Wednesday, August 24, 2016

Bond Rating and Fiscal Capacity



Bond Rating and Fiscal Capacity
I.                    Introduction

Different jurisdictions have different credit liabilities. Various evaluations of municipal bonds. Large spread of interest rates for individuals (0-25%) but for municipal bonds its NOT So

1.      Frank’s law of big numbers

80,000,000 city of Miami bond to clean up roads
1% of that is 800,000 (80k)
average maturity is 15 years
15x80k=1,200,000 over life time of bond


2.      S&P/Moody’s/Finch people listen big operations

They are nonpartisan/ when speak, people pay attention. Lower rating on an a government makes increase cost of borrowing money/ with high interest rates

3.      Bond Evaluators look at:
a.       Economic base
b.      Management practices
c.       Political climate
d.      Better side of capitalism—look for objection of credit worthiness
e.       Databases with/between jurisdictions

4.      Fiscal capacity—to receive a bond/how to rate it
a.       Linear programming, regression approach, point system, overlap and GO vs. other
b.      Most municipalities have  “toolbox of taxes”

Property taxes
Utility taxes
User fees (fire, selective services, etc. Garbage)
Misc. (cell phone taxes, light, water, gas)
Permits

Fiscal Capacity

City A (Miami)
City B (Adventura)

Property taxes
Utility taxes
User fees
Misc.
Permits

8
7
8
5
7
2
3
4
2
3

Mill is 1$/? For what?
Every jurisdiction can draw on political systems
Some areas can draw move on these than other
So bond ratings change with the age of a city.  Miami is older and has more debt than Adventura which is younger and has lower ratings…

5.      socio-physiological/look at how much poverty relates to economic base
20/30% below poverty line
how much can a county’s dept accrue?

Depends on the property tax base-met 1 to 10% of property value or the per capita income
In FL—cities and counties increase % per capita debt comparison states and cities

Ratings System
AAA
AA
A
BB
Junk Bonds
BB
B
C
D –bond is not paying on interest or principal
6.      Per Capita Debt
In FL-slightly below median income
Biotec company hub sets up in Dade county 2 times and still will not move in, why? Politics

So S&P/Moody/Finch looks at per capta income
Not just dept in absolute terms but who can pay

Aviation bonds=A ratings on Revenue Bonds
Dade County have General Obligation bonds=A/or AA


II. Municipal bonds is a “generic term” issued by state, local, governments, aviation, world trade center, port authority, school boards, etc

·         ** Interest on these Bonds is free from Federal income tax or interest

·         Example: MDS (Miami Dade Expressway) bond interest income free of federal income tax or interest (this is a Revenue bond because it uses user fees to pay for the loan)

·         **Government borrow at a discounted interest rate

·         1986 LAW/regulation? Efforts to chip away at this subsidy. Over used and some wanted it to be more regulated.

·         Local government needs to decide if the pay as you go system or how much you go into debt with pay as you use system

·         Most county and states are in debt
·         Keep debt service over time makes it level and therefore you don’t see hikes in your taxes if there is a new bond set.
·         So then you pay interest over larger periods of time (which makes it cost more)
·         Yet says Americas are Mobile and so you should pay fir it as you use the item. Average American moves 7/8 times during their life
·         Pay as you use -1% cent sales taxes to pay for jail and pay out of the pocked

7.      Huge divides-- General Obligations Debt Vs. Revenue Bonds




General Obligations Debt
Revenue Bonds
Libraries
Public schools
City halls
Jails

Must have public referendum

Life insurances companies hold lost of municipal bonds, they love to keep payments strong for their future claims
75% bonds today are RB
government subsidize principal and interest, which are paid with user fees
landing paying feeds for MIA
tolls for roads/bridges or
ports fees for docking

should use discounted cash flow analysis.
Mostly rated as AAA because they will have $ to pay off the loan


8.      COPS Certificate of Participation

Cities go to private banks to get loan so they don’t have to go through private referendum

Interest rates at the GO bonds—not high enough more risky
Why? School boards culture will not let them default/ default taint is bad so it is rare and atypical
Payback with special tax revenue/ $ coming out of general revenues
Bond for schools, super markets? EPA clean up/superfrund?
Which types are okay?

9.      Tax Reform Act of 1986- when taxes are too much benefit to the private sector
1.      decreasing federal revenues
2.      fiscal debt availability too much competition for government borrowing rates where increasing

people interest rates limited and credited other types of bonds with state port tax free
tax rates by broadly defined tax base.

10.  Tax increment financing

Development districts—create districts to do its own improvements in a community development districts, they pay taxes not in theory don’t pay??
Subdivisions of cities to pay its own repairs, then after the “turn around” it goes back to parent/city
City may think they are loosing part of tax rate, but with quasi government and a concentrated effort to do economic development for a subdivision of a city

11.  Make a buck become a bond underwriter

How are they paid?
General obligation must go to management of funds sources and auctioned off
Revenue bonds are negotiated
Bids 5to10,000 or more

GO put an add in the bond bidder though a public journal
Revenue bonds most sold directly with bidders (insurance agencies)

Underwriters take 1to4 cents to everything sold. Wachovia /Merrill Lich /City Group
They accept the risk from cities and turn it into profits from reliable individual investors


12.  Municipal bond insurance --Good Stocks to have

AMBAC/ MBIA are municipal bond insurance which are good stocks to have because they are very secure with steady stream of principal being paid back by cities. Insurance to make sure they get money in a timely manner

Monday, August 22, 2016

The Impact of Parties and Elections on Municipal Debt Policy in Mexico

Original Article
The Impact of Parties and Elections on Municipal Debt Policy in Mexico
Authors: AL Benton and HJM Smith

