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by Michael ScarchilliThe College of the Holy Cross in Worcester, Mass., this month will refund, $65 million of general obligation bonds., The Massachusetts Development Finance Agency on Thursday gave final, approval to the deal, which will refund a 1996 bond issuance from the, now-defunct Massachusetts Industrial Finance Agency. That entity merged, with, the state's Government Land Bank later in 1996 to form MassDevelopment., The bonds mature from 2007 through 2026 and will be marketed by Banc of, America Securities LLC. The bonds are scheduled to close on March 1, will, likely price the day before since it is a floating rate deal, said, MassDevelopment first vice president Jami Loh., Loh said the college entered into a swaption with Goldman, Sachs & Co., several years ago that gave Goldman the right to pay the variable-rate debt, while Holy Cross paid the fixed-rate, and Goldman exercised that option., Boston-based Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC is bond, counsel on the transaction. The bonds carry insurance from Ambac Assurance, Corp., Moody's Investors Service rates the college's debt Aa3, but hasn't yet, rated this deal. Neither Standard & Poor's nor Fitch Ratings rate the debt., The College of the Holy Cross has issued bonds twice since *1996-, selling, $31.3 million in July *1998-, and $30 million in March 2002. Though the, college, which has about $122 million of debt outstanding, has sold bonds, every four years recently, it sells debt on an as-needed basis, Loh said., MassDevelopment is a conduit issuer that financed 25 issues for various, institutions through the state in 2005. This will be its second sale of, 2006., Its first sale, priced on Feb. 7, was $47 million of solid-waste disposal, revenue bonds for Dominion Energy Brayton Point LLC in Somerset. Goldman, Sachs was the lead manager on that deal, with PNC Capital Markets and, SunTrust Capital as co-managers. The bonds mature in *2036-, with a yield of, 5.0%., Proceeds from the college's 1996 deal were used to renovate the school's, Hogan Campus Center, perform renovations to other campus buildings and, grounds, and refund pre-existing debt, Loh said., The College of the Holy Cross, founded in *1843-, is a Jesuit liberal arts, college, and the oldest Catholic college in New England. It has about 2, students and employs 1, 096 individuals in central Massachusetts.
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by Humberto SanchezThe Federal Transit Administration is proposing to enter into agreements, to provide over $300 million in fiscal 2007 to help fund five public mass, transit projects in Utah, Texas, Oregon and Colorado, agency officials, said yesterday., The FTA also anticipates providing nearly $572 million in fiscal 2007 for, 16 additional projects around the nation under existing agreements, including $90 million for the $1.4 billion Central Phoenix, East Valley, Light Rail in Arizona, a 19.6-mile rail system that will connect Phoenix, Mesa, and Tempe., Under the long-term funding commitment, formally known as a full funding, grant agreement, the federal government would pay $587 million, in $90, million-a-year increments, with the cities covering the difference., Phoenix issued $500 million in tax-exempt bonds in 2004 to cover its, portion of the project, according to a Valley Metro Rail official., Funding for the 21 projects was included in the transportation portion of, President Bush's fiscal 2007 budget, which recommended a total of $1.5, billion for the FTA's so-called New Starts program, which provides funding, for transit projects around the country., An investment in transit is an investment in fighting congestion, said, Transportation Secretary Norman Y. Mineta at a press conference., Of the $300 million the FTA recommended for new agreements in *2007-, million would be provided to help cover the estimated $611.7 million, construction cost of a 43-mile, eight-station commuter rail project, between Salt Lake City and Pleasant View, Utah. In September the Utah, Transit Authority sold $175 million sale tax revenue bonds to help finance, the project., For a 21-mile light rail extension in Dallas, the FTA proposed $80 million, in 2007. The project's cost is expected to be $1.49 billion. Area voters, approved a $2.9 billion revenue bond authorization for the authority in, 2000. The line will carry an average of nearly 46, 000 riders on weekdays, including 10, 700 new daily riders, by *2025-, according to the FTA., Oregon is the home of two projects selected by the FTA, including a nearly, 15-mile, five-station commuter rail line in the Portland area between, Beaverton and Wilsonville, estimated to cost $117 million. The FTA, proposed providing $27.6 million for the project in 2007., The other project, estimated to cost $557.4 million, is an 8.3-mile new, light rail transit line consisting of two segments connecting Portland to, Clackamas. The first segment of the proposed project is a 6.5-mile line, that runs north and south and parallel to Interstate 205. The second, segment of the project is a 1.8-mile extension, which would run along the, existing downtown bus mall on 5th and 6th Avenues in Portland. The FTA, recommended $80 million for the project in 2007., Officials from TriMet, the Portland-area transit service provider, could, not be immediately reached for more financing details., The rail agency designated a project in Denver to receive $35 million in, 2007 to help fund a $593 million, 12-station light rail extension between, downtown and West 6th Avenue, about 12 miles. Most of the $302 million, local share of the cost will be covered with bonds Denver's Regional, Transportation District plans to issue, according to RTD spokesman Scott, Reed., The FTA also proposed $355 million for two projects whose agreements have, not yet been finalized. One project is a $7.7 billion,, three-and-a-half-mile rail extension connecting the Long Island Rail Road, with New York City's Grand Central Station. As part of the state, Metropolitan Transportation Authority's capital plan, a portion of the, East Side Access project's cost will likely be bond-financed. The other is, a1.5-mile extension of Pittsburgh's light-rail system, known as the North, Shore Connector. A spokesperson with the Port Authority of Allegheny, County could not be immediately reached., In addition to the 23 projects proposed to receive FTA funding under the, president's fiscal 2007 budget, five other projects will compete for $102, million, including a $4.9 billion, 2.3 mile section of the proposed Second, Avenue Subway project on Manhattan's East Side. The MTA and the New York, City Transit Authority are seeking $1.3 billion, or 30%, in New Starts, funds for the project.
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by Elizabeth Carvlin and Yvette ShieldsBond issuance in the Midwest surged last year to $78.8 billion from $62.7, billion in 2004 - a nearly 26% increase., The increase surpassed the national gain of 13.2% and spanned all sectors., All but one of the 11 states in the region saw an increase in volume as, issuers sought to take advantage of low interest rates to refund debt., Volume grew between 20% and 32% in all four quarters of 2005. The second, quarter recorded the strongest gain - 32% - with nearly $22.5 billion in, issuance, according to Thomson Financial. Refunding bonds accounted for, nearly all of the increase, skyrocketing 71.7% to $30.4 billion from $17.7, billion. New-money issuance held steady at $40.4 billion, up only 3.5%, from the previous year., Though interest rates had remained low over the past two years, issuers, held off on some advance refunding opportunities because of negative, arbitrage that results when the spread between short- and long-term rates, is wider. The flattened yield curve last year eliminated negative, arbitrage that occurs on the short-term securities purchased to establish, the escrows that are used to retire the refunded bonds as they become, callable., The majority of debt sold in the region was sold through negotiation -, $66.7 billion compared to $11.9 billion that was competitively bid., Revenue bond issuance grew by 40.2%, to $48.1 billion from $34.3 billion., General obligation issuance grew 8.2%, to $30.8 billion from $28.4 billion., Issuers in Indiana, Michigan, Minnesota, and Missouri all recorded, multibillion increases in their volume totals. Illinois, Iowa, Nebraska, North Dakota, Ohio, and Wisconsin posted more modest gains, and only South, Dakota experienced a drop after an increase in 2004., Volume was higher for all types of issuers with the exception of state, governments, which issued $5.9 billion last year, down by 14.6% from $6.9, billion in 2004. Municipalities drove their issuance totals up by 27.1%, to $37.6 billion from $29.6 billion a year earlier. State agencies sold, $22.7 billion, 30.2% more than in 2004., The jump in volume spanned all sectors, with education accounting for the, largest chunk with $25.7 billion of debt sold, a 17.5% increase over 2004., Transportation issuance nearly doubled to $6.8 billion from $3.6 billion, the year before. That figure was boosted by large deals, including, Chicago's December sale of $1.2 billion of new-money and refunding O'Hare, general airport revenue bonds, the Illinois State Toll Highway Authority's, $770 million new-money sale in June, and the Wayne County, Mich., Airport, Authority's sale of $507 million of revenue bonds in April., Health care borrowers recorded a robust rise in issuance in *2005-, to $10.1, billion from $5.9 billion., Indiana hospitals remained a strong presence in the market with the, issuance of $450 million of bonds through the Indiana Health and Education, Facility Financing Authority on behalf of Ascension Health, with Citigroup, Global Markets Inc. as lead underwriter. The Illinois Finance