power plants open by retrofitting them with carbon capture technologies. Electric utilities Black Hills Energy and Rocky Mountain Power, the only two Wyoming coal plant operators subject to the mandate, have indicated it could cost between $500 million and $1 billion to retrofit just one of several coal units subject to the state law.

They unsurprisingly support recent efforts to repeal the carbon capture mandates.

FLORIDA BUDGET

After one of the more politically contentious budget sessions in many years, the Florida legislature passed a FY 2026 budget totaling $115.1 billion. That is some $500 million less than the governor’s proposed budget, and $3.5 billion less than last year’s adjusted total. A long debate over tax cuts was at the core of the squabbling which forced the legislature into a special session. All of this conducted in front of a backdrop of potential scandal and a looming election for Governor in 2026.

The debate before the special session was mainly over whether to cut property taxes or sales taxes. The approved budget does neither. Instead, it eliminates the state’s business rent tax. The budget also includes tax cuts for several specific interests including casinos, airlines and NASCAR.

The legislature advanced a proposed constitutional amendment that would set aside $750 million a year — or an amount equal to up to 25% of the state’s general revenue, whichever is less — into a reserve fund that lawmakers could only use for emergencies. The measure has to be approved by 60% of Florida voters to be implemented.

On the spending side, lawmakers set aside $4 billion for scholarships for private and religious education, two years after the Legislature expanded the state’s voucher program to make all K-12 students eligible, regardless of family income. Some 2,200 vacant positions are effectively eliminated. At the same time, state workers will receive an across-the-board 2% raise, while state law enforcement officers and firefighters will get a 10% total raise, and a 15% raise if they’ve been on the job for at least five years.

MTA UPGRADE

It may often appear to be all doom and gloom for New York’s MTA but that’s not true when it comes to its debt ratings. Moody’s has upgraded to A2 from A3 the rating on the Metropolitan Transportation Authority, NY’s (MTA) $17.1 billion of outstanding Transportation Revenue Bond (TRB), and revised the outlook to stable from positive. Those are the bonds effectively paid from the farebox. The upgrade comes amidst MTA’s ongoing battles with the federal government over operating and capital support and the effort to halt congestion pricing.

That did force the State legislature to confront the need to fund the ongoing capital needs of the Authority. The results were positive and led to an upgrade. According to Moody’s “The upgrade of MTA’s TRB rating reflects increased political and financial support from New York State (Aa1 stable) and New York City (Aa2 stable) for the system’s substantial operating and capital needs.

The state’s recent payroll mobility tax (PMT) increase for MTA filled a significant gap in the $68.4 billion 2025-2029 capital program which will accelerate asset investment, protect service quality and support future revenue growth. The new PMT increment will generate $1.4 billion annually, is dedicated to capital projects and will allow MTA to borrow $23 billion, in addition to $10 billion supported by the operating budget, with only moderate growth in leverage metrics and fixed costs.”

CBO ON IMMIGRATION

The number of people entering the United States increased sharply starting in 2021 and peaked in 2023 before slowing in 2024. All told, the surge in immigration that started in 2021 added an estimated 4.4 million people to the U.S. resident population in 2023. The surge continued beyond 2023, but it slowed starting in June 2024, when an executive order suspended the entry of most noncitizens at the southern border, and has slowed further in 2025.

This week the Congressional Budget Office released estimates of how the surge in immigration that began in 2021 affected state and local budgets in 2023. The surge led to a direct increase in revenues of $10.1 billion, primarily from sales taxes, and a direct increase in spending of $19.3 billion, chiefly for public elementary and secondary education, shelter and related services, and border security. The result was a direct net cost of $9.2 billion in 2023, amounting to 0.3 percent of state and local spending (net of federal grants-in-aid).

In addition to estimating the direct effects of the surge, CBO calculated an alternative measure that includes the potential broader or longer-term effects and costs that were borne without adding to spending—such as crowding in public schools and public transportation systems. By either measure, the surge imposed a net cost. By that measure, the surge in immigration had the potential to increase revenues by $18.8 billion and spending by $28.6 billion, resulting in a potential net cost to state and local governments of $9.8 billion in 2023.

FLOOD INSURANCE REALITIES

The majority of flood insurance policies are provided by the federal government, through an arm of FEMA called the National Flood Insurance Program, or NFIP. Only 6% of Americans hold it. The experience in the wake of Hurricane Helene has drawn attention again to the need for and cost of flood insurance. Across Western North Carolina counties, only about 6,500 total policies from NFIP were in place.

The NFIP can cover up to $250,000 in home structure losses and $100,000 in home contents losses. Usually, people only have a policy if their mortgage requires it. That’s often because that property has received federal assistance for flood-related damage before. But 43,700 paid losses were associated with Helene, accumulating to $1.8 million total paid out by NFIP. The average paid loss came in at $40,709.

The Heritage Foundation’s Project 2025 calls for the dismantling of the NFIP and advocates for flood insurance to go private. The problem is that the private insurance industry has essentially stopped covering flood risk. During the first Trump administration, he planned a new system which changes the way the NFIP calculated rates, bringing models up to date. This new system would have increased rates, so Trump abandoned it during his bid for reelection. The Biden administration implemented the new rating system, raising flood insurance rates for 75% of flood insurance holders.

IS THERE A DOCTOR IN THE HOUSE?

On May 27, the Trump administration suspended new interview appointments for foreign nationals applying for J-1 visas. The visas, for participants in cultural or educational exchange programs, are used by most medical residents arriving from overseas. They did this just in time to put enormous pressure on hospitals to recruit doctors to begin work on July 1, the traditional staring date for new residents.

One in five U.S. physicians was born and educated overseas, according to the Association of American Medical Colleges. New doctors from other countries account for one in six medical residents and specializing fellows at U.S. teaching hospitals. Many of the 6,653 noncitizen doctors accepted for residency positions in the United States this year this year had already secured visa appointments before May 27. Those from banned countries who are already in the country are able to remain.

Hospitals and clinics in rural areas of the country already rely heavily on international graduates. This year, there were about 40,000 residency positions offered through the national match system, but only 28,000 graduates of U.S. medical schools. It was always a bit risky to go to an emergency room on the Fourth of July weekend given the brand new status of the residents. Now there may not even be enough of them.