First published: 17 August 2016Full publication history
DOI: 10.1111/gove.12234View/save citation
Cited by: 0 articles

Article has an altmetric score of 7

Abstract

Opportunistic electoral fiscal policy cycle theory suggests that all subnational officials will raise fiscal spending during elections. Ideological partisan fiscal policy cycle theory suggests that only left-leaning governments will raise election year fiscal spending, with right-leaning parties choosing the reverse. This article assesses which of these competing logics applies to debt policy choices. Cross-sectional time-series analysis of yearly loan acquisition across Mexican municipalities—on statistically matched municipal subsamples to balance creditworthiness across left- and right-leaning governments—shows that all parties engage in electoral policy cycles but not in the way originally thought. It also shows that different parties favored different types of loans, although not always according to partisan predictions. Both electoral and partisan logics thus shape debt policy decisions—in contrast to fiscal policy where these logics are mutually exclusive—because debt policy involves decisions on multiple dimensions, about the total and type of loans.

http://onlinelibrary.wiley.com/doi/10.1111/gove.12234/abstract

Thursday, April 07, 2016

Sunny Place



Sunny 2 bedroom Heart of Culture


Ciudad de México, Distrito Federal, Mexico
This sunny 2 bedroom apartment is located across from the "Arcos de Coyoacan", Centenario Park in front of several bars and restaurants. Its just a few blocks from the Frida Kahlo and Trotsky Museu...

Tuesday, April 05, 2016

Lo bello de Coyoacan








Coyoacán Supermarkets

Coyoacán has 3 major supermarkets, the public market and several quick stops


Supermarkets
1. Superama Coyoacán, Avenida Miguel Ángel de Quevedo 870, Barrio La Concepción, 04020 Ciudad de México, D.F.



2. Sumesa Centenario, París 227, Barrio La Concepción, Ciudad de México, D.F. 4100 D.F.


3. Mega Comercial Mexicana Coyoacán, Av Miguel Ángel de Quevedo 433, Coyoacán, Romero de Terreros, 04320 Ciudad de México, D.F.


4. Marcado de Coyoacán
Ignacio Allende S/n, Del Carmen, 04100 Ciudad de México, D.F.

 

Tuesday, March 29, 2016

MEXICAN BEACHES & HACIENDA VACATIONS

VACATION BEACHES

Over the years,  I have taken some nice vacations round to the best beaches of Mexico. Here is a list of our favorites and some hotels we’ve enjoyed.  If you plan to come earlier or stay later, we are happy to also recommend more specific tours of places in Mexico.  There isn’t any particular order to these, but all of them you would  need to fly from DF and get an all inclusive type options or go hippie route and bus to wherever and find an AirBandB place for the cheap.  All accommodations and levels of prices are available.
  1. Acapulco is an easy bus or car trip from DF.  My favorite hotel overall in Mexico is Boca Chica, which is a retro place the sourthern part of town http://www.hotel-bocachica.com/.  This is part of the  Habitat group too.  We’ve also stayed at Las Brisas here: https://www.brisas.com.mx/hotels/acapulco
  2. Ixtapa zihuatanejo is pacific ocean, we went in May--it's quiet and nice with a bike trail around town and small fishing docs for dinner. We stayed at Las Brisas (https://www.brisas.com.mx/hotels/ixtapa) which was bulit by a famous Mexican architect, Ricardo Legorreta.
  3. Cozumel is the island off the Yucatan Peninsula.  I would go back there at anytime!  This is next to Playa del Carmen which is a boat trip away and has more of a party vibe than the quiet island.  We rented a motor scooter to run around the island, which was a lot of fun.
  4. Tulum is also Yucatan. It has a great local beach vibe with a some town and some ruins on the outskirts of town.  My favorite hotel is Zulum www.hotelstulum.com/zulum/  with its cabañas facing the ocean.
  5. I’ve wanted to go to Huatulco, which is pacific in Oaxaca that’s more hippie place that you can go. There are so many options along the southern part of the pacific, I haven’t been so if you go, please send me your impressions.  
  6. Taxco: The World’s Silver Capital is on the way to Acapulco and a fun place to visit: http://www.visitmexico.com/en/the-silver-capital-taxco-guerrero-mexico

HACIENDA VACATION

If you can’t afford the time or money to hit the beach, there are several haciendas near Mexico City which are as lovely and more affordable. Spend two nights and three days in the warm sun without the beach. Typically these were built in the late 1500s to 1800s and have amazing accommodations.
Carretera Federal Cuernavaca-Cuautla KM 32.5
Centro, 62736 Cocoyoc, Morelos, México
cocoyoc.com.mx
2. Hacienda de Tenango
AlbercasHacienda de Tenango Miguel Hidalgo 1, Tenango Cuautla (Morelos)
Photos Here
Plaza Kennedy 90
62560 Atlacomulco Juitepec, Morelos, Mexico
hotelhaciendadecortes.com.mx
More Photos
4. Hacienda Amanalco
Calle de la Estación, 412 62410 Cuernavaca (Morelos)
Photos Here
5. Hacienda Vista Hermosa
Km. 7 Carretera Alpuyeca Tequesquitengo, San José
Vista Hermosa CP. 62680, Puente de Ixtla Morelos
http://www.haciendavistahermosa.com.mx/
See Photos Here

Symposium on Behavioral Approaches to Bureaucratic Red Tape and Administrative Burden

CALL FOR PAPERS Public Administration Review Symposium Editors: Christopher Carrigan, The George Washington Universit...