Authority, sold $350 million of bonds for Resurrection Health Care and $226 million, for Advocate Health Care Network. The Missouri Health & Educational, Facilities Authority issued $755 million of debt on behalf of SSM Health, Care., Volume this year in the Midwest will depend on a combination of factors, that include interest rates and the political and economic climate, according to Richard Ciccarone, chief research officer at Illinois-based, McDonnell Investment Management., I would not expect refundings to come in at quite the same level, but at, the state level politics and economics will play a role, Illinois, the governor is facing re-election and has major capital, improvement plans on his agenda. In Michigan, where issuance was strong in, *2005-, I see them being a little more prudent as they face some financial, Ciccarone predicted strong issuance in the health care sector as hospitals, attempt to remain competitive by building state-of-the-art facilities or, With volume and utilization numbers strong, because of the aging baby boom population, there's a facility war going on, Chicago ranked number one among issuers with $2.9 billion of debt sold in, 19 issues, due mostly to its $1.2 billion airport sale. The Illinois, Finance Authority, the state's main conduit issuer, was number two, with, $2.6 billion sold in 67 issues. Detroit followed with $2.4 billion in, eight issues, and the state of Ohio was fourth with $1.4 billion in 21, issues., Wisconsin came in fifth with $1.4 billion in eight issues. Michigan was, sixth with eight sales totaling nearly $1.4 billion. Illinois, in the, absence of a capital budget for two years, dropped to 15th, with $815, million of debt compared to its third-place finish a year earlier., Detroit had the largest single bond issue in the region in 2005 - $1.44, billion of pension obligation certificates, a taxable deal brought to, market on June 1., In Indiana, a reorganization of the state's issuers affected statistics, for the year. The Indiana Finance Authority completed 12 deals in *2005-, after legislation established the agency as the replacement for the, Indiana Development Finance Authority. The IFA issued $962.8 million of, debt, including about $400 million for a stadium for the Indianapolis, Colts. Goldman, Sachs & Co. and J.P. Morgan Securities Inc. served as the, lead managers on that Oct. 12 sale. The Indianapolis Local Public, Improvement Bond Bank sold $889 million of bonds, ranking 12th in the, region and second in Indiana, behind the IFA., The IFA also took over issuance of bonds to fund the state revolving fund, program, which had been issued through the Indiana Bond Bank. The Bond, Bank's ranking dropped to 111th from sixth in the Midwest in 2004 as that, program shifted and municipal borrowings slowed. The Bond Bank's, short-term borrowing had grown in recent years as statewide reassessments, delayed property tax collections for municipalities, according to Dan, Huge, executive director of the bank. The Bond Bank issued $1.3 billion of, tax warrants in *2003-, a figure that dropped to $750 million in *2005-, said., UBS Securities LLC held onto its top position among underwriters, managing, 208 issues totaling $9.56 billion, including Detroit's pension certificate, issuance in May. The firm finished 2004 with 152 issues in the region, worth $7.3 billion., Citigroup Global Markets - a co-senior manager on the Detroit sale and, book-running manager on the O'Hare sale - came in a close second, senior, managing $9.52 billion worth of debt in 163 issues. That was up, dramatically from the 86 issues totaling $3.5 billion last year, when the, firm also snagged second place., Merrill Lynch & Co. placed third with $4.7 billion of issuance in 53, deals, up from its eighth position a year earlier. J.P. Morgan came in, fourth with $4.2 billion of volume in 151 issues. Lehman Brothers rose to, the fifth position from ninth a year earlier. Bear, Stearns & Co. fell to, ninth place from fifth a year earlier. Despite a strong showing in several, states, including Wisconsin, the firm's Illinois drought continued due to, ongoing state and federal probes into how it won its book-running spot on, the state's $10 billion pension bond sale in 2003., Public Financial Management Inc. held on to its first place finish among, financial advisers in the Midwest by working on 254 deals totaling nearly, $5 billion. The Detroit pension certificate sale helped Robert W. Baird &, Co. capture the No. 2 slot, up from its fifth place finish in 2004., Chicago-based Scott Balice Strategies was one of the firms that also, benefited from the Detroit deal, moving up to seventh in the overall, rankings in the Midwest from 18 in 2004. In Michigan, the firm ranked, fourth among financial advisers. Working as FA on health care issuance, Kaufman, Hall & Associates Inc. broke into the top 10 in the Midwest, moving up to sixth place from 14th in 2004., Ice Miller, bond counsel on the Detroit pension bond sale, knocked Chapman, and Cutler LLP out of the first spot among bond law firms, working on, nearly $6 billion of debt compared to Chapman's $5.8 billion. Ice Miller, also served as bond counsel on several large deals for Indiana., Miller Canfield Paddock and Stone was third among bond counsel in the, Midwest, working on $4.9 billion of issuance. Lewis & Munday, which also, worked on the Detroit sale, rose to fourth from seventh place in Michigan, and jumped to number 12 from 59 among bond counsel in the Midwest.
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by Elizabeth AlbaneseThe Denver Convention Center Hotel Authority is scheduled today to sell, $358.5 million of XL Capital Assurance-insured convention center hotel, senior revenue refunding bonds to take out debt issued in 2003 to finance, a Hyatt hotel., Piper Jaffray & Co. is the lead book-running manager for the deal. UBS, Securities LLC is the co-senior manager of the transaction, with A.G., Edwards & Sons Inc., George K. Baum & Co., Harvestons Securities Inc., JPMorgan, D.A. Davidson & Co., RBC Capital Markets, and Stifel, Nicolaus &, Kutak Rock LLP is the authority's bond counsel, and Bookhardt & O'Toole, will serve as underwriters' counsel for the transaction. JPMorgan Trust, Co. is trustee., Although some of the firms' names have changed, the underwriting syndicate, is the same team that sold the authority's Series 2003 hotel revenue bonds., That issue of debt financed the construction of a 1, 100-room Hyatt to, serve the needs of an expanded Colorado Convention Center in downtown, Denver. The hotel opened this past December., Proceeds of the issue scheduled for this week will refund the outstanding, 2003 bonds., According to the preliminary official statement, the bonds will be offered, in a term bond structure, with the issue reaching a final maturity in 2035., Standard & Poor's has assigned an underlying rating of BBB-minus to the, Series 2006 bonds, while Moody's Investors Service rates the debt Baa3., Fitch Ratings does not rate the credit., The bonds are secured by net hotel revenue and fixed contributions from, the city of Denver. Denver's share of the debt service will be funded by, an annual appropriation that averages between 40% and 42% of annual debt, service obligations., According to the Standard & Poor's report released March 31, the demand, The report, written by analysts Jodi Hecht and Scott Taylor, states that, the ramp-up period for the hotel is expected to last four years., The downtown Denver hotel market RevPAR [revenue per available room] is, below the average of the top 25 markets in the U.S., which may not support, the hotel's projected RevPAR and growth in room rate, which is above the, the long bond, term exposes lenders to increasing competition and deteriorating physical, However, the deal also reflects a number of credit strengths, the report, said, including strong support by the city, a good location alongside the, convention center, hotel management by Hyatt Hotel Corp., and the fact, that the facility is already operational, which eliminates construction, risk., Debt service for the Series 2003 bonds ranges from $19 million to $20, million per year, with no debt service payments in 2004 and 2005 and slow, amortization over the following 23 years., The original bonds were priced to yield 4.4% on the 2033 final maturity.
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by Elizabeth CarvlinThe state-appointed financial manager for Hamtramck resigned last week, after working for six years to help fix the small city's finances., Louis Schimmel, a longtime municipal finance participant in Michigan, said, he accomplished what he set out to do in the financially troubled city., Schimmel was appointed by Lansing in 2000 to return the city to fiscal, soundness. Hamtramck faced a $2.5 million deficit and had $7.5 million of, bond debt with a total city budget of about $16 million. It failed to meet, some of the requirements of its agreement with Michigan in 1999 and, triggered the process for state officials to begin a financial review and, appoint a financial manager. Michigan's response to the crisis, and those, in two other cities, became a test of legislation that sought to bring a, state solution to local fiscal problems., The state also appointed financial managers in Highland Park and Flint., Flint's financial manager ended his term, but Highland Park's resigned, amid disagreements with Lansing about how to fix the struggling city's, finances. The state appointed someone else to fill her position., Michigan officials still must decide whether to release Hamtramck from its, designation as a city in financial emergency. The Local Emergency, Financial Assistance Loan Board will make that determination., Schimmel, who had planned to leave the city in *2004-, said he accomplished, the task of helping the city stabilize its financial status, according to, local reports.
