Moody's Talks - Muniland

Inflation stands to increase personnel costs and budget stress for states and municipalities, in part because of competition from the higher-paying public sector. Plus, peak hurricane season arrives amid the elevated inflation, driving up rebuilding costs for governments along the Atlantic and Gulf coasts if they’re hit by a major storm.

Guests: Dan Kowalski, Analyst – Moody’s Investors Service; Thomas Aaron, Vice President – Senior Credit Officer, Moody’s Investors Service; Emily Raimes – Senior Vice President, Moody’s Investors Service

Host: Nick Samuels – Senior Vice President, Moody’s Investors Service

Related content on Moodys.com (some content only available to registered users or subscribers):

• State and Local Government – US: High inflation and employment shortage set to push up compensation costs
• State and Local Government – US: Rapid employee wage inflation will cause hikes in pension liabilities
• Inflation threatens to drive up US hurricane recovery costs

Rising prices are boosting state and local governments’ sales tax revenue, lessening their burden from inflation-driven cost increases. Plus, Marcia Van Wagner, who is retiring as a state analyst, speaks about her career path and offers some insight into how today’s inflationary environment compares with the turmoil in the 1970s and 1980s.  

Guests: Moody’s Investors Service; Doug Goldmacher, vice president – US Public Finance, Moody’s Investors Service; Marcia Van Wagner, vice president – US Public Finance, Moody’s Investors Service

Host: Nick Samuels, Senior Vice President - US Public Finance, Moody’s Investors Service 

Digital currencies provide states and local governments with a means to collect taxes and utility fees, while universities are accepting tuition payments and donations in crypto form. Plus, states are making efforts to ban their municipalities from making ransomware payments, hoping to deter future cyberattacks.      

Guests: Greg Sobel, Assistant Vice President - US Public Finance, Moody’s Investors Service; Michael Osborn, Vice President - US Public Finance, Moody’s Investors Service; Baye Larsen, Vice President - US Public Finance, Moody’s Investors Service

Host: Nick Samuels, Senior Vice President - US Public Finance, Moody’s Investors Service 

Recovery patterns in Puerto Rico’s bankruptcy-like case resemble large municipal bankruptcies such as Detroit. Also, flood risks threaten to weaken some cities’ property tax bases, increase the need for infrastructure investment and disrupt the economy.

Guests: Al Medioli, Senior Vice President – Ratings and Process Oversight, Moody’s Investors Service; Jennifer Chang, Vice President – Environmental, Social and Governance, Moody’s Investors Service; and Bola Kushimo, Vice President – US Public Finance, Moody’s Investors Service

Host: Nick Samuels, Senior Vice President – US Public Finance, Moody’s Investors Service

Susan Fitzgerald and Chris Collins of the US Public Finance team discuss enrollment and other revenue challenges affecting higher education. Plus, Ted Hampton discusses how gas tax suspensions will affect states’ capacity to pay debt on bonds backed in large part by the suspended taxes.

Related content on Moodys.com (some content only available to registered users or subscribers): 

• Higher Education - US: Converging forces will squeeze budgets for many colleges and universities
• Higher Education – US: Macroeconomic factors will influence fall enrollment levels and revenue growth
• States – US: Gasoline tax holidays show governance risks for state revenue bonds

Tom Aaron of the US Public Finance team and Madhavi Bokil of the Credit Strategy and Research team examine why states, local governments and other public finance issuers are generally positioned to withstand moderately rising inflation. Plus, Chris Yared and Michael Wertz discuss to what extent federal infrastructure funding will address the 44,000 US bridges in poor condition.  

Related content on Moodys.com (some content only available to registered users or subscribers): 

• Public Finance – US: US public finance issuers not immune from pressure if inflation persists past 2022
• State and Local Government– US: Federal money pours in to improve bridge conditions, but more needed in many states
• Macroeconomics – Global: Russia-Ukraine crisis injects new risks into global economic outlook
• Macroeconomics – US: US labor market strength supports Fed tightening in March

Nansis Hayek and Matt Cahill of the US Public Finance team discuss how the pandemic-driven telehealth surge is helping the challenged healthcare sector. Plus, analysts Baye Larsen and Ted Hampton explain how manufacturing computer chips in Ohio and electric vehicles in Michigan will help the Rust Belt. 

