Joseph Krist

Publisher

ZONING EARTHQUAKE

A long term goal of California advocates for denser transit oriented housing is on the edge of achievement as we go to press. Senate Bill 79 would “upzone” neighborhoods immediately surrounding train, light rail and subway stations in many of the state’s most populous metro areas. That means apartment developers will be able to construct residential buildings — some as tall as 75 feet — regardless of what local zoning regulations dictate.

The legislation is meant to create a path for more apartment developments in areas closest to jobs and services. By centering that development around public transit stations, it’s meant to steer more people away from cars and towards buses and trains. SB 79 would also give transit agencies the ability to develop their own land, giving them another potential revenue source.

SB 79 only targets homes within a half mile of train stations, subway stops, “high-frequency” light rail and commuter rail stops and fixed-route “bus rapid transit” lines. Buildings within the nearest quarter mile of Amtrak stations, Bay Area Rapid Transit stops and Los Angeles subway stations can top out at roughly seven stories. The rezoning with the new rules not taking effect until at least 2032. The legislation would only apply to counties with at least 15 passenger rail stations. According to its sponsors, just eight counties fit the bill: Los Angeles, San Diego, Orange, Santa Clara, Alameda, Sacramento, San Francisco and San Mateo.

SOLAR CHARGE PROPOSALS

There are some 9,000 residential solar installations in the Colorado Springs Utilities (CSU) service area. Calculations done by CSU revealed non-solar customers are covering on average $600 annually for solar customers. The utility says the issue stems from timing mismatches between energy production and consumption. It’s the old argument that solar is produced in the daytime but energy demand is highest in the nighttime.

A rate case hearing is scheduled with city council for Oct. 14. If passed by city council, the increased rate would go into effect Jan. 1, 2027. Solar customers with Colorado Springs Utilities could see their monthly bills increase by $50, potentially matching what non-solar customers pay. CSU customers are already seeing a series of five annual general rate increases. The credit is a solid AA so there doesn’t seem to be a financial issue driving the new solar rate.

In Nevada, the Public Utility Commission of Nevada unanimously approved a new rate design for customers in the southern portion of the state. It adds a daily demand charge for residential and small business customers that could add more than $30 to some monthly bills. It is designed to make solar less attractive for small scale sites. Shifts to the net metering program in the utility’s northern service territory, where it will calculate credits for energy returned to the grid every 15 minutes, rather than monthly as it does now are expected to negatively impact solar power users. The net metering changes would reduce annual solar customer compensation by $136

ELECTRIC ECONOMY

The US solar industry installed 7.5 gigawatts (GW) of capacity in Q2 2025, a 24% decline from Q2 2024 and a 28% decrease since Q1 2025. Solar accounted for 56% of all new electricity-generating capacity added to the US grid in the first half of 2025, with a total of 18 GW installed. Combined, solar and storage accounted for 82% of new capacity in the first half of the year. Texas installed the most solar capacity in the first half of 2025 (3.8 GW), followed by California, Indiana, and Arizona.

Every segment saw declining volumes except for commercial solar. Much of that growth was specific to California In Q2 2025, the residential segment installed 1,064 MW of solar capacity, declining 9% year-over-year and 3% quarter-over-quarter. Several bankruptcies of major residential solar companies also contributed to lower installation volumes. Then there are the implications of the OBBBA.

The solar industry will no longer have access to the Section 48E and 45Y tax credits after 2027 or the Section 25D tax credits (for customer-owned residential solar) after 2025. if a solar project starts construction on or before July 4, 2026, it has at least four years to come online to earn tax credits. Otherwise, solar projects that begin construction after that date must be placed in service by the end of 2027 to be eligible for 48E and 45Y credits.

The geopolitical aspect of new regulations could prove to be another hurdle to solar. The share of a project’s costs that cannot be paid to “companies that are headquartered in China or that have ties to China” starts at 40% in 2026 and increases five percentage points a year to 60% in 2030 and beyond. US solar projects rarely source solar panels from China. Many parts of the supply chain are fed by China headquartered companies or include technologies with patents held by Chinese companies.

While all of this is sorted out, Rivian the electric truck manufacturer officially broke ground on its huge manufacturing facility in Georgia. The news comes in the wake of concerns raised by ICE arrests at a Hyundai plant in Georgia. The company currently makes a high-end pickup truck and SUV in Normal, Illinois, as well as delivery vehicles for Amazon and others. Its truck prices start at $71,000.

The Illinois plant will begin making the smaller R2 next year, with prices starting at $45,000. The Georgia factory is projected to be able to make 200,000 vehicles yearly starting in 2028. Rivian plans another 200,000 in capacity in phase two, volume that would spread fixed costs over many more vehicles. the Rivian expects to produce 40,000 to 46,000 vehicles to deliver this year, down from 52,000 last year. The company says it’s limiting production in part to launch 2026 models.

POLITICS AND PORTS

Beginning next month, the new port usage fees will be imposed on Chinese containerships, bulk carriers, and other cargo vessels. The U.S. Trade Representative has claimed that these levies will reduce U.S. demand for Chinese shipping and provide investment incentives to U.S. shipbuilders. U.S. shipyards primarily build naval vessels, with commercial shipbuilding representing a tiny fraction of total output. Building ships in the United States is far more expensive than it is in Asia due to higher labor costs, environmental regulations, and the absence of the economies of scale enjoyed by Chinese, Korean, and Japanese shipyards. 