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by Alison L. McConnellThe Internal Revenue Service's tax-exempt bond office plans to further, toughen its settlement standards in illegal arbitrage cases, requiring, 100% of bondholders' tax exposure, in addition to disgorging illicit earnings, according to a top enforcement, official., The TEB office also intends to de-link Section 6700 penalty protection, from bondholder settlements and notify bondholders even before it issues, adverse determinations - sometimes even at the opening of an audit - to, expedite case handling, according to field manager Charles Anderson., Historically, the IRS has looked to a disgorgement of arbitrage earnings, in settled cases involving yield-burning and other abusive arbitrage, devices, Anderson said yesterday at a tax enforcement session of the, National Association of Bond Lawyers' Tax and Securities Law Institute, here., Anderson added that if the IRS were to continue with those settlement, strategies, practitioners would have little incentive to stay on the right, side of the law because existing terms are not harsh enough., With arbitrage bonds, particularly [in] advance refundings, I don't think, we're going to be much longer willing to settle on the disgorgement of, On future examinations we'll be asking for tax, exposure and the redemption of bonds. That's something all the managers, TEB's voluntary closing agreement program typically requires repayment to, the government of the arbitrage earned in an abusive deal, such as an, advance refunding scheme, and those standards should differ from those of, the audit division, he added., The enforcement division is also going to be less likely to negotiate, settlements for less than 100% of tax exposure if issuers have not, disclosed any material events to their bondholders., We're not entirely comfortable with negotiating on behalf of someone's, tax liability when that person might not know about it, think it's a question of fairness. If the issuer is not willing to notify, bondholders, He also said the IRS plans to notify bondholders and mutual funds much, earlier in the audit process than it has in the past., Bondholders are the real taxpayers and they have the right to know what's, At the earliest possible moment when we think there's, an adverse consequence, - where a dealer buys an entire maturity of bonds, and immediately sells them to an institutional investor, who then sells, them to a regional dealer who in turn sells them to retail customers -, Anderson said., Another issue TEB is examining is the discharge of indebtedness that, occurs when a party steps in to pay bondholders' tax exposure in an audit, settlement. The discharge of indebtedness represents taxable income to the, bondholders, Anderson said., I think we're going to be a little tougher on the dollars because, effect, the payment of someone's liability by another party does result in, That may, Additionally, because the TEB office has heard criticism about it using, Section *6700-, which applies penalties to the participants in abusive, transactions, enforcement agents plan to de-link 6700 from the bondholder, settlement process., But service providers, such as underwriters and financial advisers, not going to put up funds to settle cases without Section 6700 protection, according to tax controversy attorney Bradley S. Waterman, who moderated, the enforcement session., Waterman asked., Anderson replied with a smile., Waterman went on to say that the threat of Section 6700 penalties was, useful because it got the attention of participants and enabled issuers to, raise money from the deal participants for settlements with the IRS. If, TEB takes that negotiating tool off the table, it will likely see less, settlements and will have to chase down bondholders, he added., Given the often-negligible amounts of income individual bondholders earn, is more than the service can, said panelist Daniel B. Rosenbaum of Caplin & Drysdale in, Circular 230, Earlier in the day, IRS chief counsel Donald L. Korb addressed the general, NABL membership and discussed Circular 230., Donning a white T-shirt with a target in the middle of his chest, Korb, said comment letters sent to the IRS in response to interim guidance have, opened the door to the possibility that the final regulations - which, apply to covered opinions and from which traditional bond opinions are, excepted - may be revised., Echoing the position espoused by several key Treasury Department officials, in recent months, Korb added that it was common sense to reevaluate that, set of rules before finalizing the proposed regulations, which would set, forth standards for attorneys issuing state and local bond opinions., Those regulations, which were proposed in December 2004 and remain, unfinalized, would require a bond lawyer to include with the bond, transcript a memo that analyzes all significant federal tax issues., Korb also addressed tribal government financings, noting the IRS', important questions with serious implications for the, The federal tax code currently allows tribes to issue municipal bonds if, essential government, To work with that oft-disputed requirement, attorneys ought to consider, the legislative history and Congress's 1987 clarification that tribes can, only use tax-exempt bonds to finance activities customarily performed by, Taking the podium after Korb, Clifford Gannett, acting director of the, for forging, a partnership between NABL and the IRS and a challenging time for the, office's management team. Gannett replaced W. Mark Scott three months ago, when Scott went into private practice with Vinson & Elkins LLP in, Washington., Echoing comments he made in December, Gannett said TEB's field operations, division plans two new major programs this year., The first is designed to evaluate the level of noncompliance in the, charitable finance sector, and the agency is currently conducting research, and data analysis for indications of potential pockets of problems, said., We will assess which areas are most susceptible to noncompliance, then, determine the scope of an examination program, Gannett said., TEB's other 2006 initiative will deal with derivatives, focusing on the, bond yield aspect of deals after last year's focus on investment yields, TEB views the derivative market as one growing in significance, Gannett, said, noting that agents have heard troubling accounts of swap deals in, which issuers use the transactions to obtain large up-front payments and, to terminate swap agreements., We understand that practitioners are struggling with treatment of this, technical issue, which can a significant impact on the amount of arbitrage, A targeted, limited derivatives exam project will be developed this year, Gannett said.
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by Rich SaskalAn old California finance tool can finance modern approaches to dealing, with, the state's rapid growth, according to speakers here at a conference on the, topic Monday., The Mello-Roos Community Facilities District Act of 1982 was created as a, financing tool to allow governments to support traditional postwar suburban, growth after the tax cuts of Proposition 13., conference, presented by, Stone & Youngberg LLC, said the act also provides tools to support the, higher-density, infill, and brownfield development that the state needs, today., said Mike Roos, the former, state assemblyman who co-developed the law with the late state Sen. Henry, Mello. Roos is now a senior vice president for Stone & Youngberg and also, owns a political consulting firm., Here we are in 2006 and more pieces of infrastructure are needed, It has proved, The Mello-Roos act authorized the formation of community facilities, districts with the power to levy special taxes to finance infrastructure, such as sewers, streets, and schools., When there are fewer than a dozen registered voters, the districts can be, created by a vote of landowners, making Mello-Roos districts an effective, tool, to develop vacant land in an environment where local governments have, limited, general taxing power to provide such infrastructure to new development., As the state's population grows, and people look for alternatives to, continued sprawl, Mello-Roos financing tools can help pay for those, alternatives, conference participants said., Mello-Roos offers communities a great deal of flexibility in the design, of community facilities districts and their special tax levies., When it comes to infill and urban growth, we really maximize that, said Susan Goodwin, a tax consultant who, specializes in Mello-Roos consulting as managing principal of Goodwin, Consulting Group Inc., Building on an urban scale involves inherent difficulties that tend to be, greater than traditional suburban development on previously vacant land, said, Gregory Vilkin, president of the western residential business of developer, Forest City Enterprises Inc., He talked about the company's effort to redevelop Denver's former, Stapleton Airport property using so-called new urbanist principles, which, call for mixing work, retail, and residential uses at higher densities than, suburban development. The firm used a Colorado law, Title 32, which is, comparable to California's Mello-Roos law, as a financing tool., It's more expensive to build that way, Vilkin said, but noted that such, development also generates more revenue., Because you have more houses per acre, you can bond more, The Mello-Roos act came about following a crisis generated by 1978's, Proposition 13, which limited property taxes. Though the law's provisions, the state's continued population growth and, infrastructure problems should send decision makers back to the drawing, board, said Carol Whiteside, the former mayor of Modesto and president of, Great Valley Center, a nonprofit created to promote the well being of, California's Central Valley., People ought to be thinking creatively about what new financing, mechanisms might be helpful and how to get them enacted, The conference also included the announcement of the first Stone &, Youngberg Award for Innovation in Smart Growth Finance. The award went to, San Francisco Redevelopment Agency for its project to replace abandoned, railroad yards in the city's Mission Bay district with housing, office, space,, and a University of California research campus -- an effort that involved, more, than $110 million in CFD bonds., The events of Monday, the first day of a two-day conference, concluded, with a speech from Willie Brown, the former San Francisco mayor and, California Assembly speaker, who said today's term-limited Legislature, could, never produce a bill as sophisticated as the Mello-Roos act., Californians can serve only six years in the Assembly and eight in the, Senate because of term limits, which were approved by voters in 1990., Citizens of California are really idiots when it comes to voting, Brown, said.
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by Robert WhalenThe New York City Housing Development Corp. yesterday approved up to, nearly $190 million of taxable and tax-exempt revenue bonds, which will, likely start coming to market later this month., The board -- noting that the corporation has another $550 million of bond, projects in the pipeline this year -- also voted to allocate the, corporation's, remaining private activity bond capacity to signal to city and state, officials, the need for additional capacity, said HDC general counsel Richard, Froehlich., He said that HDC has increasingly taken larger shares of New York's roughly, $1.5 billion of private activity bond capacity under federal rules. The, corporation last year received $210 million and $283 million of private, activity borrowing capacity last year from the city and state, respectively., That compares to *2000-, when the corporation received $60 million from the, city and $70 million of capacity from the state, the city has designated $140 million to HDC and the state has allocated, roughly $200 million, activity capacity in the near future., The Bond Buyer's annual survey of private activity bond cap allocations, found that New York allocated roughly half of its 2005 cap to multifamily, housing projects., HDC was the nation's busiest housing bond seller last year, and is, leading housing issuers this year, corporation president Emily Youssouf, said, at the board meeting, citing data from Thomson Financial. According to, Thomson, the corporation sold more than $1.5 billion of multifamily housing, debt in 2005 and has sold roughly $725 million of such debt so far this, year., The upcoming bond sales will finance multiple developments that will, together create more than 5, 000 affordable housing units. The corporation, the city's Department of Housing Preservation & Development have joined, together to execute Mayor Michael Bloomberg's ambitious housing development, plan, which calls for the city to help create 165, 000 new residential units, throughout the city's five boroughs by 2013., Bear, Stearns & Co. is slated to underwrite several series of taxable and, tax-exempt HDC debt totaling about $163 million. These bonds are authorized, under HDC's 1993 bond resolution and are expected to be rated AA by, Standard, & Poor's and Aa2 by Moody's Investors Service, according to HDC spokesman, Aaron Donovan., An issue of $85 million of tax-exempt, fixed-rate Series C bonds will, mature through 2040 and finance more than 700 apartments in Manhattan, Queens, and the Bronx. The Series D bonds, which will also be exempt from, federal, state, and local income tax, total only $4 million and will be, used, to repay mortgage debt on three properties in Brooklyn and Manhattan. The, other series of bonds will be taxable and marketed as auction-rate debt., These obligations will help finance repair loans and mortgages on a dozen, properties., A $32 million block of Series B debt, which the board first authorized, last November, will be lumped in with the other series that Bear Stearns, will, underwrite, Donovan said., JPMorgan is expected to underwrite $25 million of 7-day, variable-rate, bonds, which will be backed by a direct pay letter of credit provided by, Citibank NA. These tax-exempt securities are expected to carry Standard &, Poor's AA, A1-plus ratings. These bonds will finance a low- and, middle-income, property in Harlem that will include 125 apartments, documents from, yesterday's meeting indicate. The bonds will probably be sold this summer.
