Joseph Krist
Publisher
REALITY BITES
The Center for New York City Affairs, a nonpartisan research organization affiliated with the New School, recently estimated that the Mayor’s proposed free child care system for all New York City children under 5 would cost about $9 billion annually. That represents an average cost per child of around $27,000. The city currently offers free pre-K for 3-year-olds and 4-year-olds, with limited seats for 2-year-olds starting this fall. That program had an FY 2025 cost of $5 billion.
When originally proposed, the Mayor gave a cost estimate of $6 billion. New York State has given the Mamdani administration $1.2 billion to jump-start its program for 2-year-olds in some neighborhoods. City Hall currently has no plan to fund the expansion after next year, besides asking the state for more money. At the same time, the center’s report points out that it could be simpler and less expensive to incorporate child care vouchers for low-income families, which are already funded mostly by the state and federal government.
The report happens to coincide with the announcement that a deadline to appeal the applicability of the new pied a terre tax to many properties. That’s the tax which was supposed to fund programs like this.
TRANSIT ON THE BALLOT
Seattle is another jurisdiction which is asking voters to approve extensions and increases in the rate of taxes to support mass transit. Seattle voters will be asked in November whether they want to double the city’s current sales tax in exchange for more bus service. The proposal from Seattle Mayor Katie Wilson would renew the Seattle Transit Measure, raising the transit-dedicated sales tax from 0.15 percent to 0.3 percent. The proposal to enact a 0.3 percent tax for ten years is the maximum amount allowed under Washington state law.
The measure would allow the city to purchase more bus service from King County Metro, the regional public transit authority, and offer more free transit passes to low-income residents. According to the city, the measure would add 100,000 bus trips and 12,000 free passes per year. That would be in addition to the 180,000 bus trips and 10,000 passes funded by the existing measure, which voters approved in 2020. If the sales tax were to remain at the current rate, the city would actually end up having to cut service because of rising costs.
It is an example of a focused approached based on locally generated funding. It is very likely to pass given the city’s history of widespread support for tax-based transit funding.
CLIMATE LITIGATION
In Michigan, a new provision in the state’s 2027 budget prevents the state attorney general from “joining a multistate lawsuit or taking part of a lawsuit against the federal government or an oil or gas entity” without legislative approval. The budget language would also block Michigan’s attorney general from participating in lawsuits against the federal government. Two immediate predecessors sued the federal government without the Legislature’s permission so it is not clear what the actual impact of the language might be.
Michigan initiated a lawsuit earlier this year which accuses four of the largest producers and the American Petroleum Institute of breaking federal and state antitrust laws by acting as a “cartel” to restrict the development of renewable energy and electric vehicles. The Trump administration earlier this year unsuccessfully sued to block Michigan from filing its case.
FLORIDA PROPERTY TAX AMENDMENT SPEED BUMP
The proposed property tax amendment that is supposed to go before voters in November is misleading, A Florida state judge ruled that the proposed property tax amendment that is supposed to go before voters in November is misleading. The judge ordered the Florida attorney general to rewrite the ballot measure. The judge cited the use of multiple “political taglines” that do more to make the amendment appealing for voters than actually tell them what the amendment will do.
The judge identified several specific instances where the “descriptive” language actually contradicts the actual language of the amendment. The Attorney General has to submit any revised ballot language to the Florida Department of State within 10 days. Anyone challenging the new ballot language has 10 days to do so once it’s submitted to the Dept. of State. At least 60% of voters must approve the amendment on the November ballot for it to pass.
CHICAGO GOVERNANCE
The Mayor has less than one year until the end of his term. The City budget process begins in earnest after Labor Day. That means the focus should be on developing an executive budget which might have a chance of passage. So, it is not a good sign for Mayor Johnson’s final budget that the two primary fiscal officers of the City – the CFO and the Budget Director – have both resigned in the last week.
It is not clear who now speaks for the City to market participants. An annual presentation to institutional investors will now be conducted by, who knows, which will worsen an already poor perception of the City’s credit. Mayor Johnson said his team remains prepared to introduce a 2027 budget proposal in October. The most recent negotiations that led to a budget being passed over the mayor’s objections for the first time in 40 years.
One issue for the next budget fight already: how much of a tax increment financing surplus Johnson will declare. That question has been pushed to the forefront as the hybrid Chicago Public Schools board voted to approve a budget that assumed $150 million in additional revenue from Springfield. That money would have to be approved by the legislature during its fall session.
