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by Daniel WolfeNetBank Inc. said it lost money last year because of stiff competition in, its mortgage business, and it expects those problems to continue this, quarter., The Atlanta company announced Monday that it had lost $180, 000 in *2005-, compared with a $4.2 million profit a year earlier., For the fourth quarter, NetBank posted net income of $895, or 2 cents, a share, compared with a net loss of $17.7 million, or 38 cents a share, the fourth quarter of 2004., The biggest drag on earnings was NetBank's mortgage business, which lost, $7.8 million before taxes in the fourth quarter. Steven F. Herbert, company's chief finance executive, said in a conference call with analysts, that price competition for nonconforming mortgages was severe last quarter, and has hardly improved this quarter., It has moderated from irresponsible to, He also told analysts that their first-quarter earnings forecasts for, NetBank -- ranging from a loss of a penny a share to an 8-cent profit --, Analysts said on the call that NetBank's retail banking business could, face similar pricing pressure. For example, ING Bank FSB, a unit of ING, Group, NV of Amsterdam, has long offered a high-yield Internet-only savings, account,, and last year Emigrant Bancorp of New York and HSBC Holdings PLC's U.S., subsidiary launched similar depository products with similarly high yields., Howard P. Milstein, Emigrant's president, chief executive, co-chairman, has said he plans to offer higher rates than any of his, competitors. One of the ways he can do so is to save money on marketing by, advertising on the sides of buildings he owns., Douglas K. Freeman, NetBank's chairman and chief executive, told analysts, paying up for liquidity, substantially above, what we, However, he also said that NetBank's 3-year-old diversification strategy, which is meant to offset such dismal earnings in a single business line, still working. (Besides its mortgage and banking businesses, NetBank also, a transaction processing unit.), The vision we laid out for the company three years ago is absolutely the, Mr. Freeman said his Internet banking competitors offer better deposit, If a customer only cares about price, chances are, pretty, But NetBank's strategy is based on more than just interest rates, If you need any kind of service, or you'd like help getting money, into, For example, NetBank and HSBC permit customers to withdraw money through, automated teller machines, but ING and Emigrant do not. NetBank also lets, customers send deposits overnight to the bank for free through United, Parcel, Service Inc.'s stores through a service it calls QuickPost., NetBank introduced QuickPost last March, and said in August that 22% of, the deposits it received by mail -- and 32% of the funds -- came through, QuickPost., We intend to, Samuel Caldwell, a research analyst and vice president with Keefe, Bruyette & Woods Inc., said NetBank's fourth-quarter earnings were, than its earnings from previous quarters, in large, part, because strong competition is driving down mortgage prices., doing all the right things, all the things that, It's just a, tough, Mr. Caldwell predicted that, given the cyclical nature of the mortgage, industry, it would be at least six months before there is any significant, improvement in the online banking company's mortgage unit. He also said, because it is also facing, pricing pressure in online banking.
Published in American Banker (2006)
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by Laurie KulikowskiBank of New York Co. Inc. has streamlined its global operations by, creating centralized divisions for investor services and client management., The global investor services division will handle the more than $11, trillion of assets the company has under custody. It combines several, securities servicing operations, including the global custody, fund, services,, risk management services, fund accounting, and outsourcing units. It also, unifies the related product development and operational support teams, Bank, of New York said Wednesday., Timothy F. Keaney, a senior vice president in London, has been named Bank, of New York's head of global investor services. He will also remain the, head, of European investor services., The global client management division puts together the sales and account, management employees that service more than 100 markets worldwide, Bank of, York said., Torry Berntsen, who is based in New York, has been promoted to senior, executive vice president and will head the global client management, division., Both Mr. Keaney and Mr. Berntsen will continue to report to Gerald, Hassell, Bank of New York's president., Before the changes, which took effect May 10, the operations were broken, into three geographic units -- North America, Asia, and Europe-Middle, East-Africa, Mr. Keaney said in an interview Wednesday., What had become increasingly clear to us is the constituencies that, by having operations in multiple, countries and buying multiple products from the company, Bank of New York's investor services customers include asset managers, banks, insurance companies, and pension funds., trying to get ahead of what we anticipate is a rapidly, Mr. Keaney said. It, hopes, faster, There have been no layoffs as a result of the changes., Bank of New York's move is similar to one by Mellon Financial Corp., which said last week it had reorganized its asset servicing operations by, combining its global securities services and investment manager solutions, enhance cross-selling. In January the Pittsburgh company had combined its, mutual fund and institutional asset management units under one umbrella., Analysts said that Bank of New York's move is related to its plan to swap, its retail and middle-market banking business for JPMorgan Chase & Co.'s, corporate trust business. That deal, announced last month, is expected to, close in September or October., However, a spokesman for Bank of New York said that the changes are not, tied to the JPMorgan Chase deal but are organizational moves the company, would have made anyway.