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by Rich Saskalfter being rebuffed by voters last year, officials in Ketchikan, Alaska, will ask their constituents next month to approve a scaled-down, authorization for revenue bonds to rebuild the city's cruise ship docks., Voters will be asked, April 11 to approve a $38.5 million authorization for revenue bonds. In, August *2005-, they voted down a $70 million bond authorization by a 55%-45%, margin., Ketchikan, located near the southernmost end of the Alaska Panhandle, traditionally been the first port of call for ships heading north on the, Inside Passage route from Vancouver, British Columbia, and Seattle., In recent years, the number of travelers taking these cruises has, snowballed, and the cruise lines have been building bigger ships to, accommodate them., That created a little problem for Ketchikan. The city's docks have room, to tie up three medium-size cruise ships of about 700 feet long. But many, They could accommodate three medium-size ships as of ten years ago, said John Hansen, president of the Vancouver-based North West CruiseShip, Association, the trade group for cruise lines on the Alaska Inside Passage, They cannot accommodate three of what we term Panamax ships, referring, to ships of the largest length possible that fit through the Panama Canal, roughly 965 feet., said Bob Newell,, Any other ships have to anchor out on the, Ships at anchor have to ferry passengers to shore on small tender boats, which is less convenient for passengers. As a result, some cruise, itineraries, in the 2006 season omit a stop in Ketchikan, Newell said., We're expected to lose 100, 000 passengers in the 2006 season, Last year, voters turned down a $70 million bond proposal., The biggest difference is the proposal last year included the city, constructing all four berths and making improvements so that the city would, Newell said., A fourth berth is still planned, but it would be privately financed, said., said Zig Ziegler,, co-owner of a real estate firm and co-chair of the advocacy group Ketchikan, For A Positive Economy!, which was created to support the bond measure., As a, result of that, RBC Capital Markets would underwrite the bonds, Newell said. Preston, Gates & Ellis LLP is bond counsel., The city is contemplating issuing the bonds through the Alaska Municipal, The revenue stream securing the improvements is a $6 per passenger fee, paid by cruise lines for ships that tie up at the Ketchikan dock, and a $4, per head fee for ships that anchor in the waters near Ketchikan, Hansen, said., Its primary purpose is to pay for the infrastructure improvements, said., Ketchikan has had a rough economic ride since *1990-, after the pulp mill, that used to be the area's largest employer closed down. But the number of, visitors arriving on cruise ships has skyrocketed since then., In *1990-, cruise ships made 314 calls in Ketchikan, dropping off 230, passengers, according to statistics posted by the Ketchikan Visitors, Bureau., *2004-, there were 538 calls, with more than 848, 000 passengers., The numbers reflect not only an increase in cruise ship calls, but also, growth in the capacity of ships, as the average vessel carried more than, 1,500 passengers in 2004 compared with about 730 in 1990., And the growth has continued: For example, two of the seven ships that, Princess Cruises, owned by Carnival Corp., will send to Alaska this year, considered post-Panamax vessels. That means the Diamond Princess and the, Sapphire Princess, each of which carry more than 2, 600 passengers, would be, too big to fit through locks of the Panama Canal., The growth in the cruise ship industry has helped on the job front, many of the jobs generated are retail-oriented and seasonal, and last, year's, election prompted some residents to complain about the impact of the ships, whose daily summer passenger counts can outnumber the city's population of, about 8,000., This year, supporters of the bond measure are committed to explaining its, benefits, Ziegler said., What we're trying to accomplish as a group is to promote the positive, aspects of this economic activity and spell out for everyone clearly the, economic impact of what it means to have the bond pass, About 25% to 30% of the city's sales tax receipts come from tourist, He said bond supporters are also going to emphasize the amenities that, will be financed by the bond measure, which include construction of a, waterfront promenade to link all the docks, improvements to a small-boat, harbor, and enhancements to traffic circulation around the downtown area., Supporters also hope to make it clear that the debt consists of revenue, bonds supported by the head tax on cruise passengers, and do not threaten, raise anyone's taxes., We are undertaking a pretty thorough education of the bond process, Ziegler said., The logging and fishing industries that sustained Ketchikan for decades, were vulnerable to economic and social forces, Ziegler said., I think it's very important for people to recognize at this point this, is one area we have direct control over with regards to our local economy, With this bond issue, we have a direct say in it, and it directly
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by Jim WattsFinancial woes for a school district in northern Arizona that the state, took over in December are being compounded by the refusal of 1, 500 members, of a polygamist sect living in Colorado City, Ariz., to pay property taxes., The State Board of Education agreed this week to loan $711, 629 to Colorado, City Unified School District No. 14 to make up for the property taxes it, will lose this year. The district's receiver is also seeking a $1.3, million interest-free loan from the state to pay off the district's debts, and warrants, including a $135, 000 debt service payment due in June on, $1.2 million of outstanding bonds, part of $1.5 million of debt sold in, 1995 and 2000., gross, The legislation authorizing the $1.3 million loan from the state's general, fund would also give the state-appointed receiver the right to sell, district property without a vote of the people, and to make debt service, payments from the district's operating funds. The measure has been, approved unanimously by the Arizona House and will be considered by the, Senate next week., Peter Davis of Simon Consulting in Phoenix, who was appointed receiver, over the district in December, said the $2 million is needed to keep the, district out of bankruptcy and its three schools operating. He said the, district would be able to repay the loans by 2012 by having a portion of, its state disbursement withheld each year., This district will be on solid financial ground if we pass this bill, Members of the Fundamentalist Church of Jesus Christ of Latter Day Saints, have been told by their leader not to pay their property taxes to the, district or cooperate with efforts to divide up the land on which they, live. Colorado City, north of the Grand Canyon on the Arizona-Utah state, line, is an enclave of the polygamist religious sect that broke away, decades ago when the mainstream Mormon Church renounced polygamy., The sect's leader, or prophet, Warren Jeffs, continues to direct his, followers despite being on the run from state and federal charges of, sexual misconduct., An arm of the sect known as the United Effort Plan trust owns about 95% of, the occupied land in the district. The land is divided into 40- to 80-acre, tracts, and members are allowed to build homes on one-acre lots. In the, past, members paid their assessed portions of the property tax monthly to, the trust, which paid the annual taxes to Mohave County, Ariz., neighboring Washington County, Utah., Those taxes haven't been paid for several months, said Bruce Wisan, a Salt, Lake City accountant who was appointed as the trust's fiduciary in May, 2005 by a Utah court. The court dissolved the board that ran the trust at, the request of the attorneys general of Utah and Arizona., They've been told by their prophet not to pay the property tax, Wisan, After I was appointed, the church leaders stopped collecting the, Wisan said the trust's total property tax bill is about $1 million a year, in Arizona and $400, 000 in Utah. The trust controlled $110 million in, property but never had a banking account until he was appointed, Wisan, said., They've been told that, if they cooperate with us, they could lose their homes. Their prophet told, them, 'Say nothing, do nothing, The community is tightly run by the leaders of the polygamist sect, according to Wisan., They're not allowed to read, newspapers and they're not allowed to have a computer. The only news they, Wisan is in the process of having the land surveyed so individuals', property taxes can be better assessed. If the taxes are not paid following, the survey, Wisan said, he would begin the lengthy legal process of, evicting the residents., A report last year by Arizona auditor-general Deborah Davenport said the, district's liabilities exceeded its assets by more than $546, 000 at the, end of the 2004-2005 school year. The audit also found that as of Aug. 9, *2005-, the district owed the Department of Education about $1 million for, warrants the district issued to teachers in lieu of paychecks. The state, purchased the warrants when the district couldn't back them up because of, its inadequate cash flow.