NUCLEAR

The Supreme Court rejected Texas’s bid to overrule federal approval of a nuclear waste storage facility. In a 6-3 decision, the court upheld the Nuclear Regulatory Commission’s decision to issue a license to a company that wanted to store nuclear waste off site from a power plant. The opinion said that Texas, as well as private company Fasken Land and Minerals, did not have the right to sue over the license. 

“Under the Hobbs Act, only an aggrieved ‘party’ may obtain judicial review of a Commission licensing decision,”. “Texas and Fasken are not license applicants, and they did not successfully intervene in the licensing proceeding. So, neither was a party eligible to obtain judicial review.” The case in question concerns a license issued in 2021 to Interim Storage Partners (ISP) that would have allowed it to store nuclear waste for 40 years in West Texas.

The question in the underlying case was about whether the Nuclear Regulatory Commission should be allowed to license private off-site nuclear waste storage sites. That question itself was not at issue in the case.

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 PIPELINE VETO

In Iowa, House File 639 would have increased insurance requirements for hazardous liquid pipelines, limited carbon pipeline permits to one 25-year term and changed the definition of a common carrier for pipelines, making it more difficult for the projects to use eminent domain. The bill would have required pipeline operator to carry insurance that covered any loss or injury from accidental, negligent or intentional discharges from the pipeline, and to cover insurance increases that landowners face due to the pipeline.

The bill passed after a four year effort. It received support from both parties in the Legislature. Nonetheless, Governor Kim Renyolds – who is not running for Governor in 2026 – vetoed the bill. She claimed that the bill was too broad and threatened the state’s ethanol industry. She cited the aviation fuel industry as a potential source of demand for biofuels and said that the bill would stifle that industry.

The arguments at the core of the debate have always been over private property rights. Over the years, the arguments have been over whether the pipelines are a public or private carrier. Those opposed to the project say a private company should not be given the right to condemn agricultural land. South Dakota voters recently codified that opinion with a law that specifically bans CO2 pipelines from the right of eminent domain.  

Politically, the veto seems to fly in the face of public sentiment. Even the 2025 Iowa Republican party platform opposes the use of eminent domain by the use of a private party or for-profit entity. It was an issue in the 2024 Iowa Republican caucuses. Nevertheless, further attempts to revisit pipeline regulations in Iowa in the near term are unlikely.

A special session of the legislature could be called but two-thirds of the Legislature must sign a petition to request a special session, and to override a veto, two-thirds of the members from each chamber must vote to pass the bill again.

IS THERE A POLICY?

Microsoft Corp. announced some 15 days ago that it has agreed to purchase up to 622,500 tons of low-carbon cementitious materials from Sublime Systems’ first commercial factory in Holyoke, Mass., as well as the full-scale factory it plans to develop in the next six to nine years. Imagine the surprise at Sublime and in the Commonwealth at the news that this very project would not be receiving a promised $87 million from the Department of Energy. This stems from the proposed termination of the DOE Office of Energy Development which we covered last week.

The Holyoke factory is expected to be completed in 2027 and provide jobs for at least 70 people after it opens. The plant will still get some subsidies, including $47 million in federal tax credits that remain in place, $1.05 million in state tax credits, and $351,000 in local property tax breaks. It has significant private funding support – $45 + million in venture capital and investments from two legacy cement producers of $75 million.  

Here is where ideology triumphs again. This project has significant public and private support. Some of the funding comes from large concrete producers for whom a project like this could be competition. They are investing as rational business people. Why is that bad policy?

OFF THE RAILS

With the President’s comments this week, the already highly troubled California high speed rail line managed to be cited as a justification for sending troops into the City of Los Angeles. That follows after the US transportation secretary released a compliance review report that said the project was in default of the terms of its federal grant awards. He said, “there’s no viable path to complete the rail project on time or on budget.”

The project has long been a favorite target of criticism from the President. In 2019, Donald Trump cancelled almost $1bn in funding for the project. The Biden administration, however, restored that funding and later allocated another $3.3bn toward the project. The state has supplied 82% of the $14bn already spent on the project. The state has now focused not on the original route designed to connect California’s metropolitan areas, but on a 171-mile stretch in the Central valley, which is expected to be completed by 2033 at a cost of more than $35bn. 

Governor Gavin Newsom’s budget proposal before the legislature extends at least $1 billion per year in funding for the next 20 years “providing the necessary resources to complete the project’s initial operating segment.” The Feds insist that this is insufficient to fund the $7 billion gap to complete the Central Valley section. 

USDOT gave California until mid-July to respond and then the administration could terminate the grants.

Earlier, the U.S. Department of Transportation and Amtrak released a joint statement on April 14, 2025, announcing that the previously awarded $63.9 million grant under the Corridor Identification and Development program for the Dallas to Houston HSR line was being cancelled, and Amtrak would no longer be a partner on the project. Investors for Texas Central have indicated they will continue to pursue the project as a fully privately funded venture.

Separately, Fort Worth and Arlington have also commissioned an economic impact study to determine the benefits of the proposed HSR line from Dallas to Fort Worth. That study is anticipated to be complete by the end of 2025.

In the meantime, the coalition of rural Utah counties pushing the development of an 88-mile railroad connecting the Uinta Basin oilfields with the national rail network approved a plan to seek $2.4 billion in private activity bonds from the U.S. Department of Transportation to fund the railroad’s construction. That is some $500 million more in bond financing than was requested by the counties in 2023.

The bonds are only expected to cover 70% of the cost of the project, so the bonding request pins total construction around $3.4 billion, or around $3.8 million for every mile of track. When the Surface Transportation Board reviewed the project in 2020, the projected cost of the Uinta Basin Railway was $1.4 billion. The Transportation Department is authorized by Congress to distribute no more than $30 billion in the tax-exempt bonds, an amount that was doubled in the 2021 Infrastructure Investment and Jobs Act. 

COAL REALITIES

The effort to force electric utilities to operate coal-fired generation plants in spite of their uneconomic operating profile got a little less support from the data. A recent report was released which reviewed the economics of operating coal plants across the country. It comes as operators in Michigan and Pennsylvania face the reality that operating these plants will only drive up the cost of power to retail customers.

The cost to generate electricity from coal has increased faster than the rate of inflation, the new report found. It was 28% more expensive to generate electricity from coal last year than it was in 2021. The latest report analyzed 181 coal plants that were still in operation at the beginning of this year. One state which stood out was the coal hotbed of West Virginia. Among the 15 where costs increased the most: The Pleasants Power Station in Pleasants County, WV which was supposed to shut down in 2023.