Related content on Moodys.com (some content only available to registered users or subscribers): 

• Hospitals – US: Developments to watch: 2022
• State and Local Government – Ohio: Intel plant will give Ohio an economic boost; state aid to ease infrastructure pressure
• Michigan (State of): GM’s BEV manufacturing initiative supports Michigan's auto industry, mitigating carbon transition risk

Marcia Van Wagner of the US Public Finance team discusses reasons behind the falloff in soaring state tax revenue growth, including expired federal pandemic aid and interest rates. Plus, Jennifer Chang, Adebola Kushimo and Coley Anderson weigh in on environmental, social and governance (ESG) issues facing state and local governments and delve into our new simplified way of communicating ESG risks.    

Related content on Moodys.com (some content only available to registered users or subscribers): 

• States – US: Surge in tax revenue will moderate as pandemic effects evolve
• State Government – US: ESG considerations have mostly neutral to low credit impact on US states
• Local Government – US: ESG considerations have neutral to low credit impact on most large US cities
• Local Government – US: ESG considerations have neutral to low credit impact on most large US counties

Kendra Smith of the US Public Finance team discusses why a nursing/labor shortage and difficulties with insurer reimbursement contribute to our negative outlook for the healthcare sector. Plus, Tim Blake and Leonard Jones weigh in on solid tax revenue growth during the pandemic playing a leading role in the stable outlooks for states and local governments. 

Related content on Moodys.com (some content only available to registered users or subscribers): 

• Not-for-Profit and Public Healthcare – US: 2022 outlook negative as labor costs drive expense growth higher
• Higher Education – US: 2022 outlook stable as emergence from remote learning supports revenue growth
• States – US: 2022 outlook stable as fiscal momentum set to offset lingering economic risks
• Local Government – US: 2022 outlook stable with solid revenue growth and influx of federal aid

Matt Cahill and Beth Wexler of the US Public Finance team discuss financial challenges hospitals face from a shortage of nurses and other employees. Plus, Dan Seymour weighs in on how some smaller public finance issuers are recovering from pandemic-driven shutdowns.

In this Episode:

• Matt Cahill and Beth Wexler of the US Public Finance team discuss financial challenges hospitals face from a shortage of nurses and other employees.  (begins at 1:23 mins)
• Dan Seymour weighs in on how some smaller public finance issuers are recovering from pandemic-driven shutdowns. (begins at 8:41 mins)

Related content on Moodys.com (some content only available to registered users or subscribers): 

• Not-for-Profit and Public Healthcare – US: Labor shortage worsens, straining profitability, as Delta and burnout persist
• Healthcare Quarterly, October 2021
• Public Finance – US: Municipal delinquencies, reserve fund draws and financial difficulties: Q3 2021

Analyst Earl Heffintrayer of the Project and Infrastructure Finance team discusses how the air traffic recovery is helping US airports and their ability to weather COVID-19 surges. Plus, Eva Bogaty of the US Public Finance team examines prospects for tourism destinations Hawaii and Las Vegas and Tom Aaron weighs in on investment returns reducing pension liabilities for cities and states.

In this Episode:

• Earl Heffintrayer outlines how much of the boost to airports is driven by tourists (begins at 3:22 mins)
   
• Eva Bogaty on what the economic consequences will be for major tourist destinations in the event of another COVID surge. (begins at 7:27 mins)

Related Content:

Airports – US: Traffic recovery stalls past peak leisure travel season; delta variant weighs on fall

Hawaii (State of): Update to analysis following outlook revision to positive

State and Local Government – US: Huge investment returns set to benefit governments' pension funding

State and Local Government – New York: Steep drop in target return for pension system investments is credit positive

State and Local Government – US: Retiree healthcare obligations remain material for a segment of municipal issuers

Dan Kowalski and Michael Wertz of the US Public Finance team discuss the bill’s funding to replace lead service lines and water utilities facing a mix of aging assets and climate change. Plus, Steven Goodman-Leibof and Helen Cregger weigh in on the credit effects of water reductions in Arizona, Nevada and California.

Inside this episode:

• Dan Kowalski and Michael Wertz of the US Public Finance team discuss the bill’s funding to replace lead service lines and water utilities facing a mix of aging assets and climate change. (begins at 1:22 mins)
• Steven Goodman-Leibof and Helen Cregger weigh in on the credit effects of water reductions in Arizona, Nevada and California. (begins at 8:56 mins)

Related content:

• State and Local Government – US: Infrastructure bill would help fund lead service line replacement, a credit positive - The Senate's bipartisan infrastructure bill would provide $15.7 billion to replace lead service lines, benefiting states, cities, utilities and school districts with high exposure.
• Water Distribution – US: Drought-driven water supply cuts pose long-term risks for utilities in Arizona,California and Nevada - Declining water levels in Lake Mead, a major water reservoir in the West, highlight the long-term environmental risks from accelerating climate change for utilities in drought-prone areas.
• Municipal Water and Sewer Utilities – US: Climate threats and aging infrastructure portend rising credit risks for many utilities - Escalating infrastructure needs due to aging systems and growing climate challenges expose municipal water and sewer utilities to increased costs, higher debt loads and rising customer rates
• Environmental Utilities – California: Water utilities prepared for current drought; climate risks will intensify threat over time - California water utilities are generally well prepared to meet challenges as the state's drought continues, but greater investment to combat the effects of climate change will remain key.
• Jackson (City of) MS: Storm disruption to cost already struggling water and sewer system - A service outage will hurt revenue and bring repair costs for the Jackson water and sewer system, which already faces heightened costs associated with a consent decree and other matters.

David Levett and Ted Hampton of the US Public Finance team delve into Chicago and the State of Illinois’ improved prospects despite heavy pension obligations. Also, Sarah Jensen and Al Medioli discuss the lack of pandemic-driven defaults among US public finance credits we rate.

Inside this episode:

• David Levett and Ted Hampton of the US Public Finance team delve into Chicago and the State of Illinois’ improved prospects despite heavy pension obligations. (begins at 1:29 mins)
• Sarah Jensen and Al Medioli discuss the lack of pandemic-driven defaults among US public finance credits we rate. (begins at 8:43 mins)

Related content:

• Chicago (City of) IL: Update to credit analysis following revision of outlook to stable - Our credit view incorporating the city's healthy liquidity, massive economy, very high leverage and recovering revenue.
• Chicago (City of) IL: Political will to raise revenue, use of federal aid and state actions will drive financial trajectory - Chicago's credit trajectory will be influenced by political will to raise revenue, its use of federal aid and actions taken by the State of Illinois.
• Local Government – US: Falling rents, remote work uncertainty will hit property tax revenue in some big cities - Office vacancy is rising and rents are falling, which will likely weaken assessed valuation and have varying property tax revenue implications for five large cities.
• Illinois (State of): Update to credit analysis following upgrade to Baa2 - Our credit view of Illinois, reflecting its sovereign powers over revenue and spending, offset by its very large unfunded pension liabilities that remain on an upward trajectory.
• US Public Finance: US municipal bond defaults and recoveries, 1970-2020 - This study updates our findings concerning the default, loss and rating transition experience of US municipal bond issuers from 1970 to 2020.
   

Emily Raimes of the US Public Finance team discusses the rise in state debt amid COVID-19 and the role borrowing will play as states’ infrastructure needs mount. Plus, Joe Manoleas and Val Gomez delve into the potential effects of wildfires in California and hurricanes along the Atlantic and Gulf coasts.

Inside this episode:

• Emily Raimes of the US Public Finance team discusses the rise in state debt amid COVID-19 and the role borrowing will play as states’ infrastructure needs mount.  (begins at 2:00 mins)
• Joe Manoleas and Val Gomez delve into the potential effects of wildfires in California and hurricanes along the Atlantic and Gulf coasts. (begins at 7:52 mins)

Related content:

• State Government – US: Medians - State debt rose 2.5% in 2020, spurred by pandemic-linked borrowing - States' total net tax-supported debt increased to a record last year, but the growth rate was relatively modest despite pandemic-induced borrowings.
• Local Government – California: Municipalities will withstand credit risks posed by heightened wildfire threat - Despite a potentially devastating fire season, credit risks for local governments we rate are minimal owing to liquidity, tax bases, private insurance, and federal and state emergency aid.
• State and Local Government – US: Hurricane season starts amid rising costs for recovery; proposed changes in federal support pose risks - As the 2021 hurricane season begins, challenges loom for governments and residents needing to rebuild after storms hit.

Michael Osborn, Heather Correia and Matthew Cahill of the US Public Finance team discuss the increasing cyber threats facing universities, state and local governments, hospitals and transit systems. Also, Pisei Chea weighs in on what recent US Census results signal about states’ economic fortunes, while Frank Mamo comments on municipalities’ prospects as they emerge from the coronavirus pandemic.  