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by Lynn HumeNASD has exempted five broker-dealer firms from Rule G-37's two-year ban, on municipal securities business with certain issuers after their, municipal finance professionals made contributions to issuer officials, that ran afoul of the Municipal Securities Rulemaking Board rule, which, was designed to prevent muni dealers from engaging in pay-to-play, practices., The exemptions were granted by NASD in separate letters sent to each of, the firms. NASD released the letters yesterday on a batch basis, though, their dates ranged from Sept. 20, 2005, to Feb. 23, 2006., The letters were redacted and did not identify any of the parties, but one, case clearly involved JPMorgan, which The Bond Buyer reported last month, had obtained an NASD exemption from a two-year ban on business with New, York that was triggered by an employee's $1, 000 contribution to the, gubernatorial campaign of Eliot Spitzer, the state's attorney general., The JPMorgan case involved the rule's look-forward provision, under which, supervisory and management-level and other municipal finance professionals, who move to non-muni positions at dealer firms retain their MFP status, and therefore remain subject to the rule, for one year., In three of the other cases where dealers received exemptions from the, rule's temporary ban, their employees ran afoul of the rule's look-back, provision. Under this provision, the rule's temporary ban on muni business, is triggered if a firm hires someone for a supervisory or management-level, position who has made contributions to issuer officials during the past, six months, except in cases where the contributions were to issuer, officials solicited for muni business, in which case the look-back period, is two years. For anyone else hired, the look-back period for, contributions to issuer officials is two years., The remaining case involved an MFP who, at the request of an acquaintance, made a $300 contribution to a gubernatorial campaign that ran afoul of the, rule. The contribution should have been pre-cleared under the firm's, policy, but was not and the firm did not discover it until after it was, made., In all of the cases, NASD said the MFPs who contributed to issuer, officials could not solicit municipal securities business from those, officials' governments or related agencies for two years after the date of, their most recent contribution to the issuer officials. NASD also barred, the MFPs from receiving compensation related to the firm's muni business, with the issuers. However, the firms were not banned from soliciting muni, business from those issuers., The JPMorgan case involved Jeffrey S. Flug, The Bond Buyer learned last, month from campaign contributions records. Flug was head of institutional, investor sales for the firm's fixed-income division from June 2000 until, Feb. 11, *2005-, where he coordinated with about eight of the firm's sales, forces, including its muni securities institutional investor sales force, making him an MFP., On Feb. 11, *2005-, Flug took a leave of absence from the firm for personal, reasons for several months. He returned to the firm in September of that, year in a new non-muni position - as relationship manager for a few large, private institutional investors., Flug made the $1, 000 contribution to Spitzer on Nov. 21, *2005-, after he, had switched to the non-muni position, but while he was still designated, as an MFP. He did not get the firm to clear the contribution, as was, required under the firm's procedures. JPMorgan did not discover the, contribution until after it had been made and the firm had underwritten, several bond issues for the state. It self-banned itself from engaging in, muni business with the state after discovering the contribution, while its, exemption request was pending., In pressing for the exemption from the temporary ban, which would have put, a serious dent in its muni business, JPMorgan argued that Flug had never, solicited muni business for it, that its long-time established, relationship with New York State showed that a political contribution was, not necessary to obtain business from the state, and that it had embarked, upon an educational initiative to educate employees about G-37's, requirements. A refund of the contribution also was obtained, the firm, said., The firm also pointed out that a personal acquaintance of Flug's had, solicited the contribution, not Spitzer or his campaign., NASD granted the exemption in a Feb. 23, *2006-, letter, requiring JPMorgan, to take several remedial actions, including banning Flug from soliciting, muni business until Nov. 20, *2007-, educating all firm MFPs on G-37's, restrictions, and reviewing its compliance procedures to determine if, improvements are needed., In a letter dated Oct. 11, NASD exempted a broker-dealer from G-37's, temporary ban after it hired as an MFP one of its former muni securities, consultants who had made political contributions to issuer officials. The, employee, who was hired by the firm as an MFP on Aug. 29, *2005-, contributed $500 to a City Council member on Feb. 24, *2005-, and $500 to, the City Council's president on Jan. 25, 2005., In arguing for an exemption, the broker-dealer told NASD that the employee, had never solicited muni securities business from the city, even as a, consultant for the firm, and that the firm had a long-standing history of, underwriting the city's bonds so that a contribution was not needed to, secure business., The dealer also said that the contribution to the council president was, made because of a personal friendship and the other contribution was made, to the council member because of a close working relationship the member, had with the contributor when he was head of the city's Recreation and, Parks Commission. Both contributions were returned, the dealer said., NASD granted the exemption after barring the employee from soliciting muni, business from the city or its entities until Feb. 25, 2007. It also barred, the employee from receiving compensation from the firm's muni business, with the city and affiliated entities during that same period. The, employee was required to provide NASD with quarterly certification of his, or her compliance with the requirements., In another letter also dated Oct. 11, NASD exempted a broker-dealer from, G-37's temporary ban, after the firm hired, as its chief administrative, officer, a member of its management committee, and an MFP the former chief, executive officer of a public relations firm who had made two, contributions to issuer officials a few months earlier., The person was hired as an employee of the firm on Sept. 1, *2005-, but on, June 30, *2005-, had contributed $1, 000 to a treasurer from one state who, was running for a U.S. Senate seat, and on May 10, *2005-, had donated $697, to the campaign of a gubernatorial candidate in another state., In arguing for an exemption, the firm said the new employee had never been, involved in the muni securities business and that the firm uncovered the, contributions during the hiring process., NASD granted the exemption after requiring the employee to be banned from, soliciting muni business from the issuers, or receiving any compensation, from the firm's muni business with those issuers, until June 30, 2007., In a Sept. 22, *2005-, letter, NASD exempted a broker-dealer from the G-37, ban after it hired, as an economic development specialist and MFP, former analyst at a city financial advisory firm who had made, contributions to city officials several months earlier., The person was hired on Sept. 19, *2005-, but on May 17, *2005-, contributed $150 to a candidate for the City Council and on Oct. 17, *2004-, had contributed $200 to a City Council member and mayoral candidate. The, person was not eligible to vote for either candidate and therefore did not, qualify for G-37's de minimis rule. Under that rule, an MFP can contribute, up to $250 per election to any candidate for whom it can vote, even if, they are issuer officials., The dealer said that it discovered the contributions during its hiring, process and that the new employee had never solicited muni finance, business from the city or its entities. It said also that it had been, underwriting muni bonds for the city for some time and contributions were, not needed to obtain muni business from the city., NASD granted the exemption, after prohibiting the MFP from soliciting muni, business from the city, or receiving compensation from the firm's muni, business with the city, until at least May 18, 2007. The self-regulatory, organization also required the MFP to provide quarterly certifications of, its compliance with these requirements., In a letter dated Sept. 20, *2005-, the NASD exempted a dealer from the G-37, ban after one of its registered representatives who was an MFP contributed, to a gubernatorial candidate's campaign. The employee contributed $300 to, the candidate on June 11, 2005., The dealer argued for an exemption on grounds that the contribution, had been solicited by a personal acquaintance of the employee and not the, candidate or his campaign. The firm's G-37 policy required the employee to, get clearance for the contribution before making it, but the employee, failed to follow this policy. After receiving the firm's quarterly request, for information on political contributions, the employee remembered the, donation and alerted the firm., The dealer told NASD that the employee, during his three years at the, firm, had never solicited muni business from the state or its entities., The firm also claimed that it had worked with the state for years on muni, securities business and the contribution was not necessary to obtain such, business., In addition, the dealer pointed out that it had banned itself from, business with the state while its exemption request was pending and, obtained a refund of the contribution., NASD granted the exemption after barring the employee from soliciting muni, business or receiving compensation from the firm's muni business with the, state through June 11, 2006. The self-regulatory organization also barred, the employee from making any political contributions through June 11, 2006.
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by Bill CurranThe municipal market softened modestly yesterday, as dealers looked ahead, to one of the heaviest new issue calendars of 2006 and wrestled with, continued losses in the Treasury market., Traders said yields increased by one to two basis points as prices fell., The market firmed as the session progressed but still finished below the, unchanged line., It felt pretty sticky at the open and we've beaten our way back a, You had some people cutting offerings, for a while there, but as Treasuries have come back they've gotten more, proud. We're just off a little. There was very light volume - everyone was, looking at the calendar now that we finally have one. I think we'll be, able to digest it. As long as the deals aren't priced too aggressively I, think they'll get done. The markets need a little bit of a concession, Underwriters wasted no time in beginning their marketing efforts., Citigroup Global Markets Inc. began taking retail orders on $1.2 billion, of toll bridge revenue bonds being sold by California's Bay Area Toll, Authority ahead of institutional pricing today. Pricing details were not, released. Bonds mature from 2007 through *2026-, with a term bond in 2031., The bonds are rated Aa3 by Moody's Investors Service, AA by Standard &, Poor's, and AA-minus by Fitch Ratings. The deal is backed by toll revenues, paid by users of seven San Francisco Bay region bridges., M.R. Beal & Co. priced for retail investors $375 million of New York City, general obligation bonds ahead of a second day of retail pricing today and, institutional pricing is scheduled for tomorrow. For retail, the bonds, were priced to yield from 3.58% in 2008 to 4.50% in 2027 and are callable, at par in 2016. Financial Security Assurance guaranteed bonds maturing in, 2017 and 2019 and the bonds have underlying ratings of A1 from Moody's, and A-plus from Standard & Poor's and Fitch., Lehman Brothers priced for retail investors $75 million of Nebraska, Investment Finance Authority single-family housing revenue bonds ahead of, institutional pricing today. Bonds were priced to yield from 3.75% in *2007-, to 4.70% in 2016. Bonds maturing in 2021 and 2036 were not offered to, retail. The deal is subject to the alternative minimum tax and has a par, call in 2016. Standard & Poor's rates the credit triple-A., The new deals are pouring into a market left uncertain by a significant, sell-off last week., I think a lot of people are taking their losses and trying to figure out, I've got a, bunch of offerings from people this morning on the long end. People are, showing one level but willing to give up a lot more. Everybody is putting, bandages on their wounds this morning. The question now is when does the, 10-year Treasury note hit 5%. I think it will go back and forth this week, but I think we'll get there, The Treasury market opened in the red yesterday and was little changed on, mixed economic data. The Institute for Supply Management's monthly, business index decreased to 55.2 in March from 56.7 in February, while, economists polled by IFR Markets predicted the index would rise to 57.5., An index reading of above 50 indicates the economy is expanding., Meanwhile, construction spending increased by 0.8% in February, according, to the Commerce Department, surpassing the 0.5% rise projected by IFR's, poll., The data notwithstanding, the 10-year Treasury note bounced between, testing technical support near 4.90% and its opening level of 4.855% and, closed at 4.87%. The tone remained negative after a major sell off last, week that centered on the Federal Open Market Committee's monetary, tightening. Policy-makers increased the fed funds rate by 25 basis points, to 4.75% as expected and surprised many investors by suggesting that more, increases likely would be forthcoming. In its policy statement, the FOMC, Investors expect at least one more rate increase, according to the fed, funds futures market., Right now, you're looking at a 25 basis points hike fully priced in at, the May 10 meeting, but after that there's a lot more uncertainty, said, John Canavan, debt strategist at Stone & McCarthy Research in Princeton, There's a greater probability at this point priced in of a move to, Policymakers have said monetary policy will hinge on economic data, the economic calendar is fairly spare until Friday, when the closely, watched non-farm payrolls report is set for release. IFR's poll indicates, payrolls swelled by 195, 000 jobs in March after an increase of 243, jobs in February., Canavan said an upside surprise would carry more weight than a, disappointing payrolls number., Even if you do see a little bit weaker than expected for one month, But I, think that should we see a sharp upward surprise in payrolls, that might, be a little more important, just because at this point the Fed seems, poised to tighten again at the May meeting, and if the numbers start, coming in well above expectations, it's going to pretty sharply increase, Michael Scarchilli contributed to this column.