The impact on customers? According to data from the U.S. Energy Information Administration, the cost to generate electricity rose 162% at Pleasants from 2021 to 2024. Appalachian Power and Wheeling Power’s three West Virginia plants saw cost increases of more than 50%. Residential electricity rates in West Virginia have increased 24% since 2021, the report says, higher than the 16% increase in the Consumer Price Index in the same time.

BAY AREA TRANSIT WOES

A recent analysis for the Metropolitan Transportation Commission found that collectively, BART, Muni, AC Transit, Caltrain and Golden Gate Transit face a total deficit of $3.7 billion in the five fiscal years beginning in July 2026.

BART and San Francisco’s Muni system account for $2.9 billion of that total, with both facing staggering shortfalls — $380 million for BART, $320 million for Muni — in fiscal 2026–27.

BART said that it might have to suspend service on two of its five lines, reduce service on those runs to just one or two trains every 60 minutes, shorten daily service hours and shut down some stations as a result. Muni management has made it clear that the agency might need to suspend service on 20 bus lines, cut the frequency of service by 50% and end service at 9 p.m.

A bill, SB 63, recently passed the Senate and will be taken up next by the Assembly Transportation Committee. It would impose additional sales taxes in San Francisco, Alameda and Contra Costa counties to support day-to-day operations and to improve regional transit connections. The MTC has estimated that the sales taxes — a half-cent in Alameda and Contra counties and up to one cent in San Francisco — would raise up to $550 million a year. The bill also allows San Mateo and Santa Clara counties to opt in to the ballot measure, a decision each county would have to make by Aug. 11.

The legislation comes as ridership on BART remains well below prepandemic levels negatively impacting farebox revenues.

FLORIDA TOURISM

Orange County, FL released data for collections of its tourism taxes for the month of April. $30.3 million was collected in April, which was down nearly 10% or $3.3 million from April 2023. It’s the biggest decrease since February 2021. April 2024 collections were lower than March 2024 collections by $10.2 million or 25.3%. It is difficult to make a true “apples to apples” comparison because of the different timing of Easter and Spring breaks between the years.

That’s disappointing because it’s harder to assess the Canadian effect on tourism to Florida. We look at what data we can. According to StatCan, for the month of May 2025, Canadian-resident return trips by air from the U.S. were down 24.2% year over year. The May 2025 decrease is even bigger than the drops in April 2025 (19.9%) and March 2025 (13.5%).

Last month’s 24% decline in air travel from Canada to the U.S. is eclipsed by the decline in Canada-to-U.S. automobile traffic. Canadian-resident return trips by automobile dropped 38.1% in May 2025. It’s the fifth consecutive month of year-over-year declines. It’s also the biggest drop in three months, surpassing the 35.2% decrease in April 2025, and the 31.9% decrease in March 2025.

TEXAS WATER

Given its historic reliance on underground water supplies, Texas is facing many of the same issues impacting water supplies which face its western neighbors. The supply situation has spawned a number of ideas for solutions including multi-state pipelines. The feasibility of those ideas has not proven out so now the state and its fossil fuel industries are generating another idea.

Governor Greg Abbott has signed a law that allows oil and gas companies to treat and sell fracking wastewater — also known as produced water — for reuse. That could include discharging it into rivers and streams or even applying it on farmland for crop irrigation. That has generated immediate pushback from a variety of interest groups. Texas Agriculture Commissioner said the most logical use for treated produced water may not be on crops at all. “I would suggest, probably, a better use of it would be fracking. Let this oil industry reuse it.”

The law shields oil producers, landowners, and treatment facilities from legal liability if treated water causes harm, unless there is gross negligence or criminal behavior. 

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

This year is providing one of the most uncertain budget seasons that we can remember. Many of the states are going through fairly contentious budget negotiations and votes. One thing common to them all is the uncertainty around the pending federal budget being negotiated in Congress right now. No one can say with any certainty what that budget will look like or what the impact of changes resulting from that budget will be. We do know that many of the potential cuts would lead to higher expenses for state governments. Policy changes in the areas of transportation, energy and public health will put immediate increased pressure on both state budgets and economies. State fiscal years will be underway when a final deal is reached in Congress. We can expect to see the fallout from that budget fairly quickly.

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ILLINOIS BUDGET

Illinois passed a $55 billion budget just before the midnight deadline over the weekend. The budget includes new or increased taxes on sports betting and tobacco products. Lawmakers did not pass plans to address a fiscal cliff facing the state’s public transit system or funding for a new Bears stadium. The taxes increased include a 25-cent tax per wager for sports betting licensees’ first 20,000 wagers and 50 cents per wager after that; an increase in tobacco products from 36% to 45%; subjecting businesses that move profits to other countries to the state’s corporate income tax.

The fallout from the failure to address Chicago’s public transportation funding needs has become quickly apparent. The games have begun in terms of efforts to generate public support. CTA, Metra and Pace officials said they would soon begin planning cuts in their 2026 budgets. Four of eight CTA rail lines would see service suspended on all or portions of the lines. And more than 50 stations would close or see service significantly scaled back.

Lawmakers could return to Springfield for a special session over the summer to consider a pending bill, which already passed the state Senate, or to negotiate a new proposal. They also have the option of taking it up during the fall veto session.

The failure to act during the just ended budget session has created a higher hurdle for lawmakers’ approval. With the spring session over, bills now require 60% approval instead of a simple majority.

CARBON MITIGATION FUNDING CUT

The Department of Energy is canceling over $3.7 billion in funding for projects that would cut carbon emissions and toxic air pollution from power plants and industrial sites. The impact is geographically diverse. Red state/Blue state status does not appear to be a factor. The impact is not just on smaller entities. Some of the largest participants are among the nation’s leading companies.

Kraft Heinz will lose its $170 million award to install clean heat technologies at 10 of its food production facilities. Beverage giant Diageo North America will no longer receive the $75 million it was promised to help install thermal energy storage systems from startup Rondo Energy at production facilities in Kentucky and Illinois. A $75 million grant to back American Cast Iron Pipe Co.’s ​“Next Gen Melt Project,” which would have lowered emissions from iron and steelmaking at its site in Birmingham, Alabama is being taken back. It also includes $75 million for United States Pipe and Foundry Co. to replace a coal-fired furnace with electric arc furnaces.

