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 20th 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.
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