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by Anastasija Johnson & Bill CurranThe municipal bond market started what promises to be a more active week, of new issues a touch easier as a drop in new home sales data yesterday, wasn't sufficient to take tax-exempt and government bonds higher, given, widespread expectations of more rate hikes by the Federal Reserve Board., I don't think anyone was buying into that long bond strength this, I would say the trades I've seen, were probably a little cheaper. There was a strip of Memphis paper that, traded five or six basis points from the offering. That's the only way to, A trader in Chicago agreed the market was a tad cheaper amid sluggish, activity., I have not seen a lot of action. I traded one piece and a couple of, I think in general we are, probably weaker by a hair, but not by much. I have not seen a lot of, bid-wanteds. There were a couple of lists out, but I wouldn't call that, heavy - for a Monday, it was a pretty average amount., We've got some supply, but sometimes supply could be the best thing for, us. Sometimes supply pulls you through and takes you to a new level rather, According to estimates by The Bond Buyer, issuers will come to market with, $5.298 billion of long-term bonds this week, compared with $4.17 billion, sold last week. In the largest deal of the week, California is bringing, $800 million of general obligation bonds tomorrow, and there are four, other high-grade deals on the calendar as well. Georgia today is selling, $625 million of GOs in a three-pronged new-money deal and the Washington, Suburban Sanitary District in Maryland will offer $100 million of water, supply and sewage disposal bonds. Tomorrow, Maryland itself will come to, market with $300 million of GOs and Virginia will sell $103 million of, refunding GOs., Although the new-issue calendar is heavier than it has been in the past, few weeks, traders said the gilt-edged names in the market this week are, more likely to push prices higher., It's, mostly state GO competitive paper, so it's not likely to cheapen up the, market much. In fact, it might have the opposite effect, it can actually, A trader in New York said these aggressive bids could be risky, indicated that there is broad-based demand for new supply that could, mitigate this risk., There is a good chance that they will bid them too high and will have to, But at, the same time, there are a lot of buyers - mostly insurance companies and, not so much arbitrage accounts - and since there are no bonds in the, secondary, they could take a big piece of state names [on offer] because, Before the market heats up today, J.P Morgan Securities Inc. yesterday, began taking retail orders on a portion of a $140 million University of, Connecticut general obligation deal. For retail, the underwriter priced, $79 million of bonds to yield from 3.23% in 2007 to 4.22% in 2026. Bonds, maturing after 2013 were insured by Financial Guaranty Insurance Co. The, deal has underlying ratings of Aa3 by Moody's Investors Service, AA from, Standard & Poor's, and AA-minus by Fitch Ratings. There is a par call in, 2016., In the only economic release of the day, the Commerce Department reported, sales of new single-family homes in the United States fell 5% in January, to a seasonally adjusted annual rate of 1.233 million units from an, upwardly revised 1.298 million level reported in December. Economists, polled by IFR BondData Americas expected new home sales to reach the 1.270, million unit level in January. While sales declined, both the unadjusted, average and the median price rose., Steven Ricchiuto, chief U.S. economist at ABN Amro, said the market showed, little reaction to the data because it did not change the immediate, interest rate outlook. Although the headline number was weak and hence, supportive of bond prices, the price data pointed in another direction., It's the split between the decline in sales versus the upward movement in, The [sales] number came weaker than expected,, which is a little surprising given the weather. The general read is that, builders have not yet begun the discounting and that leads you to believe, that either they are making a big mistake or that the market is still, firmer than these numbers imply, Ricchiuto said the front end of the Treasury market has been steadily, deteriorating as market participants become more and more convinced that, the Fed is going to hike rates in March, but the back end remains, people say the Fed is going to stay ahead of the, The federal funds rate currently stands at 4.50% and the next, three policy-setting meetings are scheduled for March 27-28, May 10, June 28-29., I've got 5% fed funds rate by the end of the second quarter, Ricchiuto, said., James Caron, director of fixed-income strategy at Merrill Lynch & Co., said front-end yields could grind even higher unless economic data begin, to point to a slowdown., I think the market needs to price in a distinct possibility that the Fed, It's, becoming more and more clear that the criteria for the Fed to keep hiking, rates - resource and labor utilization - continue to point toward more
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by Lynn HumeThe Bond Market Association, International Swaps and Derivatives, Association, and International Capital Market Association are forming a, Global Capital Markets Board that will help them collaborate on, coordinate, their actions regarding regional and worldwide capital market, issues., The creation of the GCMB will give market participants an effective way, to address the multitude of regulatory and market practice issues that will, arise as capital markets continue to develop and expand globally, said, Edward C. Forst, TBMA's chairman and chief administrator of Goldman, Sachs, The board will serve as a forum for the exchange of ideas between the, three associations. It will allow them to identify areas of common concern, and interest and facilitate the development of common industry positions on, market, regulatory, and legal issues, the groups said., Each group will appoint four members to the GCMB, which will meet three, times per year and make recommendations for joint positions or actions to, respective boards of their associations., Ensuring coordination and collaboration between these three, organizations serves the interests of the respective memberships, particularly given the interaction of the cash and derivatives markets, across, said Jonathan Moulds, chairman of ISDA, international head of global capital markets at Bank of America., TBMA represents nearly 500 member firms, mostly securities firms, also banks and asset managers, that trade, sell, and invest in debt, securities and other financial products. ISDA represents nearly 700 member, institutions from 50 countries on six continents and ICMA is the, self-regulatory organization and trade association representing investment, banks and securities firms that issue securities and trade in the, international capital markets.
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by Humberto SanchezSenate panel currently rewriting federal telecommunications law should, include a provision that would prevent states from blocking localities, from providing broadband services, Dianah Neff, chief information officer, of Philadelphia, and other municipal broadband network supporters said, yesterday., A century ago municipal leaders across the country knew that without, electricity their communities would be left behind as our nation moved, Neff told the Senate Commerce, Today, Philadelphia Mayor John Street and many others across, the country have recognized that without affordable high-speed broadband, access, our communities will be left behind as the world moves from an, The term broadband typically refers to a communication network in which a, wide band of frequencies is available to transmit information through a, single portal. It includes video, voice, and data services, such as, Internet access, cable television, telephone, and related services., Last year Philadelphia contracted with Earthlink to design, build, maintain high-speed wireless Internet access in the city. The project, announced in *2004-, would consist of a 135-square-mile wireless Internet, zone that would give city residents access to affordable high-speed, Internet service, including low-income residents who would pay about $10 a, month and receive assistance to purchase computers., Verizon opposed the project and tried to get legislation enacted in, Pennsylvania to prevent the city from providing the service. But a, compromise was reached that allowed the Philadelphia project to proceed., The Philadelphia project is expected to cost between $15 million and $18, million, which will be funded by Earthlink., Public power utilities are also interested in offering broadband services, because they often have parts of the necessary infrastructure already in, place, according to the American Public Power Association. Public power, utilities have sold tax-exempt revenue bonds to finance their broadband, infrastructure, but those issues tend to be small in size., The result of an APPA survey in December 2004 of the more than 2, not-for-profit utilities that the group represents showed that more than, the report, said., However, private telecommunications companies have lobbied state, legislatures to bar municipalities from providing the services and about, 14 states have tried to enact laws., Supporters of municipal broadband are urging the Commerce Committee, which, is drafting a telecom bill, to include a provision that would allow, localities to offer the service. The committee could consider the bill as, soon as next month, according to chairman Ted Stevens, R-Alaska., We won our battle in Pennsylvania, but other communities need your help, Neff said., One member of the panel, Sen. Frank Lautenberg, D-N.J., introduced, stand-alone legislation last summer that would prevent states from, standing in the way of a municipality offering the service., But another member of the panel, Sen. John Ensign, R-Nev., has introduced, legislation that some believe would dissuade municipalities from providing, broadband. The legislation, among other things, would require localities, that intend to furnish Internet or other such services to its citizens to, provide a detailed description of the proposed scope of the service. The, Ensign bill also stipulates that private companies would have the option, to participate in an open bidding process conducted by a neutral third, party to provide the service under the same terms as listed in the, municipality's notice, including financing.