Should state leaders not heed the mayor’s and the Chicago Teachers Union’s calls for the funding, the city will likely either need to find additional money or risk painful midyear cuts at the district. CPS is already counting on the city to pull $285 million from the special property tax districts to help balance this school year’s budget.
MISSOURI AND BALLOT INITIATIVES
Missouri voters rejected an attempt by the Republican-controlled Legislature to make it harder to pass citizen-sponsored amendments to the state’s constitution. The measure would have amended the state’s constitution to require a majority in each of the state’s eight congressional districts, rather than a simple majority statewide, to pass citizen-sponsored amendments. Those requirements would have been the most restrictive against voter initiatives of any of the 18 states which permit them.
The Legislature had been upset because voters approved citizen-sponsored amendments that expanded Medicaid, legalized marijuana and sports betting, established a right to abortion, raised the minimum wage and required paid sick leave. All of these issues had been rejected by the Legislature. This measure would have amended the state’s constitution to require a majority in each of the state’s eight congressional districts, rather than a simple majority statewide, to pass citizen-sponsored amendments. None of the four amendments Missouri voters have passed since 2020 have won in all congressional districts.
INDIANA GAS TAX SHUFFLE
When we last reported on gas tax suspensions it appeared that the most recent such action in Indiana was the last authorized by law. In fact, Gov. Mike Braun was the one who said that he didn’t have the power to extend the tax break without the Legislature coming into special session and authorizing another extension. The emergency conditions attributed to the war in Iran no longer applied. That caused the need for new legislation. Or did it?
This week, the Governor said he was declaring a new emergency under the state’s energy emergency law. Rather than the U.S. war with Iran, the emergency is disruptions to global oil shipping lanes from the four-year-is old Russian invasion of Ukraine. He also pointed to troubles the Canadian wildfires have caused in the Alberta Oil Sands Region – blame Canada!
The Braun administration projected a revenue decrease of $533 million from the initial four months of the tax suspension. State officials began the process last month of reimbursing local governments from the State Highway Fund for their lost revenue.
TEXAS DATA CENTER COST FOLLOW UP
Last week we commented on the rising total of revenues being given up annually in Texas through tax incentives for data centers. While legislation will not be taken up in the Texas legislature until next year, action can be taken elsewhere. This week, Gov. Greg Abbott on announced a moratorium on the approval of data centers until regulatory agencies can audit proposed data centers seeking connection to the state’s electric grid.
Those audits will require significant amounts of data. Gov. Abbott is directing the Public Utility Commission of Texas and the Electric Reliability Council of Texas to ensure data center developers provide information on tax breaks they will receive; power use and generation; water use and cooling operations; efforts to reduce impacts on local communities; and ownership of the facility.
Abbott’s letter to the PUCT and ERCOT directs them to conduct the audit on all data centers advancing through ERCOT’s interconnection queue, or the line for energy intensive projects seeking connection to the electric grid. ERCOT is currently tracking more than 1,800 projects in the queue, representing over 474 gigawatts of electricity, or more than five times the grid’s record for peak demand, according to ERCOT. Approximately 90% of the new power requests are data centers, Abbott said.
PUERTO RICO UTILITY NEWS
The U.S. Department of Energy’s (DOE) Office of Energy Dominance Financing (EDF) announced it has closed a $489.4 million loan to Amanecer Puerto Rico LLC, a subsidiary of Pattern Energy. The loan is intended to fund 220 megawatts of battery energy storage systems in Arecibo and Santa Isabel using American-manufactured battery technology and secure domestic supply chains. Battery storage capable of providing backup electricity for more than 100,000 customers during power shortages and helping avoid approximately 13 million customer interruption hours based on 2025 operating data.
On the negative side, the Commonwealth’s water utility (PRASA) is facing serious operational issues. For the past year, the San Juan region has been affected by the outages. That impacts some 1 million residents. Reliability is poor as evidenced by increased water interruptions and issues with low water pressure. In June, more than 120,000 clients of the Puerto Rico Aqueduct and Sewer Authority (PRASA) had their taps run dry after three major ruptures were found in a key pipeline.
Gov. Jenniffer González-Colón declared a state of emergency on July 31 and activated the National Guard to help distribute and transport water – the second time the Guard was activated this summer due to water issues. Reservoir levels are so low that water rations are in place for the San Juan region beginning as we go to press.
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