Inside this episode:

• Michael Osborn, Heather Correia and Matthew Cahill of the US Public Finance team discuss the increasing cyber threats facing universities, state and local governments, hospitals and transit systems. (begins at 1:45 mins)
• Pisei Chea weighs in on what recent US Census results signal about states’ economic fortunes, while Frank Mamo comments on municipalities’ prospects as they emerge from the coronavirus pandemic. (begins at 14:51 mins)

Related content:

• State and Local Government – US: Cybersecurity stronger among larger organizations, including states and transits
• Higher Education – US: FBI warning for universities underscores vulnerability to cyberattacks
• Hospitals – US: Healthcare cyber risk remains elevated given increasing reliance on technology
• Insurance -US: Surge in ransomware claims drives cyber insurance prices higher
• State Government – US: Population trends underscore state social and economic credit drivers
• Local Government – US: Uneven economic recovery will shape credit environment for local governments

Baye Larsen and Ken Kurtz of the US Public Finance team discuss how federal aid is buoying mass transit, but that a new normal awaits, with sector-wide ridership settling in below pre-pandemic levels. Plus, Val Gomez and Marcia Van Wagner explain how the pandemic has slowed progress toward gender equality in the labor force with implications for tax revenue and the housing market.

Inside this episode:

• Baye Larsen and Ken Kurtz of the US Public Finance team discuss how federal aid is buoying mass transit, but that a new normal awaits, with sector-wide ridership settling in below pre-pandemic levels. (begins at 1:25) 
• Val Gomez and Marcia Van Wagner explain how the pandemic has slowed progress toward gender equality in the labor force with implications for tax revenue and the housing market. (begins at 11:54)

Related content:

• Mass Transit – US Outlook improves to stable with substantial federal aid and likely rebound in tax revenue - Federal assistance for transit in the 2021 American Rescue Plan Act will offset operating losses driven by low ridership and weak tax collections.
• Public Finance – US: Covid's hit to women's employment poses economic, social risks across public finance - The pandemic has slowed trends toward gender equality, eroding gains in women's earning potential. The economic and social risks to public finance vary but are credit negative overall.

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Ted Hampton of the US Public Finance team discusses how the State of Illinois is weathering COVID-19’s financial difficulties while pension obligations continue to weigh on its credit quality. Plus, Earl Heffintrayer and Myra Shankin of the Project and Infrastructure Finance team weigh in on the US airport sector’s improving prospects as passenger levels pick up. 

Inside this episode:

• Ted Hampton of the US Public Finance team discusses how the State of Illinois is weathering COVID-19’s financial difficulties while pension obligations continue to weigh on its credit quality. (begins at 1:36)
• Earl Heffintrayer and Myra Shankin of the Project and Infrastructure Finance team weigh in on the US airport sector’s improving prospects as passenger levels pick up. (begins at 8:23)

Related content:

• Illinois (State of): Update to credit analysis after outlook revision to stable
• Illinois (State of): Adjusted net pension liability to surpass $300 billion as source of credit stress worsens
• Illinois (State of): Appeals court ruling allowing challenge to validity of Illinois GO bonds is credit negative
• Airports – US: Outlook revised to stable as passenger activity steady as COVID-19 surge wanes
• Airports - US: Recovery holds amid new travel restrictions as airports continue to restructure debt
• Airports – US: Airports reach short-term lease agreement extensions with airlines under similar terms

Inside this episode:

Matthew Butler and Natalie Claes of the US Public Finance team discuss how better-than-expected revenue and a new wave of federal assistance spurred the outlook changes for US state and local governments in the face of the pandemic.   

Related content:

• States – US Outlook improves to stable amid stronger budgetary picture and federal support
• Local Government – US Outlook changed to stable as revenue conditions improve, federal aid continues

In the inaugural episode of Moody’s Talks – Muniland, Pisei Chea and Jared Brewster of the US Public Finance team discuss the effects of federal policies on states and higher education. Also, Susan Fitzgerald and Michael Osborn focus on how the pandemic’s upheaval will affect the year ahead for colleges and universities, including enrollment and debt refinancing.

Inside this episode:

• Pisei Chea and Jared Brewster of the US Public Finance team discuss the effects of federal policies on states and higher education. (begins at 1:52)
• Susan Fitzgerald and Michael Osborn focus on how the pandemic’s upheaval will affect the year ahead for colleges and universities, including enrollment and debt refinancing. (begins at 9:10)

Related content:

• Extended public health emergency maintains higher federal funding for states and hospitals
• Higher Education: Federal policy changes would have material impact if enacted but prospects uncertain
• Higher Education – US: Debt strategies provide flexibility amid pandemic; some carry longer-term risks
• Higher Education – US: 2021 outlook negative as pandemic weakens key revenue streams

Welcome to Muniland! Hosted by Nick Samuels of the US Public Finance team, Muniland delves into the latest developments impacting the credit environment for states, local governments, healthcare, higher education and more. In each episode, Moody’s analysts join Nick in exploring the ramifications of the pandemic, climate change, cyber risk, federal policy, pensions burdens and other deep-seated challenges.