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by Christine AlbanoMom-and-pop retail investors expanded their footprint in the municipal, market in *2005-, as their holdings climbed to a record high of $845.2, billion at year-end., Household holdings of municipal securities rose $83.5 billion, or 11%, during the year, from $761.8 billion at the end of *2004-, according to new, data released last Thursday by the Federal Reserve Board. The category, accounted for 37.9% of the $2.23 trillion in total municipal liabilities, outstanding at year-end., In the last three months of *2005-, individual investors increased their, holdings by $17.5 billion as they continued to seek out municipal debt, like they did throughout the year for the safety and tax advantages it, provides, according to the Fed, which compiles the quarterly flow of funds, for individuals, mutual funds, banks, insurance companies, and other, holders., Household ownership has risen every year since *1996-, when holdings for the, category totaled $498 billion., is driven by the fact that, the population continues to age, and as it ages, Baby Boomers shift more, said Peter Delahunt, national, institutional sales manager at Raymond James & Associates Inc. in New York, City., Additionally, Delahunt believes other factors, such as poor risk-reward, characteristics in other asset classes, are contributing to the growth in, household holdings in the municipal arena as retail investors continue to, be faithful to municipal debt, for its predictable income stream and low, risk factors., The performance of the equity market has been nothing special and the, many people lost so much a few years ago with internet stocks and have, been burnt so horribly that they have gotten more conservative and don't, he added., Municipal bonds are a staple in an individual's asset allocation mix for, the after-tax income they provide, especially for those that are planning, for major life commitments like college or retirement, the trader added., Just like in your meals you need your vegetables, portfolios need munis, Treasuries than they may have been in the past, for a growing number of, If people are unsure where to turn, munis are one of the better returning, Delahunt said. For an investor in a, 35% tax bracket, a stock that returns 6% translates into a 3.9%, tax-adjusted return, he pointed out., If you buy municipals, you can earn 4% or more on a tax-free security, and you are not taking equity risk and you are going to get your principle, If munis offer more yield than taxable securities on a, tax-adjusted basis, the muni sector of the fixed-income asset class is, Much of the recent growth in the household category stemmed from, individuals taking advantage of 2005's record $407 billion in municipal, issuance volume at a time when individuals needed municipal investments, for their tax-exemption and capital preservation, according to Phil, Fischer, a municipal strategist at Merrill Lynch & Co., Retail has been heavy buyers of high-yield mutual funds, money market, funds, and they also have been expanding their direct purchase of muni, bonds, particularly in the short and intermediate sectors, Fischer said., Individuals also continue to prefer bonds that are priced around par and, have less desire for long-term paper in the current market climate, said., A flat yield curve beyond 20 years and the sub-5% absolute yield level in, the 30-year maturity range is what has kept retail investors close to the, short and intermediate slope of the curve, according to market sources., While the latest household figure is substantial in and of itself, Delahunt said households actually own even more municipal debt than those, figures indicate since many of the other categories also represent, individual investors, such as the mutual fund category., The municipal asset class is predominantly driven by retail, Other than the tender-option bond and, derivative players, most of our institutional demand universe is, in fact, Mutual funds and money market funds the second- and third-largest, holders of municipal debt increased their holdings during the year., The two categories continue to significantly trail households, with just, $313.2 billion and $337.1 billion in muni debt holdings at year-end, respectively., Mutual funds increased their holdings by just $90 million during the, fourth quarter, but were up $18.9 billion, or 6.4%, for the year. Money, market funds, on the other hand, increased their holdings $13.4 billion in, the fourth quarter, or 4.1%, from the end of the third quarter, and by, $23.2 billion, or 7.4%, for the year., Closed-end fund muni debt holdings fell $125 million during the fourth, quarter to $89.5 billion. However, for the year their assets were still up, $363 million., Property and casualty insurance companies, meanwhile, had a $9.1 billion, or 3.1%, increase in their muni holdings, to $301.2 billion during the, year. The growth occurred despite the large claims facing some insurers, due to the devastating hurricane season that left a path of destruction, across Louisiana, Mississippi, and Alabama., Commercial banks ended the year with $157.7 billion in muni assets, which, was a 12% increase from the end of 2004., In other categories, broker-dealers held $43 billion in muni assets at, year-end, which was up $11 billion, or 34.4%, from the end of 2004. The, bulk of that growth, totaling $7.7 billion, occurred during the fourth, quarter., State and local retirement funds continued to be the lowest holders of, municipal debt, with just $1.6 billion at year-end, which was down $58, million from the end of 2004. Non-farm, non-corporate businesses were also, minimal holders, owning just $3.7 billion at year-end, which was up $549, million during the year. State and local government general fund holdings, totaled $4.8 billion at year-end, which was up $177 million during the, year.
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by small, independent, special, such as tax-credit bond programs for certain sectors, to the, existing framework for tax-exempt bonds, a department official told, Congress, yesterday., The federal government's cost of providing municipalities with, financing, in the form of tax-exempt and tax-credit bonds, said Eric Solomon, deputy assistant secretary, regulatory affairs in Treasury's Office of Tax Policy., Testifying yesterday at a hearing of the House Ways and Means Committee's, subcommittee on select revenue measures -- at which muni market, participants, lobbied for expanded tax-exempt financing options -- Solomon said both, types, of bonds have the same fundamental purpose of providing a federal subsidy, promote public infrastructure financing., But having parallel regulatory regimes for the large tax-exempt bond, program and the various, limited tax-credit bond intiatives, which provide, bondholders with an income tax credit in lieu of cash interest payments, after Ways and Means chairman Bill Thomas, R-Calif., suggested the panel, conduct a thorough review of both tax-exempt and tax-credit bonds., Solomon said tax-credit bonds have practical inefficiencies because they, are limited and illiquid, requiring Treasury involvement in setting credit, rates., These rates are designed to allow zero-interest tax-credit bonds to, price at par, although this often does not happen in practice, properly, when considering further, expansions, of tax-preferred bond financing, he noted., Solomon also said at the hearing that Treasury and the Internal Revenue, Service should not be involved with states' annual private-activity bond, volume cap allocations because tax administrators lack the technical, knowledge necessary to make informed allocation decisions., Donald Marron, acting director of the Congressional Budget Office, echoed, many of Solomon's remarks and said tax-credit bond programs provide more, generous subsidies for issuers when compared to traditional tax-exempt, bonds., That's because the purchaser of a tax-credit bond receives a taxable, tax-credit set by the Treasury that yields tax savings equivalent to the, interest that would have been earned on a taxable bond, A variation on tax-credit bonds might be a cost-effective alternative, Marron suggested in his testimony. Bond purchasers would receive two, payments, -- taxable interest income equal to their current tax-exempt interest, income, and a taxable federal tax credit equal in value to the tax benefits that a, tax-exempt bond would have provided to the purchaser with the lowest, marginal, tax rate., Since the credit rate would be the same for all bondholders regardless, of their tax bracket, there would be no windfall gain to taxpayers, and the, full revenue loss to the federal government would be received as a subsidy, Marron also expressed concern about the potential misallocation of, capital to deals that would not be done without private-activity bond, financing., Such financing effectively transfers resources to private investors, distorting the allotment of capital investment and thereby reducing the, nation's economic output, he noted., investments that would otherwise not be made,, channeling scarce private savings into investments that have a relatively, Marron said., The CBO director also said the federal tax administration system is, poorly equipped to monitor compliance with tax code rules for bonding., Compliance could be enhanced if state and local organizations were, required to monitor compliance and report their findings to the IRS, suggested., Solomon and Marron's comments starkly contrasted with those of other, panelists at yesterday's sparsely attended hearing, run by subcommittee, chairman Dave Camp, R-Mich. The only other subcommittee member present was, Rep. Michael R. McNulty, D-N.Y., who made a brief appearance., Carla Sledge, president of the Government Finance Officers Association, and chief financial officer of Wayne County, Mich., told Camp that there is, for issuers than complying with arbitrage rebate rules., In her testimony she reiterated GFOA recommendations that Congress raise, the amount of annual debt exempted from arbitrage rebate restrictions from, million to $25 million, as well as allow issuers to do a second advance, refunding of tax-exempt bonds. Current law permits one such refunding., And the opportunity for state and local governments to enter into, public-private partnerships would enhance their ability to finance, infrastructure needs, Sledge said., Walter St. Onge 3d, president of the National Association of Bond Lawyers, and a partner with Palmer Dodge Edwards Angell LLP in Boston, said, simplifying, is critical to enable, state, and local governments to perform their role in providing cost-effective, financing for ever-expanding public infrastructure needs and other public, Michah S. Green, president of The Bond Market Association, testified, tax-exempt bonding is very, efficient, for municipal issuers while tax-credit bonds are unusual securities with, limited flexibility and investor demand., Even if tax credits could be stripped from the bonds and sold separately, and if tax-credit bonds could be issued in unlimited supplies, would, Demand would be, limited largely to property and casualty insurance companies and a few, other, Green also noted that TBMA is seeking to have state-level bond pools, exempted from the pooled bonds restrictions that may be enacted as part of, tax reconciliation legislation this spring., Camp asked Sledge, St. Onge, and Green whether current private-activity, bond limitations are effective if issuers can finance professional sports, stadiums with governmental bonds instead. Congress prohibited the issuance, private-activity bonds for such facilities in 1986., St. Onge responded that while stadium deals require careful analysis by, tax lawyers to ensure compliance with all applicable federal laws, such, projects -- like affordable housing -- represent an area in which, municipalities' economic development roles have evolved significantly., Several House lawmakers also testified at yesterday's hearing about their, proposals for expanded municipal bonding., Rep. E. Clay Shaw, R-Fla., touted legislation he re-introduced last, would encourage utilities to find willing partners in the, Shaw's bill would exempt tax-exempt financing of private water and, wastewater treatment plants from the private-activity bond volume cap, provided that companies enter into partnerships with municipalities., Rep. Kevin P. Brady, R-Tex., testified about a bill he introduced earlier, this month that would authorize tax-exempt financing of privately owned air, and water pollution control facilities., The legislation would restore language to the tax code that was stricken, after tax reforms were enacted in 1986 and include pollution centers to the, list of exempt facilities eligible for private-activity bond financing., The solution is to give states additional tools like [exempt] facility, Brady said yesterday., The bill, which would not increase the existing private-activity bond, volume cap, would allow states to prioritize compliance issues and, accelerate