The Trump administration is getting rid of funding for several efforts to decarbonize the production of cement, one of the most carbon-intensive industries in the world. The cancelled funding includes $189 million for Brimstone and $87 million for Sublime Systems, two startups pioneering new low-carbon cement production methods. Global cement giant Heidelberg Materials will lose its $500 million award to capture carbon emissions at a massive existing cement plant in Indiana. And the National Cement Company of California won’t receive its $500 million grant to take a multi-technology approach to cutting emissions from its plant in Lebec, California.

Funding for carbon capture and storage projects at power plants will be scrapped, too. Calpine will not receive a pair of $270 million awards to retrofit power plants in Texas and California.  

WHERE’S THE OIL BOOM?

U.S. energy firms this week cut the number of oil and natural gas rigs operating for a fifth week in a row to the lowest since November 2021. It was the first time since September 2023 that the number of rigs declined for five straight weeks. The oil and gas rig count declined by about 5% in 2024 and 20% in 2023. After five years of steadily increasing capital investment, independent exploration and production (E&P) companies said they planned to cut capital expenditures by around 3% in 2025 from levels seen in 2024.

PUERTO RICO GRID FINANCE

The US Department of Energy announced that it was redirecting $336 million of federal money originally granted by the Biden administration for the development of renewable generation and microgrids. The funding will instead be directed to be used to reinforce Puerto Rico’s legacy grid and traditional centralized generation infrastructure. The same infrastructure crushed by Hurricane Maria in 2017, the same infrastructure that continues to fail. The same infrastructure that has produced three island wide blackouts in ten months.

That is what makes support from the Puerto Rico government for reinforcement of a failed system at the expense of projects that work so disappointing. It is clear that they are afraid of offending the federal government but that requires supporting decisions which reflect politics and ideology rather than actual events on the ground. At the end of March, LUMA reported over 1.14 gigawatts of grid-connected distributed solar capacity, with an additional 2.34 gigawatt-hours of distributed batteries connected to the grid. Solar power produces over 2 terawatt-hours of electricity each year, which accounts for more than 12.5 percent of Puerto Rico’s total residential electricity consumption annually. 

Can it work? Adjuntas is a small municipality with a population of about 18,000. The town operates five microgrids which provide 228 kilowatts of photovoltaic capacity and an additional 1.2 megawatt-hours of storage, which serve residences and fifteen commercial businesses. The town participates in a research study with the US Department of Energy to see if microgrids can be interconnected to create a functioning system over a wide area.

The town was in the midst of testing when the April 16 blackout occurred. The process of connecting multiple microgrids known as grid orchestration created a system which was able to “keep the lights on” in the entire town without being connected to the legacy grid during that event. One might think that the experience showed the merit of the idea. Instead, DOE and its ideological leader went the opposite way and removed funding for such projects.

Throughout the entire Puerto Rico financial disaster, the gap between what people want and what the government advocates for grows ever wider. The current entity running the power system LUMA has little public support as it seems to view its reason for being to be that of “restoring” a system that did not work very well in its best era. The new government seems less inclined to go against anything the Trump administration wants. In the meantime, local non-profits are generating proposals and projects that reflect local needs and conditions. But DOE pulls the funding.

All this occurs while the PREPA bankruptcy continues to drag on.

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

Joseph Krist

Publisher

NYC BUDGET

The Independent Budget Office (IBO) presented its analysis of the Adams administration’s Fiscal Year 2026 Executive Budget and 2025-2029 Financial Plan, as required by the New York City Charter. It notes that usually during economic downturns, the federal government works to smooth the economic cycle and help state and local governments navigate financially. Now, the federal government is the underlying cause of much of the turmoil.

Federal dollars play a direct role in both the State and City’s ability to pay for planned expenses. New York State’s fiscal year 2025 budget of $240 billion included $89.2 billion (37% of total State budget) in federal funding. The Adams administration’s fiscal year 2025 budget of $119.8 billion includes $10.5 billion in federal funds in 2025 (9% of the total City budget) and $7.4 billion in 2026 (6%).

In the Executive Budget, the Adams administration assumes a surplus of $2.9 billion that it allocates towards prepaying next year’s debt. IBO estimates that there will be an additional $1.7 billion available, mostly due to agency underspending, for a resulting 2025 surplus of $4.6 billion. A growing concern is the Adams administration’s prepayment of $2.9 billion follows a pattern of shrinking pre-payments year-over-year since 2022.

Over that time, the pre-payment has shrunk from 9% of year-end tax revenues in 2021 to 4% this year. This means that the Adams administration’s practice of spending more than the revenue it brings in is unsustainable. IBO’s estimated gaps increase to $7.2, $7.9, and $7.1 billion in 2027, 2028, and 2029, respectively. These gaps are on average 7% of City tax revenues. This is minimally larger than the gaps the City has closed in recent years, which were around 4% to 6% of City tax revenues.

D.C. BUDGET

On March 8, the U.S. House of Representatives introduced a resolution to temporarily fund the federal government while mandating a federal spending freeze. Historically, continuing resolutions have exempted the city from spending freezes, since the money it spends on services comes from locally raised taxes, not federal funds. That provision was not in the House’s resolution. This created a $1.1 billion shortfall with the fiscal year already half over. The U.S. Senate unanimously passed a bill allowing D.C. to keep operating according to its current budget but the chaotic House failed to adjust its CR to include funding for D.C.

In mid-April, the mayor announced that the city was going to address most of the shortfall by invoking a 2009 federal law that gives the city the authority to increase its appropriated funding by up to 6 percent. That only eliminated some of the shortfall. Now, with the House still unwilling to act, the City outlined how it would close the remaining gap. Some payments would be pushed into the next fiscal year, which begins in October; some debt would be refinanced; open positions would temporarily go unfilled; and certain individual programs would face cuts.

It is apparently not enough for ideologues that the DOGE-related mass layoffs of federal workers have reduced the city’s revenue estimates by more than $1 billion over the next three years and has led Moody’s to downgrade the city’s credit rating.