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by Matthias RiekerBank stocks have risen this year, but analysts and investors are divided about the group's prospects for the next six months., Though the sector did well compared with the broader market, they underperformed some other financial stocks and may continue to do so for the rest of the year, according to some strategists. The naysayers note that the banking sector underperformed the broad market last year, and they worry that weak fundamentals will drag it down again this year., However, others say there are still buying opportunities in bank stocks, especially large-cap ones. That could be good news for large banking companies, which have underperformed small- and midcap ones for most of the past six years., The big-bank stocks should finally outperform this year, some strategists say., Many of the larger banks have been able to capitalize on the breadth of their business, particularly nontraditional banking business like capital markets, in a way that helped their bottom-line result and helped investor confidence in the sector, said Joseph V. Battipaglia, chief investment officer of BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc., Shares of regional banking companies, which have fed off investors' hope for more consolidation at hefty premiums, were hit hard over the last two months but still outperformed the broader market, excluding financials., this year, Mr. Battipaglia said., As of midday Friday the American Banker index of 225 bank stocks had risen 4.8% this year. The Nasdaq bank index, which includes many small companies and some large regionals, had climbed 3.6%, but the American Banker index of top 50 banks had risen 4.9%., The Standard & Poor's 500 has lost most of its gains from early this year, as of midday Friday it has risen 1.9%, while the Dow Jones industrial average had climbed 4.4%., But certain financials continue to outperform banking companies. In the first half of the year the S&P insurance index fell 4.1%, but the American Stock Exchange's brokerage index rose 8.5%., Brokers have reported better earnings growth that banking companies., Conversely, the operating environment has not been good for bank stocks, according to John Clausen, Over the next six months you have a challenging fundamental environment, you've got a flat yield curve, you've got continued net interest market pressure, However, Mr. Clausen said he believes there are still opportunities to make money on bank stocks, mostly by investing in large-cap ones., Mark W. Batty, an analyst with PNC Advisors, Instead, Mr. Batty favors shares of the nation's three biggest banking companies: Citigroup Inc., Bank of America Corp., and JPMorgan Chase & Co., In the first half JPMorgan Chase rose 6.7% and B of A gained 5%, while Citi fell 0.3%., Among regionals, versus the 8% to 10% it had previously forecast., Mr. Batty said., Some observers say they firmly believe bank stocks will underperform the broad market again this year., said Robert B. Albertson, chief strategist at Sandler O'Neill & Partners LP. He and several other strategists and analysts say that fundamentals will deteriorate, and that investment opportunities are simply better elsewhere., Bank stocks will underperform, he predicted, and financial companies in general, driven by large-cap ones, will perform in line with the market., Several strategists at large brokerage firms hold the same view. In reports issued last week, rating for the bank group, Others say that a slow but steadily growing economy and a stable interest rate environment will provide bankers with stable earnings, and that credit quality will hold up well., We view this as a solid environment in which to invest in bank stocks, Andrew B. Collins, a Piper Jaffray & Co. analyst, wrote in a report published on June 21., The economy will remain one of the most important factors for bank stock investors. If gross domestic product grows too much, the Federal Reserve Board will continue its interest rate hikes, which would hurt banks' profit margins., If you are of the school that the Fed is going to overreach in the rate hikes, the inversion of the yield curve is actually going to deepen and perpetuate, then what is looming large is the potential of a recession., And in that environment ... perhaps the smaller banks will hold on to their value better than some of the larger ones, and certainly the banks will give ground, but the brokers and the insurers will give more ground, he said., However, economic growth at an ideal rate of 3% is more likely, Then what I would expect is that the brokers and the insurance companies have a better second half than first half. And I'd even throw the banks in there, because as the economy demonstrates this vitality, and the Fed somewhere in here decides that they've done what they need to do, Last week the Federal Open Market Committee increased its federal funds rate by 25 basis points, to 5.25%, and left the door open for more hikes., Carl Tannenbaum, the chief economist of ABN Amro Holding NV's LaSalle Bank Corp. in Chicago, But in a note issued after the Fed's decision, Neal Soss, Credit Suisse AG's chief U.S. economist, That maneuverability caused stocks, including bank stocks, to rally Thursday, observers said., But the economy and interest rates are not the only factors that influence bank investors. Mr. Batty said they are mostly looking to the banks' strong dividends, which have kept the group rising., On average, banking companies in the S&P 500 offer a 3.5% dividend yield, Mr. Batty said., Wells Fargo & Co. said last week that its board raised the quarterly dividend