Joseph Krist

Publisher

This week, we update a couple of recent comments. The trade deal agreement with China does remove two items which were having real world impacts on American interests. Rural America will benefit from the resumption of imports of American soy beans  by China. Soybean purchases will take a couple of years to return to levels seen pre-Trump 2.0. The second is port fees. We recently cited examples of the impact of anti-China policies on shipping and trade. With the relaxation of short-term trade tensions. It will take a while for trade flows to renormalize since so much was shipped in July and August.

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NOVEMBER REALITIES

November 1 has emerged as a crucial date in the Congressional standoff and government shutdown. Without a continuing resolution, funding stops for significant social service programs most prominently SNAP, the program supporting some 42 million Americans. The impact of cuts like that can have potentially serious impacts especially in the nation’s largest cities.

NYC has explained the potential negative impact of impending federal funding cutbacks on the City. The federal government will cease paying SNAP benefits November 1^st which has not occurred in prior shutdowns. In 2025, about 1.8 million NYC households received monthly support through SNAP and spent $5 billion throughout fiscal year 2025 in retail establishments. Even with a reopened government, recipient numbers are projected to fall due to increased and more difficult compliance requirements.

Several OBBBA changes related to SNAP impact the State and the City. Shifting more of the City’s administrative costs by increasing the City’s cost to process applications, screen for eligibility, and distribute benefits. The federal government previously split those costs in half with the City, but starting in 2026, the federal government will pay only 25% of the costs, forcing the City to pay the remaining 75%.

The new work requirements were originally scheduled to begin in March 2026, at the end of the State’s most recent waiver for work requirements related to the pandemic and job availability. Instead, in early October, the USDA announced it was terminating all previously issued waivers nationwide. The USDA estimates that each $1 spent on SNAP results in $1.54 spent in the total economy. These benefits totaled about $5 billion in NYC in City fiscal year 2025, spent in any one of over 8,600 NYC retail establishments, 40% of which are convenience stores and 26% are grocery stores. Applying the USDA multiplier, SNAP’s total impact on the NYC economy could be up to $7.7 billion.

NEW ORLEANS

The State of Louisiana Fiscal Affairs Committee is one of those entities you usually do not hear about much. It is responsible for reviewing and, on occasion, intervening in the financial stability of cities and parishes through the appointment of fiscal administrators, who are empowered to formulate local budgets, hire and fire personnel and approve contracts unilaterally, without the consent of elected officials. We last saw similar situations around Detroit in the last decade.

The actions follow intervention in the City’s budget process by the State’s increasingly active Governor. The City had asked for a $125 million loan to assure that payroll is met through year end 2025. According to the incoming Mayor, the only way the State Bond Commission would approve the $125 million bond request is if the council agreed to have a state administrator take over the city’s finances. 

The fiscal administrator law was recently amended to make it easier to trigger a fiscal review. If a political subdivision fails to meet any of ten listed conditions, including having insufficient revenue to cover a year’s worth of operating expenditures, it can be subject to takeover. As you would expect, the move to impose an administrator is not sitting well especially with a newly elected Mayor.

LAYOFFS

With so much attention on the lack of official data from the federal government, one has to look for more anecdotal evidence of what is going on in the economy. That is especially true for the labor market. So, we have noticed some clear headline events around jobs. Amazon is clearly looking to eliminate hundreds of thousands of warehouse and fulfillment jobs. They are also looking to reduce white-collar positions by the tens of thousands.

General Motors plans to lay off 1,750 workers indefinitely in the coming months and an additional 1,670 temporarily as it reduces electric vehicle production. After Tesla, G.M. sells more battery powered cars in the United States than any other manufacturer. Rivianannounced 600 layoffs, about 4% of its workforce, amid an EV market pullback, marking its third layoff this year. Paramount is going to lay off about 2,000 employees — about 10% of its workforce. UPS said it’s cut about 34,000 operational positions — and the company announced another 14,000 role reductions.