CHICAGO ON NEGATIVE

Fitch affirmed Chicago’s A- rating on its GO debt. It did change its outlook to negative. “The revised Outlook on Chicago’s IDR and GO bond rating to Negative is driven by a lack of substantial progress procuring permanent and high impact solutions to its structure budget gap. This is estimated at more than $1.1 billion for 2026 (roughly 20% of the corporate fund budget). Fitch estimates reserves could weaken to less than 15% of spending by the end of 2025 compared to 29% in 2023. The city has budgeted reserve draws in 2024 ($414 million) and 2025 ($368 million), to help close its fiscal gap and fund advance contributions to its pension funds.” 

The City also faces uncertainty regarding potential reductions in state aid. The State’s budget process is unfolding in the face of potential cuts in federal funding both to the State and City. What could drive a downgrade? Management ineffectiveness, including late budget adoption, failure to adhere to fund balance policies or irresolute or excessively contentious fiscal decision-making; material reliance on non-structural fiscal measures (including fund balance use), aggressive budget assumptions or failure to fund the full statutory pension contribution, at a minimum; an actual or expected weakening of available reserves to less than 10% of general fund spending.

HURRICANE SEASON

The National Oceanic and Atmospheric Administration issued its forecast for this year’s Atlantic hurricane season. It expects to see between 13 to 19 named storms this year. That would make for anabove-average season, and most likely not as active as 2024 ended up being. An average Atlantic hurricane season has 14 named storms, including seven hurricanes and three major hurricanes.

The agency’s forecasters believe that six to 10 of the named storms could become hurricanes, meaning they would include winds of at least 74 miles per hour. Those could include three to five major hurricanes — Category 3 or higher — with winds of at least 111 m.p.h. According to NOAA, there is a 30 percent chance of a near-normal season and a 60percent chance of an above-normal season, with a 10 percent chance of a below-normal season.

CONGESTION PRICING

U.S. Judge Lewis J. Liman granted the Metropolitan Transportation Authority’s request for a temporary restraining order against the Trump administration efforts to end congestion pricing in Manhattan. Judge Liman noted that the M.T.A. “showed a likelihood of success” in its case to maintain congestion pricing. New York State “would suffer irreparable harm” without a restraining order. The decision leaves congestion pricing in place through at least June 9.

Secretary of Transportation Sean Duffy said in February that the department would begin withholding federal approvals and funding for a range of transportation projects beginning on May 28, starting with a payment freeze on a number of highway and transit accessibility projects. That was tied to a May 21 deadline which came and went as did the previous deadlines.

NUCLEAR

President Trump signed four executive orders to support accelerating the construction of nuclear power plants in the United States.  The orders include support for small modular reactors that offer the promise of faster deployment.

One order directs the Nuclear Regulatory Commission to streamline its rules and to take no more than 18 months to approve applications for new reactors.

Another directs the Energy and Defense departments to explore siting reactors on federal lands and military bases, possibly alongside new data centers. That could allow the departments to bypass the N.R.C. and develop their own, faster processes for approving reactors. Advanced nuclear facilities would only have to start construction by the end of 2028 to access 45Y and 48E tax credits.

The Tennessee Valley Authority applied for a license to construct the first small nuclear reactor at its Clinch River Nuclear Site in Oak Ridge, Tennessee. TVA is the first utility to submit a construction permit application to the U.S. Nuclear Regulatory Commission for a small modular reactor. The first small modular reactor at the Clinch River Nuclear Site could cost around $5.4 billion, according to a draft of TVA’s long-term energy plan.

The project will use its own variant of GE turbine technology already employed at TVA. The other two SMR projects proposed for Wyoming and Texas use reactors are cooled by salt and gas rather than water. The Nuclear Regulatory Commission will likely take 2 1/2 years to review and grant the construction permit. TVA can begin on non-nuclear construction as early as 2026 if it secures a Department of Energy $800 million grant for the project.

California startup Valar Atomics and the state of Utah announced a partnership to have a new nuclear test reactor operating in the state in one year. The reactor will be developed at the San Rafael Energy Research Center in Emery County, which was purchased by the state last year. It is all part of a plan to develop a fleet of SMRs throughout the State of Utah.

COAL

The Trump administration declared that ​“an emergency exists in portions of the Midwest region of the United States due to a shortage of electric energy.” It cites that “shortage” to invoke the DOE’s emergency authority under the 1935 Federal Power Act to unilaterally order any power plant in the country to keep running. Now, the U.S. Department of Energy issued an order demanding that the J.H. Campbell plant, a 1,560-megawatt coal-burning power plant owned by Michigan utility Consumers Energy, must abandon its plans to shut down on May 31 and instead continue operating through at least late August.

The closure has been long anticipated and planned for since 2021. The planned shutdown is part of a broader agreement between Consumers Energy and state regulators to end coal use by 2025 and put the utility on a path to meeting the state’s mandate of 100% carbon-free power by 2040. Consumers Energy has estimated that the switch from costlier coal to cheap gas, solar, and energy storage will save customers $600 million through 2040.

The DOE justified its emergency order by citing a December 2024 report from North American Electric Reliability Corporation which said that the Midwest was at the most risk of “grid reliability challenges”. The power from the coal plant is offset by new gas generation and renewable energy purchases. The Trump administration has offered regulatory relief to some 70 coal fired generation plants nationwide.

MUNI SOLAR

In the midst of the array of trade barriers being erected by the Trump administration, the City of San Antonio’s electric utility (CPS Energy) has entered into an international agreement to develop solar and battery resources for its system. OCI Holdings of Korea announced that its U.S. subsidiary, OCI Energy, has signed a three-party memorandum of understanding with CPS Energy, and Vertech, the U.S. subsidiary of LG Energy Solution, to collaborate on energy storage system (ESS) projects in North America.

OCI Energy will obtain ESS batteries from Vertech, store solar energy generated during the daytime and sell the stored electricity to CPS Energy. The first project is the Alamo City ESS project a solar power facility under development on a 35-acre site in southeastern Bexar County in Texas. It will combine a 120-megawatt solar photovoltaic system with a 480-megawatt-hour energy storage system. OCI signed a 20-year storage capacity agreement with CPS Energy to supply power to the San Antonio area.

OCI will be a potential electric customer. It recently revealed plans to spend $265 million to build a solar cell manufacturing plant in San Antonio. It is expected to reach a production capacity of 2 gigawatts — 1 gigawatt in the first half of next year and another in the second half. 

