SEC redefines 'sophisticated' in municipal market

Starting in July, dealers in the U.S. municipal bond market will have a simpler time identifying customers who qualify as sophisticated investors and more buyers will be considered institutional customers.

The Securities and Exchange Commission on Friday approved a new definition of “sophisticated municipal market professional,” which will go into effect on July 9, the Municipal Securities Rulemaking Board said on Tuesday.

The new definition will help determine the suitability of transactions for some bond buyers. If a buyer is not considered sophisticated, then investor protections could apply and a broker-dealer would be accountable for making sure the buyer understood the purchase

Maryland budget measure pressures counties -Moody's


May 29 (Reuters) - A move in Maryland to shrink a large budget gap by shifting millions of dollars in pension costs to counties will help the state’s credit quality, but could hurt local governments’ financial health, Moody’s Investors Service said on Tuesday.

"The measure is credit positive for the state," the agency said in a report, but added that "the change is credit negative for affected local governments, which will certainly face a material increase in expenditures despite revenue measures intended to offset some of those expenses."

The recently passed legislation will save the top-rated state a net $109 million in fiscal 2013, which begins July 1. The net savings will climb to $154 million in fiscal 2016.

Puerto Rico bets on American tourists to repay debt

Michael Connor reports that the Caribbean island hopes American tourists will flock to its sand, surf and spanking new resorts to help pay off massive debts.

Portfolio manager Robert DiMella… discounts as overblown predictions Puerto Rico’s finances will swell into a crisis as severe as Greece’s. But he says investors’ interest in the island’s debt can suddenly dry up. Puerto Rico is unlikely to default on any bonds but will need to extend maturities or otherwise restructure some of its $3.8 billion of appropriations debt, DiMella said.

This paragraph really caught my eye: But with debt equivalent to 103 percent of its annual gross product, the U.S. territory carries a burden that would make troubled states like California and Illinois blanch. The two states’ debt levels are just under 5 percent of economic output. 

And another staggering comparison:    By many financial measures, Puerto Rico is an outlier. Its net tax-supported debt in 2010 equaled $10,474 per person, compared with a U.S. per capita mean of $1,408, $2,542 in California and $2,383 in Illinois.

Will A Golf Course Save Benton Harbor's Economy?

The Whirlpool Corp., the largest home appliance maker in the world, wants to improve its hometown of Benton Harbor, Mich. Executives are leveraging a PGA-approved golf course to try to turn the city into a tourist destination. But many residents aren’t convinced becoming a tourist town is the best way to create jobs.

Census accuracy report shakes up municipal challenges
Property taxes give NY Westchester edge over peers

Joan Gralla reports that:

Rockland County, which lies north of New York City and has a population just one third that of Westchester, and larger Nassau and Suffolk, which lie east of Manhattan on Long Island, depend more on sales taxes. 
   Sales taxes are a more volatile source of revenues that, compounded over the years with bad management, have pushed down cash reserves and credit ratings. 
   Although all four counties, whose household incomes and housing values easily exceed national averages, rely heavily on Wall Street as their economic engine, their fortunes have diverged markedly 
  All four were badly hit by the financial crisis, and after the recession all four counties elected new leaders, who say their predecessors overspent and over-taxed.   
   But Westchester boasts reserves of $110 million in fiscal 2012, markedly down from a record high of $177 million in 2006, but it still claims a top-tier credit rating because of its healthier finances.

State budgets spring new, smaller holes

Finding balance may be tough, as states gutted their budgets and enacted temporary tax hikes when their revenues began collapsing in 2009. Budget shortfalls for fiscal 2009 through fiscal 2012 totaled more than $530 billion, CBPP noted.

State revenues remain 7 percent below pre-recession levels “and are not growing fast enough to recover fully soon,” the CBPP said.

"Meanwhile states’ education and healthcare obligations continue to grow," it added. "Next year, states expect to educate 350,000 more K-12 students and 1.7 million more public college and university students in the upcoming school year than in 2007-08."

At the same time, states expect 5.6 million more people to become eligible for the Medicaid health insurance program for the poor, which states run with reimbursements from the federal government and which already takes up a third of some states’ budgets.

A Pennsylvania judge approved the appointment of Harrisburg's new receiver on Thursday

Hilary Russ and Mark Shade report that

Commonwealth Court Judge Bonnie Leadbetter said at a hearing that she would issue an order confirming retired U.S. Air Force Major General William Lynch as receiver.

She announced her decision after David Unkovic, the former receiver, testified about why he suddenly resigned at the end of March.

In his first public comments since he quit two months ago, Unkovic testified that “creditors’ control of the incinerator fundamentally undermined” his ability to do his job.

He also said, “I believed I was about to be removed as receiver.”

These tax decreases are really the result of temporary rate increases that expired in 2011. The net result, of course, is that it produced a tax decrease without any legislative action….California, Maryland, New York, North Carolina fall into this category of tax decreases as a result of legislative inaction after they had temporary tax increases that expired.

Jeff Saviano, Ernst & Young LLP Director of Indirect and US State and Local Tax, on some of the recent state tax cuts.

New York pension fund assets hit $150 billion, near peak

Joan Gralla reports that

New York’s pension fund, the nation’s third largest, was funded at an unusually high level of around 90 percent in fiscal 2011. The funding level for fiscal 2012, which ended on March 31, is not yet available.


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