by 7.7%, to 56 cents a share. The San Francisco company's yield is over 3%., However, Mr. Battipaglia said that dividends are only a contributing factor in the financial sector's performance, and that the main driver is better-than-expected earnings and strong cash flow., And for investors hunting for a high dividend yield, banks are not the only group to look at., Another positive factor for bank stocks: Credit quality has remained strong., Because of falling credit costs in recent years, investors had reason to expect that provisions would begin to rise this year, as credit quality has remained stable and allowed banks to report results that looked better than investors' expectations., However, some analysts and strategists worry that credit problems will soon appear on balance sheets and require bankers to beef up provisions., I find it awesome that investors and analysts alike have been looking at earnings numbers as if the loan-loss provisions are normal
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by Since the city's inception in the early 1940s, North Las Vegas has collected wastewater but conveyed it for treatment to the Clark County Water Reclamation District and Las Vegas, paying for these services according to gallons treated., There will still be rate increases in the future, but it won't be as much as we would need without the new facility, said David Bereskin, director of utilities for North Las Vegas, adding that the savings come from not having to pump as much effluent and water to and from neighboring utilities., Paying for other municipalities' wastewater treatment would cost more than building a facility dedicated to North Las Vegas, according to two studies commissioned by the city., The second study in particular found that North Las Vegas should build the largest facility possible, as the city estimates it will grow 28% over the next three years., However, Bereskin said., The new facility has a goal of treating 20 million gallons of wastewater per day and daily reclaiming eight million of that as highly treated effluent, according to Bereskin, who said he'd like to see the new facility built by early 2011., Bereskin said that the city will decide at least six months from now whether to obtain additional financing for the project, since he anticipates the project cost at $20 million more than what the bonding covers., So far, North Las Vegas has purchased the land for the facility, and expects to finish an environmental impact study within the coming months., The utility will study rates at the end of this year, pursuant to a policy of evaluating fees every three years before increasing these prices. The last rate hike occurred in October 2005., Nevada State Bank is financially advising North Las Vegas
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by Yvette ShieldsStandard & Poor's last week revised its outlook to stable from negative on, Naperville-based Edward Health Services Corp.'s A-plus credit, largely, because of its failed efforts to win state regulatory approval for a new, hospital in the growing suburbs south of Naperville., The outlook revision affects $25 million of debt issued in *1993-, $138, million from a 2001 issue, and $30 million from a 1997 issue. The negative, outlook was initially placed on the credit in the fall of 2003 when Edward, was planning a significant new-money deal for construction of a 150-bed, hospital in the neighboring southwest Chicago suburb of Plainfield., However, the Illinois Health Facilities Planning Board, which must approve, major new health care projects, rejected Edward's application and the, hospital system recently exhausted the appeal process. In the interim, Edward Hospital is undertaking several smaller projects. It will expand, the number of beds on its Naperville campus and construct an outpatient, center and medical office building in Plainfield, while continuing to, pursue the construction of a new facility in that area. The agency plans, to sell about $65 million to $70 million in new money later this year to, cover the costs., Edward will continue to manage capacity constraints in the near term as, plans for the denied hospital in Plainfield become clearer, Standard &, Poor's analyst Suzie Desai wrote., The hospital earlier this month submitted a revised plan for a new $218, million Plainfield hospital to the planning board., A shakedown scandal over the original proposal prompted the state to, reconstitute the board in 2004. After the previous board's initial, rejection of the new hospital, Edward administrators filed a federal, whistleblower's lawsuit alleging that P. Nicholas Hurtgen, a Bear, Stearns, & Co. banker at the time, as well as former planning board vice chairman, Stuart Levine and construction company owner Jacob Kiferbaum tried to, pressure the hospital into using the construction firm to build the, hospital in exchange for the board's endorsement. The hospital refused and, the board rejected the plan. Federal authorities last spring announced, indictments against the three men for alleged extortion., The new application includes updated geographic and population figures, that hospital officials believe better support their contention that the, region needs a new hospital. Edward currently commands 35% of the market, share in its primary service area. Existing hospitals that serve the, Plainfield area oppose the new hospital plan., Capital plans for a new hospital would likely put pressure on the hospital, rating, but have not been incorporated into the outlook or rating at this, time, according to Standard & Poor's. If approved, no debt would be issued, until late 2007 or 2008.