NUCLEAR

Santee Cooper announced that it has signed a letter of intent regarding the potential sale of two unfinished reactors at the abandoned V.C. Summer project in South Carolina to Brookfield Asset Management. The 2.2-GW project was mothballed in 2017 following delays and cost overruns. Santee Cooper has maintained equipment at the site over the past eight years in the hope that the project could become viable again. It launched a competitive bidding process in January.

Initial expressions of interest from over 70 potential bidders and 15 formal proposals were submitted. The letter of intent with Brookfield establishes a six-week initial project feasibility period during which the parties will select a project manager and evaluate construction providers to resume construction of the two nuclear units. The agreement comes along with the announcement of an agreement with Westinghouse Electric, Cameco and Brookfield and the US government to fund $80 billion of nuclear power development.

Google and NextEra Energy will collaborate to restart the 600-MW Duane Arnold Energy Center in Iowa as part of a larger partnership aimed at accelerating nuclear deployment across the U.S. Google and NextEra say they expect Duane Arnold to be back online in early 2029. The Federal Energy Regulatory Commission in August approved a waiver request that will allow NextEra to restart the facility. NextEra shuttered the plant in 2020.

HYDROGEN

Recent weeks have seen a slew of indications that the Trump administration is pulling the plug on federal funding for the development of so-called hydrogen hubs. Initially, seven such groupings of various production facilities were to be located across the country. While the effort was very ambitious and full development of hubs unlikely, it is disappointing that efforts in this area are slowing significantly.

That leaves efforts to develop hydrogen fueled generation and/or production facilities to the private sector. Hyundai Motor Group says its plan to invest $6 billion to develop a low-carbon steel mill in Louisiana ​“remains unchanged,”. This comes after tax credits supporting green hydrogen projects were cut for the green hydrogen needed to produce clean iron and the immigration raid on a factory the automaker is building in Georgia.

There had been real concerns that potential investments could be reduced or withdrawn in the face of policy hostility. Hyundai recently said construction at the Georgia plant is being slowed due to labor shortages, and work on at least 22 other South Korean projects in the U.S. has nearly all halted, according to the press reports in South Korea.

The Louisiana project is set to come online in 2029. It will use direct reduced iron, a cleaner method of making iron that relies on natural gas or hydrogen instead of the coal that fuels a blast furnace, the Hyundai facility is slated to produce 2.7 million metric tons of steel each year, including​“low-carbon steel sheets using the abundant supply of steel scrap in the U.S.”

Initially using what’s called blue hydrogen, a version of the fuel made with natural gas and equipped with carbon-capture technology to prevent the emissions from entering the atmosphere. But by 2034, Hyundai intends to start producing green hydrogen — made with renewable energy — at the facility to power the process.

Green steel has had a rocky road on the path to development. Perhaps reading the tea leaves before President Trump returned to office in January, Swedish steel company SSAB suspended talks with the Department of Energy for a $500 million grant to support a green-steel project in Mississippi. In June, Cleveland-Cliffs decided against implementing its plans to replace the blast furnaces at its Middletown Works facility in Ohio with cleaner, hydrogen-ready technology, also with $500 million in financing from the federal government.

BATTERIES LOSE TAX POWER

In 2022, the State of Michigan lured a Chinese electric vehicle battery manufacturer to build a $2.1 billion production facility near Big Rapids, about 200 miles northwest of Detroit. State lawmakers approved nearly $175 million in incentives for the project. From the start there were political concerns about the manufacturers Chinese roots. Support for the plant was pressured especially as trade issues grew between the US and China.

The state is now holding Gotion Inc., the manufacturer, in default of $23.6 million of incentives, accusing the company of abandoning the project. Michigan informed Gotion that it was in default of economic development grant obligations because no “eligible activities” had occurred on the site’s property in over 120 days. The state is seeking to claw back $23.6 million that was disbursed toward the purchase of the site’s land. $26.4 million remaining from the grant that was not spent will be returned to the state, Emerson said. Citing a lack of progress on the project, a different $125 million grant was not distributed to Gotion.