HOSPITAL FIRST AID

In 2023, S&P lowered its rating to ‘A-‘ from ‘A’ on PeaceHealth, Wash.’s existing taxable bonds and tax-exempt revenue bonds. They kept a negative outlook. PeaceHealth, based in Vancouver, Wash., is a nonprofit Catholic health system providing care to communities in Washington, Oregon and Alaska. PeaceHealth has approximately 16,000 employees, a multi-specialty medical group practice with more than 1,100 providers, and 10 medical centers serving both urban and rural communities.

It is clear that the hospitals’ operating trends have not improved. It’s not a surprise given its smaller community orientation and the unfavorable demographics in those areas. PeaceHealth gets between 55 and 58% of its revenue from Medicare and Medicaid. Medicare alone is 40%. Operating losses have continued albeit with some improvement in FY 2024. Only strongly increased investment earnings got the system to breakeven.

Now the system is making cuts to better balance operations. It announced a 1% staffing reduction this week with immediate effect.  A hiring freeze is also being implemented through 2025, with the exception of clinical and essential operational roles. One important metric did follow recent trends unfortunately. Days in cash on hand declined again.

TARIFFS AND PORT CAPITAL COSTS

Much of the focus on proposed tariffs is rightfully on the most obvious impact – reduced shipping and port activity. That does have an impact on port revenues. The industry however is directing its attention to one serious impact to ports from a specific proposal regarding tariffs and Chinese ship building and the manufacture of port equipment led by The American Association of Port Authorities (AAPA).

Ship-to-shore (STS) cranes are a basic component of modern ports. They are the structures which actually load and unload containers onto ships. Currently, no U.S. companies manufacture STS cranes, and Chinese firms dominate the market. A joint survey by AAPA and the Maritime Administration revealed that 55 cranes are currently on order for U.S. ports, 44 of which are being sourced from China. Over the next decade, U.S. ports are expected to acquire 151 cranes, with about 80% projected to come from Chinese suppliers.

The Trump administration has proposed and then suspended the imposition of a 100% tariff on STS cranes imported from China. Before tariffs, a crane cost roughly $15 million. With the proposed tariff layered atop existing duties, AAPA estimates that U.S. ports could face $6.7 billion in additional costs over the next 10 years. One example is the Port of Houston, which has eight Chinese cranes scheduled for delivery in 2026. That result in $302.4 million in extra fees if the tariff is applied.

The AAPA has urged the US Trade representative to consider exemptions for cranes ordered before April 17, 2025, delay implementation by one to two years, and clarify whether the proposed Section 301 tariffs will be cumulative with existing duties.

CARBON CAPTURE AND WATER

The Mahomet Aquifer supplies water to hundreds of thousands of people in central Illinois.  Estimates for the number of Illinois residents served daily by the aquifer range from 500,000 to 1 million people. In 2015, portions of the aquifer in 14 Illinois counties were designated as a sole source aquifer by the EPA, since contamination of the aquifer could cause significant public health risk. That EPA designation also indicates that there are no “reasonably available alternative drinking water sources” that could be used if the water in the aquifer were contaminated.

Archer Daniels Midland (ADM) has been operating a carbon injection site in Illinois since 2011. The project received the first federal permit for “geologic sequestration of carbon dioxide” in 2017. Since then, the project has stored more than 4.5 million tons of carbon dioxide more than a mile underground. Last year, it was found that a leak occurred during carbon injections carried out by ADM.  8,000 metric tons of liquid carbon dioxide and other ground fluid escaped the area it was permitted to be in.

ADM temporarily paused carbon injections in October after another issue with a well was identified. Now, legislation awaits the Governor’s signature which would restrict injections in the area of the aquifer. SB1723 passed out of the Senate in April 55-0 and passed out of the House on Tuesday with a vote of 91-19.

This week, the Environmental Protection Agency announced it was turning over regulatory oversight of carbon injection facilities in Arizona to the state.

There are no carbon injection facilities in Arizona and no permits have yet been requested to build any in the state. The Arizona Department of Environmental Quality is the state agency that will be responsible for implementing state oversight. Debate over carbon wells revolves around groundwater issues.

The state is losing significant groundwater supplies as industrial agriculture has engaged in significant pumping of groundwater to irrigate its crops. An Arizona State University study found that the Colorado River basin has lost 27.8m acre-feet of groundwater in the past 20 years, an amount of water nearly equivalent to the full capacity of Lake Mead. Most of the groundwater losses since 2003 occurred in the lower Colorado River basin which includes Arizona. Depletion of water storage in the Colorado River basin has sped up in the past decade. Since 2015, the basin has been losing freshwater at a rate three times faster than in the decade before, driven mostly by groundwater depletion in Arizona.

INTERNATIONAL STUDENTS

We have already commented on the role of international students as a source of funding for U.S. universities. While Harvard has been in the spotlight through its ongoing fights with the White House, a number of well-known institutions – public and private – have substantial cohorts of international students. These are the universities with the largest number of students and the share of international students as a % of total full time enrollment. Data is from the National Center for Education Statistics.

NYU – 49,847 (37%); Michigan – 48,167 (17%); Illinois – 47,118 (23%); Washington – 43,118 (18%); USC – 41,648 (28%); UC Berkeley – 41,572 (17%); UC San Diego (40,716 (18%); UC Davis – 38,184 (15%); UC Irvine – 35,511 (16%); Northeastern – 29,738 (40%). For the schools currently in the crosshairs Harvard has 20,807 (28%) and Columbia has 28,756 (40%).

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

TEXAS POWER

There has been a flurry of Texas legislation seeking to erect or maintain barriers to renewable projects. S.B. 388 requires every new megawatt of renewables to be matched by a megawatt of new gas power. It would require at least 50 percent of power generation installed after January 1, 2026, to come from “dispatchable” energy sources, which include natural gas and coal.

S.B. 819 would use “the police power of the state” to restrict landowners from leasing their properties to wind and solar companies. The bill would make it harder to permit renewable energy projects. The bill invokes the “police power of [the] state” to “increase electric generation” and “mitigate unreasonable impacts of renewable energy generation facilities on wildlife, water, and land” in Texas. The legislation would require new renewable energy projects that generate over 10 megawatts—enough to power about 10,000 homes—to obtain permits from state regulators before connecting to the power grid. 

The Texas Senate passed S.B. 715 which would require all renewable projects — even existing ones — to buy backup power, largely from coal or gas plants. It would require solar plants in particular to buy backup power to “match their output at night. The usual reliability arguments are being made by coal/gas advocates. This isn’t about daytime reliability (that’s not an issue). The bill would also force renewable projects to pay an annual “environmental impact fee” to fund site cleanups of these projects. Greenhouse gas-emitting energy projects in the state, including oil and natural gas, are not subject to similar dues. 