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by Jim WattsClosing arguments in the federal corruption trial of former New Mexico, Treasurer Robert Vigil began yesterday afternoon at Albuquerque's federal, courthouse as the defense lost its bid to have the case thrown out for lack, of evidence., Defense attorneys Sam Bregman and Jason Bowles on May 10 filed three, legal motions to dismiss all 28 indictments against Vigil on the grounds, that, they were not supported by the evidence presented by prosecutors during the, trial's first four weeks. U.S. District Judge James Parker ruled late, Friday, that the evidence was skimpy only in four charges related to money, laundering, and removed them., The charges dismissed by Parker involved four checks issued to cover some, of Vigil's expenses during his 2002 campaign for state treasurer., The prosecution charged that the money came from a kickback from, investment adviser Kent Nelson, and therefore were the proceeds of a, criminal, conspiracy, and that Vigil did not intend to report them on his campaign, disclosure statements., doesn't allow a, on the charges., Parker began Monday's session with a lengthy charge to the jurors, detailing the laws that Vigil is accused of breaking in the remaining 24, charges that include racketeering, extortion, and conspiracy., The judge urged attorneys on both sides of the case to reduce the amount, of evidence that the jury must consider, including transcripts of dozens of, recorded meetings between Vigil and alleged accomplices, to shorten jury, deliberations. More than 800 pieces of evidence have been submitted., The transcripts cover several meetings between Vigil and Nelson, investment adviser who pleaded guilty to mail fraud and agreed to help the, Federal Bureau of Investigation's probe. Nelson wore a tape recorder during, several meetings with Vigil, including videotaped encounters in which he, gave, the treasurer envelopes containing cash., In one tape played in court, Nelson was shown handing Vigil two envelopes, containing $11, 500 in $100 bills. Vigil later tried to repay the FBI sting, money to the U.S. Treasury., Under cross-examination by Bowles, a former federal prosecutor, a tearful, Nelson said he never had a specific agreement with Vigil to pay him bribes, exchange for investment deals., However, in his direct examination of Nelson, assistant U.S. attorney, Jonathon Gerson reviewed exhibits showing at least six deals made by Nelson, after he had donated $1, 500 to a golf tournament sponsored by Vigil's, campaign., on an amended, campaign finance form submitted just before trial began.
