Muni’s fare better than Municipalities


Scorched earth policy of municipal governments proves 'successful'

Inquiring minds are reading a an article at MarketWatch.com on Muni Bonds and their municipalities:

A California town firing nearly all of its employees and the capital of Pennsylvania considering bankruptcy are just two examples of U.S. municipalities in worse financial condition than even a year ago.

But this deterioration holds more peril for the already-slowing U.S. economic recovery than the legions of investors holding debt issued by these municipalities, according to fund managers and rating agencies.

These bleak headlines are likely to continue as municipalities continue to adapt to slowing revenues, especially from property taxes.

But for municipal bond holders, the outlook is hardly as grim.

Budgets on the brink:

Cities and municipalities with the starkest financial problems all had to deal with some issue on top of just declining tax revenue.

Maywood, Calif., fired almost all of its employees and contracted services for its residents to a neighboring town and Los Angeles County because it couldn’t get insurance

Harrisburg, Penn., was considering filing for bankruptcy because on top of the stress other municipalities are facing, the capital of Pennsylvania has big payments due on bonds that were sold to build an incinerator that hasn’t met revenue expectations.

Central Falls, R.I., went into receivership in May and its budget deficits are now the state’s to fix. It’s Moody’s only municipal default so far this year.

This summer is getting hotter by the moment.

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