A study by the Texas Association of Business (TAB) concluded the laws would cost the state $5.2 billion more per year — and cost individual consumers $225 more each year. The irony is that Texas is a leader in installed wind and solar capacity. It has been established that shortages under a variety of weather situations have not been the result of renewable generation. Nevertheless,

the state’s oil and gas lobby continues to push against renewables.

NEW YORK STATE BUDGET

The State of New York finally has a budget some five weeks after the beginning of fiscal year 2026. The budget faced some thorny issues such as funding for the MTA in the face of threats to federal funding. Fiscal issues weren’t the source of the delay, however. Rather it was non-fiscal policy issues that held up enactment. Primary among them were changes made to recently enacted legislation which was seen in the criminal justice system seen as more favorable to defendants. Others were changes to the state’s involuntary commitment standards and a bell-to-bell cellphone ban in schools.

The fiscal side did include items such as an inflation rebate check program ($2 billion to provide direct cash assistance to more than 8 million New Yorkers with checks of up to $400 per family), a child tax credit (a $1,000 credit for kids younger than 4 years old and a $500 credit for kids ages 4-16) and middle class tax cut ($1 billion). 

Gov. Kathy Hochul signed new legislation as part of the FY26 Enacted Budget to fully fund the MTA $68.4 billion 2025-29 Capital Plan. The funding plan that also includes cuts to the regional Payroll Mobility Tax (PMT) for roughly 10,000 small businesses and an elimination of the PMT for self-employed individuals earning $150,000 or less. The plan will also eliminate the PMT for all local governments outside New York City. 

In addition to providing $8 billion in total operating aid for the MTA, the FY 2026 Budget will give a $3 billion State capital appropriation to support the MTA capital plan. The FY 2026 Budget also requires the City of New York to provide $3 billion toward the MTA capital plan and requires the MTA to find $3 billion in efficiencies. 

In the end, this budget might not matter that much. All of the major players in the process agree that proposed changes to federal budgets could substantially reduce funding and create gaps which would need to be addressed.

CALIFORNIA MAY BUDGET REVISION

Governor Newsom proposed a $322 billion state budget for fiscal 2026. According to the Governor, Washington’s imposition of tariffs has driven a downgrade in both the economic and revenue forecasts. Combined with increased expenditure growth above the Governor’s Budget—most notably in Medi-Cal—the state must now close an estimated shortfall of $12 billion to balance the budget.

Market volatility since tariffs were imposed has resulted in a substantial downgrade to the S&P 500 forecast in the second quarter of 2025. The impact of tariffs on financial markets was seen in significantly reduced stock prices of the largest California-based technology companies. The May Revision forecast assumes stock-based compensation to their employees is projected to decrease in 2025.

This is contributing to a downgrade in projected personal income tax revenues in 2025-26 that will reverse the positive trends in personal income tax withholding cash results through April 2025. In addition, personal income tax revenues from capital gains were significantly downgraded in 2025-26 due to the stock market decline.

Expenditures in the Medi-Cal program—the state’s health care program for low-income individuals—have increased significantly and continue to outpace revenues. In Spring of 2025, a cash flow loan of $3.4 billion was executed and an additional $2.8 billion General Fund was appropriated to support Medi-Cal expenditures of $37.6 billion General Fund in 2024-25. The major drivers of these increases are higher overall enrollment, pharmacy costs, and higher managed care costs.

It is the source of proposed cuts to deal with the budget gap which is getting much attention. Most prominent is an enrollment freeze for Full-Scope Medi-Cal Expansion for Undocumented Adults, Adults 19 and Older. Others include imposing Medi-Cal Premiums on Adults 19 and Older and Asset Test Limits.

The May Revision maintains the planned withdrawal of approximately $7.1 billion from the Budget Stabilization Account (BSA). That would leave total reserve balances of approximately $15.7 billion at the end of 2025-26. This consists of $11.2 billion in the BSA and $4.5 billion in the Special Fund for Economic Uncertainties.

IOWA EMINENT DOMAIN

Iowa senators voted 27-22 to pass a bill to limit the ability of carbon sequestration pipelines to use eminent domain. House File 639 comprised a number of bills passed by the House aimed at eminent domain. As written, the bill changed definitions of a common carrier, increased insurance requirements to cover any damages to property and reimburse landowners for increases in premiums due to the pipeline. It set requirements for the Iowa Utilities Commission (IUC) and expanded who can intervene in IUC proceedings.

This is the first time that the Senate took a vote on a bill associated with eminent domain after three other attempts. As is often the case with potentially difficult policy decisions, the budget process offered the best vehicle for progress on the issue. By refusing to vote on a budget for the State, supporters of the legislation were able to force consideration of the bill. This year, debate was contentious and efforts to amend the bill in favor of the Summit Carbon Solutions failed.

The effort to amend the bills focused on provisions designed to protect the Summit project. It was led by a former managing director (now a sitting State Senator) of a related entity Summit Agricultural Systems. Opposition to the Summit pipeline regularly hovers around 75%. It actually was in issue in the 2024 Iowa caucuses.

One interesting issue arises from the legislation. Does enactment language in the bill open the door to lawsuits from Iowans who have already signed an easement contract with the state when Summit is no longer able to uphold that contract without eminent domain to complete the project? It’s not clear how many land owners took the money out of fear of eminent domain but clearly many did. Will they be able to get out of their agreements and, if so, at what price?

Summit faces other challenges. The North Dakota Supreme Court heard arguments in a case where landowners are suing the state of North Dakota and the state Industrial Commission over a state law that can force landowners to take part in an underground CO2 storage project. Under that law, landowners can be forced to allow carbon dioxide storage beneath their property if 60% of the landowners agree to a storage project. The argument is that the law is unconstitutional because it doesn’t allow landowners to use the court system to argue for just compensation. 

The Northwest Landowners Association is the lead plaintiff in this case. It successfully challenged a 2019 North Dakota pore space law at the state Supreme Court, with justices finding it unconstitutional.

IS THIS LIFE AFTER FEMA?