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by Michael ScarchilliAll of The Bond Buyer's weekly yield indexes declined this week, as the municipal market was slightly firmer Wednesday and yesterday, following three consecutive unchanged sessions., This whole week still had the air of a holiday week to some degree, in terms of the end of the summer, a big vacation week, said Evan Rourke, With that said, there was a positive tone to the market. Munis felt good, it feels like there's cash in our market, and it feels like there are people out there buying bonds, both relative value and going-away investors. We really didn't see a lot of heavy selling, and we didn't have a big calendar, so munis felt pretty good. We've got a light calendar coming up still next week, but with the rumblings and clouds of potential bonds to come, so you might see some more bonds the next week or the week after, With no economic data scheduled for release and no sizeable new issues hitting the market, tax-exempts were unchanged last Friday, the first of three straight flat sessions. Monday was more of the same, as no major data was released, and the new-issue calendar was again sparse., However, the market finished unchanged Tuesday only after the release of the bond-friendly minutes of the Aug. 8 Federal Open Market Committee meeting, which began in June *2004-, at that meeting., Muni yields finally moved Wednesday, albeit a slight one basis point decline, as the market was quiet and investors were mainly sitting on the sidelines, waiting for the bulk of the week's data, which was to be released yesterday and today. The data released yesterday -- which included July personal income and consumption, the July core personal consumption expenditures deflator, and July factory orders -- had a muted impact on the market, which was firmer by one or two basis points, as investors placed more importance on today's data, which has the release of the August nonfarm payrolls report at the forefront., Economists polled by IFR Markets are predicting that 125, 000 new jobs were created in August, which would be an increase from 113, 000 in July. Also scheduled for release today is the August Institute for Supply Management manufacturing business activity composite index, the University of Michigan's final August consumer sentiment index, and construction spending for July., The Bond Buyer 20-bond index of GO yields fell four basis points this week to 4.30%, its lowest level since Sept. 22, *2005-, when it was also 4.30%., The 11-bond index dropped five basis points to 4.25%, its lowest level since Sept. 22, *2005-, when it was 4.23%., The revenue bond index fell two basis points to 4.91%, its lowest level since Sept. 8, *2005-, when it was 4.87%., The 10-year Treasury note fell six basis points to 4.74%, its lowest level since March 23, when it was also 4.74%., The 30-year Treasury bond fell six basis points to 4.88%, its lowest level since March 23, when it was 4.75%., The Bond Buyer one-year note index fell two basis points to 3.53%, its lowest level in five months, when it was 3.52 % on March 29., The weekly average yield to maturity on The Bond Buyer 40-bond municipal bond index finished at 4.73%
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by Humberto SanchezA burgeoning trend kicked off when private foreign firms started leasing, toll roads from state and local governments around the nation has sent U.S., transportation infrastructure finance players scrambling -- including, funneling billions of dollars into infrastructure investment funds and, rethinking their traditional roles -- to get a piece of the action., It all started with the Chicago Skyway, which was leased for 99 years by, the city of Chicago to a consortium led by Australia-based Macquarie, Infrastructure Group and Spain-based Cintra Concesiones de Infraestructuras, de Transporte SA. The deal closed in January 2005., The 7.8-mile toll road was built in 1958 and connects the Dan Ryan, Expressway on the west end to the Indiana Toll Road on the east end., Under the deal, Chicago received a $1.83 billion cash payment from the, Cintra-Macquarie group, which took over operation and maintenance of the, road, and keeps the toll revenue collected through 2104. The deal allows the, private, group to raise the tolls on a schedule negotiated with the city. Tolls for, passenger cars are capped at $2.50 until 2008 and rise incrementally to, $5.00, starting in 2017., This transaction between the consortium and Chicago was the first, privatization of an existing toll road anywhere in the United States., Most recently, the same pair of companies is close to closing a deal with, Indiana on a 75-year lease deal for its toll road, a 157-mile highway that, runs east to west along the state's northern boarder, in exchange for a, $3.8, billion upfront payment., While it is too early to declare that the nation is in a new era of, transportation infrastructure finance, several traditional transportation, finance firms are betting that if we aren't yet, we ultimately will be., Many companies, including investment banks Goldman, Sachs & Co., JPMorgan, Chase & Co., Morgan Stanley, as well as the giant construction and, engineering, firm Parsons, are actively seeking out concession deals, and Macquarie is, exploring the possibility of leasing U.S. airports, according to recent, interviews with company officials and representatives., Their interest also comes as the Virginia Department of Transportation, last month agreed in principle to a 99-year concession deal -- including, operations, maintenance, and collection of toll revenue -- with Transurban, Ltd., an Australia-based toll road operator, for the Richmond-area, Pocahontas, Parkway. Under the deal Transurban would pay VDOT $525 million., Traditionally states and localities have relied on federal, state, local gas taxes vehicle fees and other revenues, along with municipal bonds, to finance transportation infrastructure. But those sources have not kept, pace with the nation's growing infrastructure needs., THIRD FINANCING OPTION, The private sector capital now interested in public infrastructure, that