The U.S. LNG industry will be among the hardest hit by these new port fees. No LNG carriers have been built in the United States since the 1970s. No U.S. shipyard has the infrastructure or technical expertise to build one. Last year Chinese-built ships accounted for an estimated 30% of all visits to U.S. ports. U.S. manufacturers who rely on integrated international supply chains need costs to stay down.

It is estimated that more than half of the value of U.S. imports every year is composed of capital equipment, raw materials, and other intermediate goods – not final goods. Many of those industrial inputs – from electronics and automotive parts to machine tools and chemicals – flow into the United States on Chinese vessels.

This is driving activity at the Port of Los Angeles. We never worry about the Port as a credit but it serves as a good indicator of economic activity and trends. In August, the Port processed 958,355 Twenty-Foot Equivalent Units (TEUs), nearly the same as last year. August 2025 loaded imports came in at 504,514 TEUs, 1% less than last year. Loaded exports landed at 127,379 TEUs, a 5% improvement from 2024. The Port processed 326,462 empty container units, 1% less than last year.

Eight months into 2025, the Port of Los Angeles has handled 6,934,004 TEUs, 4.5% more than the same period in 2024. The Port expects 4Q activity to slow relative to 2024 levels. The Port cited tariff risk as well as economic signals like slowing job growth and lingering inflation to project lower volumes.

CALIFORNIA TRANSIT PACKAGE

Senate Bill 105 was approved unanimously by the California Senate. It amended the state’s FY 2026 budget to provide funding for mass transit in the Bay area. The legislation requires the Department of Finance, with support from the state’s Transportation Agency, to look for “loan or other financing options that might be used to provide sufficient short-term state financial assistance for local transit agencies.” The deadline to complete that process is January 10, 2026.

The proposed loans to the agencies with BART the most prominent among them are designed to provide a bridge until a sustainable funding package can go before voters. A November 2026 ballot measure if voters approve it, will fund transit agencies through a retail tax of .05% to 1%, starting in 2027. Before ridership collapsed during the pandemic and the rise of work from home, 70% of BART funding came from fares. By 2023 that number was had declined to only 25%.. 

FLORIDA’S LESS SUNNY BUDGET

Florida’s Legislative Budget Commission (LBC) approved state economic estimate that projects a surplus of $3.8 billion for the 2026-27 fiscal year, but a $1.5 billion gap and $6.6 gap billion in the following budget years. Some of the projected shortfalls can be attributed to moves to balance the current budget that effectively pushed the risk of budget shortfalls to later fiscal years.

Education and health care make up more than two-thirds of the budget. One item that is not is the cost of Alligator Alcatraz. The State insists that its $200 million of sunk costs will be reimbursed by current court proceedings have found that with no federal money having been spent on the facility, it is not a given that the facility is eligible for reimbursement.

UTILITY TAKEOVER

This summer (MCN 8.4.25) we documented the travails of a small Mississippi electric utility serving the City of Holly Springs. This week, the Mississippi Public Service Commission voted unanimously to place Holly Springs Public Utility (HSPU) in receivership. By going into receivership, a chancery court judge will determine the future of the utility’s operations. Options outlined by the commission included being placed for sale, becoming a cooperative model, or eminent domain.

The utility has not completed an audit in several years. The utility’s attorney explained that HSPU is audited with the city, and Holly Springs has not had one since the early 2020s. It owes its electricity provider, the Tennessee Valley Authority, more than $6 million as well as $3 million to contractors. The report estimates the debt is between $20 to $30 million. The city admitted HSPU is understaffed and lacks qualified managers and that it cannot provide adequate service to its 12,000 customers.

MEDICAID

We have commented on the potentially devastating impact of changes to the federal Medicaid Program. Safety net hospitals are the ones at most risk. Now, a report from the NYC Independent Budget Office (IBO) details potential negative impacts on the nation’s largest public health system. New York City Health and Hospitals Corporation (HHC) is the largest public hospital system in the United States. HHC has over 43,000 employees, an operating budget of $13.5 billion, and serves over one million patients annually.

Over 65% of the system’s adult patients are either uninsured or enrolled in Medicaid.  51% of HHC’s $13.5 billion budget is generated through a combination of public insurance reimbursements and supplemental Medicaid payments. The City of New York provides a need-based subsidy to HHC that totaled 28% of its 2025 operating budget. The OBBBA did not directly adjust Medicaid reimbursement rates.

Federal changes primarily adjusted the populations who will be eligible for Medicaid. Changes in Medicaid eligibility, which may lead to an increase in the number of uninsured patients seeking care at HHC, will result in a reduction in revenues for the system, and a decrease in revenues will result in an increased need for external support.

This comes at a time when hospitals all over are considering cutbacks in the face of uncertainty. Seattle Children’s Hospital plans to lay off 154 employees due to state and federal funding cuts. The hospital, which has an estimated 10,275 employees, said it also is eliminating 350 unfilled positions. The cuts were mostly administrative, but some clinical roles were affected. Memorial Sloan Kettering Cancer Center plans to lay off between 1 and 2% of its staff.  

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