Recently, North Carolina received a $1.4 billion grant from the U.S. Department of Housing and Urban Development for disaster recovery—including the repair or reconstruction of single-family homes, rental housing and infrastructure—as well as economic revitalization and mitigation. The grant administration is a state responsibility. The N.C. Department of Commerce on May 9 awarded a project management contract to Horne LLP, worth $81.5 million over the next three years to run North Carolina’s disaster recovery program in western counties flattened by Hurricane Helene.

The contract was awarded despite the fact that Horne was the prime contractor for the N.C. Office of Recovery and Resiliency, also known as ReBuild NC, providing case management and other services from 2019 to 2022, when the firm’s contract was not renewed after many disaster victims complained about poor case management. Here is how privatization gets a bad name. The western North Carolina disaster recovery advisor to Gov. Josh Stein, worked for Horne until April 2024. He was one of six people who authored the RFP.

The state noted in the RFP that this ranking method “may result in an award other than the lowest price or highest technically qualified offer.” In Louisiana, the state auditor investigated Horne in November 2022 after several company employees allegedly received COVID-related relief funds they were administering. Earlier that year the state of Alabama had to return more than $42 million in pandemic aid to the U.S. Department of Treasury after Horne failed to distribute emergency rental funds on time. In April, in West Virginia, Horne agreed to pay $1.2 million as part of a settlement agreement with the federal government over alleged improper billing for services related to disaster recovery in the state.

CALIFORNIA FIRE INSURANCE

The California FAIR Plan Assn., the state’s insurer of last resort, assessed its member carriers $1 billion on Feb. 11. The plan, operated and backstopped by the state’s licensed home insurers, said it has made $2.75 billion in claims payments as of last week and expects its costs for the fires will total $4 billion, which it could not cover with its limited surplus and reinsurance funds.

Under a plan approved by the state’s insurance regulator, insurers are filing applications with the state Department of Insurance seeking to surcharge their policyholders statewide for half the costs of that assessment. Ten home insurers and their affiliates have filed applications for surcharges, with the fees ranging from about $6 or less for some rental policyholders, $20 or $30 for condo owners and typically $40 to $60 for a standard homeowners policy. A bill working its way through the Legislature would authorize the California Infrastructure and Economic Development Bank to issue bonds on behalf of the FAIR Plan to help pay its claims and increase its liquidity.

State Farm is estimated to cover some 1,000,000 homes which means that one in five homes in the state are State Farm customers. Given that dominant position, it’s not a real surprise that the company has been the target of criticism from customers trying to navigate the insurance process. In spite of a 20% rate increase granted in 2024, the January fires have driven even higher insured losses. The State Insurance Commissioner has now approved State Farm for a “temporary” 17% increase in premium rates. The interim rates go into effect on June 1. 

S&P Global Ratings downgraded State Farm’s California subsidiary from an “AA” to an “A+” rating. The action reflected “a significant deterioration” in the company’s capital position over the last five years. The Commissioner’s order does require State Farm’s parent company to provide an infusion of $400 million in cash to the California subsidiary.

CLIMATE LITIGATION

In 2021, the most destructive fire in Colorado history, the Marshall Fire, burned more than 1,000 homes in Boulder County and caused more than $2 billion in damages. That was some three years after Boulder County and the City of Boulder began litigation against fossil fuel producers. Like so many other cities and states, the Boulder lawsuit claims taxpayers shouldn’t bear the full cost of disasters like floods and wildfires. It argues the two defendant companies should share the financial burden after knowingly contributing to climate change and misleading consumers about the risks of burning fossil fuels.

As is the case everywhere else, the companies argue that the cases belong in federal court where they believe they will have a more sympathetic audience. Like everywhere else, the Colorado Supreme Court ruled the lawsuit could proceed within Colorado. The decision returned the case to a lower district court, which had already ruled the lawsuit wasn’t preempted by federal law and belonged in the state legal system. 

BRIGHTLINE RATINGS DIM

Fitch downgraded $2.219 billion of Brightline Florida LLC’s senior secured private activity bonds to BB-plus from BBB-minus and cut Brightline East LLC’s (BLE) $1.1 billion senior secured taxable notes to CCC-plus from B. Both securities have been placed on rating watch negative. It follows news that S&P lowered its outlook on its BBB-minus underlying rating on Brightline Trains Florida LLC’s (OpCo) bonds to negative from stable. Of the $2.2 billion in tax-exempt bonds, $1.13 billion is insured by Assured Guaranty (AGO) and rated AA.

Fitch said “The downgrades to OpCo and BLE debt reflect the weaker than expected ridership ramp up, lower fares, elevated operating costs, and significant spend down of the project’s liquidity accounts. The rating further reflects a number of unanticipated expenses that were not previously reported to Fitch that resulted in material draws on cash balances. Ramp-up is expected to be comparatively longer for Brightline than for other new transportation development projects.

Ridership data to Orlando is limited, complicating the validation of consultants’ long-term forecasts, and initial fares are high relative to competing alternatives particularly to Orlando. Due to slower ridership ramp up, lower fares, and higher operating expense, Brightline ended the year with an operating loss of $63 million.”

S&P notes that “ticket revenue is ramping slower than we anticipated, causing year-to-date revenues as of third-quarter 2024 to lag our base-case forecast by 20%. Notably, for the same period average long-distance fares were 19% lower than our forecast, long distance ridership revenue accounts for about 70% of total ticket revenues in 2024 under our base case. OpCo expenses reported through the third quarter of 2024 are higher than our base case by 7%. We understand additional costs have been incurred in fourth quarter 2024, impairing the balance of the reserves. 

Both agencies see the potential for a serious liquidity crunch in the next 18-24 months.

NEW YORK CITY – RIKERS ISLAND

Federal Justice Laura Taylor Swain (yes, the same judge handling Puerto Rico’s bankruptcy) ordered the City of New York to appoint an outside official to make major decisions regarding the operation of the City’s prison complex on Rikers Island. The official, called a remediation manager, would work with the New York City correction commissioner, but be “empowered to take all actions necessary”. The official would report directly to the judge and would not be a city employee.

The decision comes some ten years after the City settled litigation over conditions at the jails. That settlement resulted in the appointment of a federal monitor who reported on operations. That position was not empowered to make decision, whereas the “manager” is. It is an extraordinary step. Since 1974, federal courts have put only nine jail systems in receivership, not counting Rikers order. In November, the judge found the City found the city to be in contempt for failing to stem violence and excessive force at the facility.

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