When the project was proposed, officials said the factory would produce over 2,000 jobs. 

MORE FEMA CUTS

FEMA has denied the state’s request for a second time for help following a March ice storm that left significant damage in Northern Michigan. Gov. Gretchen Whitmer had appealed the initial denial in August, seeking funding to repair homes, utilities and risk reduction efforts. While the funding for home and utility repairs was denied, a request to fund long-term projects to reduce future risks, is still under review.

The denial comes after President Donald Trump announced in July he was approving $50 million in assistance for storm recovery efforts. But that was limited: FEMA approved assistance to state, local, tribal and territorial governments and certain private nonprofit organizations. State lawmakers included $14 million for northern Michigan ice storm recovery in the new budget approved this month. 

MUNICIPAL UTILITY SOLAR FEE CHALLENGE

The municipal utility which provides electricity in Bowling Green, OH is being sued over its solar energy fees. It puts a spotlight back on the debate over how to fund an existing utility’s generation and transmission base as more customers move to employ solar panels and batteries. A monthly charge is imposed by the city of Bowling Green’s municipal utility on its few customers with solar panels on their rooftops. Customers who use batteries to store surplus solar power pay even more.

It is the latest effort to reduce the revenue hit to legacy utilities from the expansion of individual generation. In response, one customer is suing the City over its fixed monthly charge. Bowling Green said that the city adopted its $4-per-kilowatt monthly charge for installed renewable capacity ​“to ensure rooftop solar customers were paying for the electric service they were receiving, and that the rooftop solar customers were not being subsidized by non-solar customers.”

It is almost a formulaic response which is unsurprising given its use almost exclusively by proponents of the legacy providers. Bowling Green supports one as it does have a long-term ​“take-or-pay” contract to obtain half of its power from the Prairie State coal plant in Illinois. That coal plant is a top ten national carbon emitter and the “leader” in Illinois.

That has created a real knot for the utility to untie. The case is being made that the solar customer is actually subsidizing the traditional customers. That is because the utility pays 7.9 cents a Kwh under its net metering scheme but it sells the power across its system for 13 cents a Kwh. Customers have noticed.

ALASKA LOCAL DEBT

The State of Alaska has been working to find ways to tighten its financial belt as it works through periods of lower oil revenues. Alaska’s current oil prices are below  what lawmakers budgeted for. This has led to the State looking at solution’s for its budget. Some of them will have direct impacts on the debt funding ability of local governments.

The state’s School Bond Debt Reimbursement Program started when the Alaska pipeline supported oil production in the 1970’s. Local governments borrowed money to pay for new or improved school facilities, and the state committed to help repay the debt over time. The cost for the state to fully fund projects under the program would have been roughly $47 million a year.

Now, 17 Alaska municipalities and school districts that are trying to close budget shortfalls after the state cut its payments for school construction and renovation projects by roughly 25-30% this year. In 2015, the Alaska Legislature paused funding of new projects for 10 years, a moratorium that expired on July 1. But the state kept paying for pre-moratorium debt. That has provided funding for up to 70% of local debt under the program.

This isn’t the first time lawmakers have reduced annual funding under the reimbursement Program.  In 2019, the governor cut the program and left districts to manage the additional funding requirements for debt payments from 2020 through 2022.. Then, in 2023, they back-paid districts and municipalities for those three years. There is no requirement that the State do so. If oil prices rise, that may deliver more revenue to potentially fund the program.

The timing of the reduction creates a dilemma for potential borrowers. The reduction in funding coincides with the expiration of the 10-year moratorium on the program. While this has created pressure to open the program beyond the existing borrowers, the funding cut works against that. The uncertainty raises concerns about small government’s ability to adequately plan and budget for debt service is support is sporadic rather than consistent.

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