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by Humberto SanchezCiting a growing need for wastewater infrastructure, members of a Senate, water panel yesterday disparaged a White House recommendation that $688, million be provided in fiscal 2007 for an Environmental Protection Agency, wastewater infrastructure grants program, which would represent a nearly, $200 million cut from what Congress provided for 2006., said Sen. Conrad Burns, R-Mont.,, chairman of the Senate Appropriations Committee's Interior and related, agencies subcommittee, at a hearing on the EPA budget., Burns referenced a 2002 EPA report that estimated that the gap between how, much is currently spent on drinking water and wastewater infrastructure, capital needs and what capital needs will be during the next 20 years is, about $540 billion., indicates that we still have a substantial gap in funding, said., Burns also suggested that the proposed cut would force localities to delay, projects, which typically take years to build, and ultimately drive up, construction costs because of inflation., The EPA grants are doled out to states to fund the so-called wastewater, and drinking water state revolving funds. The SRFs, as they are also, known, provide low-interest loans to local governments and operators of, sewer and drinking water facilities to help pay for improvements to and, maintenance of the infrastructure. Once the loans are repaid, the SRFs, loan out the repaid dollars to finance other water infrastructure, The SRFs have become a major source of water infrastructure financing and, about 27 states have leveraged their programs by issuing bonds., At the hearing, Burns pledged to fund both wastewater and drinking water, Another member of the panel, Sen. Byron L. Dorgan, D-N.D., also spoke out, against the cut., I happen to think [the proposed cut would] short change our communities, In his budget for fiscal *2007-, which starts Oct. 1, President Bush, recommended providing $688 million in grants for the wastewater SRF, $199 million cut from the $887 million Congress provided for this year., The 2007 budget also requested $841 million in funding for the drinking, water SRF, which would amount to a $4 million increase. The proposed cut, comes after Congress has cut more than $450 million from the wastewater, SRF since 2004., But the SRFs are only one element of the EPA's strategy to meet the, nation's growing water infrastructure needs, agency administrator Stephen, L. Johnson told the panel., He said that the budget also provides $7 million for research into, innovative technologies, which is another piece of the EPA's strategy., Other strategies include water conservation initiatives and improved, infrastructure management measures., The White House's 2007 wastewater SRF funding request is also part of a, longer-term goal to provide $6.8 billion for the wastewater SRF between, fiscal 2004 and fiscal 2011 - an amount that would allow the fund to spend, an average of $3.4 billion a year on projects between 2015 and *2040-, Johnson said.
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by Robert WhalenNew York's exploration of public-private partnerships arranged for, building or operating large-scale transportation projects and assets took, an important early step last week, even as key lawmakers expressed serious, doubts about allowing the Empire State to follow on the heels of, transactions like the Chicago Skyway concession and the pending, privatization of the Indiana Toll Road., The New York Department of Transportation and the University, Transportation Research Center hosted a one-day conference on Wednesday in, Albany to hash out the potential pros and cons of public-private, partnerships for transportation projects. The gathering attracted roughly, 300 attendees and some of the leading figures on public-private, partnerships - or P3s, as many refer to such agreements - and was the, first of its kind in New York. Many of the speakers lauded state officials, for setting the table for opening what is likely to be an ongoing public, debate for a controversial type of proposal., Republican Gov. George Pataki earlier this year included provisions in his, budget that would allow the Department of Transportation and the New York, State Thruway Authority to ink design-build contracts and enter into, long-term lease agreements with private entities. The Pataki, administration, principally through DOT commissioner Thomas Madison, touted the proposed laws as necessary for the state to finance and, complete major projects in a less costly, more expedient manner., Although key members of the state Legislature said last week that members, of both chambers were open to negotiating the terms of Pataki's proposal, many in Albany expressed doubt that such legislation would pass muster, this year. Little wonder, considering the language of the Legislature's, chief transportation figures., Speaking for my colleagues, and certainly for [Senate President Joseph], Bruno, I can say that we in the Senate will keep a very open mind about, this idea. However, the language the governor has provided is not entirely, said Sen. Thomas Libous,, chairman of the Republican-controlled Senate's Transportation Committee., Assembly Transportation Committee chairman Richard Brodsky, a Democrat, was more blunt in his criticism of the proposal., he told the crowd assembled in the, Swyer Theatre at The Egg, Albany's signature venue for live events., Brodsky said Pataki's proposal granted too much executive power without, It comes from the school of policy that, Additionally, Brodsky said the Pataki administration has not been, persuasive regarding the value to New Yorkers of such public-private, partnerships. He took issue with the presumption that the government is, incapable of financing and executing large-scale infrastructure projects., It's not a fact - it's a choice - and it's a choice not to invest in, The notion that government can't do this, is not true. The notion that it hasn't, and that it won't, Madison, a Pataki appointee, said that while New York has a $38 billion, capital program for transportation infrastructure on its books, additional $70 billion of projects are on the drawing boards with no, funding identified as yet., New York has some of the oldest, most heavily punished infrastructure in, The longer the projects are delayed, the, more expensive the projects, and the less competitive the state is, In late January, Madison cited the rebuilding of the Tappan Zee Bridge, among projects that would benefit from P3s, veritable poster, The three-mile bridge, which crosses the Hudson River about 13 miles north, of New York City, was opened in 1955 and needs to be replaced or, substantially rebuilt. The Tappan Zee accommodated about 18, 000 vehicles, daily during its first year of operation. Currently, the bridge handles an, average of 132, 000 vehicles each day. And although the bridge cost $80.8, million to build originally, replacing or rebuilding the structure is, expected to cost from $2 billion to $14.5 billion, depending on the size, and scope of the work., Transportation partnerships have long existed in Europe and Asia and they, are starting to catch on in the United States. Chicago decided in 2004 to, lease its Skyway to a private consortium for 99 years, generating $1.8, billion of cash for the city. Lawmakers in Indiana are currently wrangling, over details of a $3.85 billion plan to lease the state's 157-mile toll, road. California, which has done such deals in the past, as well as Texas, are mulling new proposals, as are officials in Georgia and Oregon., In New York, where old-school P3s helped build the Brooklyn Bridge and, private companies built portions of the city's robust subway system, law does not permit either the state DOT or the Thruway Authority to, engage in such activity., Pataki's proposal, which would bring P3s to the state in a big way, is not, without controversy., Frank Mauro, executive director of the nonpartisan Fiscal Policy, Institute, expressed skepticism about P3s and said debate must begin with, an understanding of the motivation behind the idea., Is it to generate money, or is this done to undercut public faith in the, You might be able to get the project done, faster, as they say, but it's also a way to avoid debt limits because the, security is the same and the people paying [tolls] are the same - it's the, same debt, but this is off the books. This really is a way to do one-shot, Mauro said it was unclear how a private company could extract more value, from the same revenue stream available to the public sector. He also, value to the table, citing the already high quality of Thruway Authority, roads and bridges., When was the last time you saw a pothole on the Thruway? The Thruway, Authority is already as well-run as [the Chicago Skyway] ever will be, said., John Schmidt, a partner at Mayer, Brown, Rowe & Maw LLP, worked for the, governments in both the Skyway and the Indiana Toll Road deals. He said, equity, from their transportation assets., There is no other way for the public to capture the value of, The cost differential is accentuated by the, conservative nature of the municipal bond market. You might have gotten $1, billion of bonding from the Skyway and $2 billion from the Indiana Toll, Road, so if you bond to extract capital, you're going to leave money on, the table - money that can be used and redeployed to meet other needs and, Even if Pataki's proposal is not resuscitated this year, it is likely to, manifest in one form or another in future years, according to conference, attendees and speakers., said Richard Norment,, executive director of the National Council for Public-Private, It ain't there yet,, Several speakers who have had experience with P3s expressed common, checkpoints that public officials should review when considering or, entering into such arrangements., Jeff Morales, a former director of the California Department of, Transportation, who now works for the consulting arm of engineering, company Parsons Brinckerhoff, said there are three chief keys to a, successful transportation partnership: education of the public, collaboration among public officials and with the private interests, and a, willingness to innovate. Morales said the goals of both sides must be, clearly articulated and understood., Public policy goals really have to drive the partnerships. Define those, goals - whether it is to raise cash, expedite projects, or fill funding, adding that the P3s in California involved a steep, road. Most of the problems he had, Norment said communication problems are common because public officials, and private executives often speak different languages, using different, phrases to express a common idea., The private sector says 'customer satisfaction, return on investment, risk-reward' and the public side says 'responsibility to the public, accountability, and risk avoidance, ' and they're really talking about the, Norment cited public support - through an accommodating regulatory and, statutory framework - detailed contracts, and well-chosen partners as, vital components of a successful and beneficial long-term arrangement., In New York, the cautious approach is under way, and the private interests, that engage in P3s, such as Australia-based Macquarie Bank - which, invested in the Skyway and Indiana deals - are keeping close watch on, developments., These are not high prestige investments, but they're very nice, investments with good, steady revenue, and we've got a lot of money that, said Christopher Leslie, a managing director, We're not going to die in a ditch if New York doesn't go to
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