should be considered as part of any, said Mark Florian, chief operating officer of Goldman's, municipal finance and infrastructure group., The gist of this business really grew up out of need, in places such as, Europe and Australia, and other parts of the world where there is not a, big,, Governments needed to build, projects,, but didn't necessarily have access to the very liquid municipal bond market, that we have in the United States. What they would do is ask the private, sector to come in and build facilities and give the private sector the, ability to collect revenue as an enticement to get them to build it in the, Following the Macquarie-Cintra group's execution of the Skyway concession, in January *2005-, Goldman reorganized its municipal finance group in March, 2006. As part of the reorganization, Tracy Wolstencroft was brought in to, head the group from Goldman's corporate investment banking team., The reorganization at Goldman Sachs took place with a couple of things, One is to grow our existing, municipal, finance business, which is a debt and derivatives business. The second is, is really about growing the existing business and as well, Henry M. Paulson Jr., Goldman's chairman and chief executive, very, of the change towards moving into the private concession, sector,, according to Florian. Paulson was nominated late last month by President, Bush, to become Treasury secretary., Florian does not believe that there are any tax rules or regulations that, Paulson could change in order to help the private concession market grow., The federal government has been relatively accommodating to date -- this, There is nothing that the, A sign of the administration's general support came last month when, Transportation Secretary Norman Y. Mineta spoke before opening the day's, trading at the Nasdaq stock exchange. He urged investment and engineering, firms to lead the privatization charge., The time is now for United States investors -- including our financial, construction, and engineering institutions -- to get involved in, Their involvement will be, crucial, if we ever hope to have the funds necessary to build the transportation, network required by our rapidly growing economy. Private capital will give, those communities willing to embrace it an opportunity to augment public, Florian did, however, point out that loosening tolling restrictions on, the Interstate highway system would be beneficial to expanding the public, infrastructure privatization market., One initiative local governments could take that might attract private, investment is to build new high-occupancy toll lanes on existing free, roads,, he suggested. HOT lanes, which are actively being planned in Virginia, Maryland, and other states, would increase capacity on the road and, relieve congestion, while leaving a drive-for-free option., RAISING CAPITAL, Meanwhile, Goldman Sachs, the Carlyle Group, a private equity firm, other investment companies are putting together funds -- Goldman's is, estimated to be worth about $3 billion and Carlyle's roughly $1 billion --, that are designed to acquire transportation infrastructure assets around, nation, according to published reports., In March, around the same time as the Goldman reorganization, Carlyle, announced that it established a team to conduct investments in the, infrastructure sector., Carlyle's Infrastructure team will invest primarily in U.S., infrastructure in transactions ranging from $100 million to more than $1, The team will engage in, public-private, partnerships with governments at all levels as well as purchase projects, Morgan Stanley is putting together an infrastructure fund, which is part, of its asset management business, firm officials said in an interview. But, they did not provide any other details citing restrictions during fund, raising., Their interest in privatization comes as the firms increasingly see, municipalities look to corporate finance frameworks to solve public finance, problems, according to Robert Collins, a Chicago-based Morgan Stanley, executive director who heads the mergers and acquisition group., We are having dialogues with those clients that have underfunded pension, plans or vast budget deficits to explore unlocking any latent equity value, These kinds of dialogues have been, The firm is exploring private deals for both existing infrastructure, sometimes referred to a brownfields, and to build new infrastructure, known, as greenfields., We are looking at both sides of it, the greenfield and the brownfield, we are looking at working with municipal entities to advise them on all, said Eugene Devlin, a Morgan, Stanley, managing director and head of the firms public finance department., Devlin also noted that he was skeptical that the privatization trend, I think, this will supplement the projects that would not normally get done, said., Banks are typically raising dollars primarily from foreign pension funds, and insurance companies, which are seeking investments that yield more than, municipal bonds, but are not as volatile as stocks and equities., These types of investments make a lot of sense for pension funds because, a lot of these pension funds have very long liabilities where they are, going, to be paying out a lot of money for the next 30, 50 years, said one, For them to have a long duration asset that is generating cash, flow, that is pretty steady cash flow over a long period of time is perfect. It, is a, A lot of insurance companies have investment pools that last for a long, They have reserves they need to, The recent influx of available capital is coming from nations like, Australia, where Macquarie and TransUrban are based. Australia introduced, compulsory pensions 15 years ago., The Australians have an awful lot of pension money to put to work and, they are looking for stable long-term investments that produce stable, returns, said Michael C., Finnegan, a, managing director with JPMorgan., JPMorgan is building a fund, but Finnegan did not have any other details, about it. He noted that the bank's leaders keep Finnegan's group -- which, advises state and local governments on concession deals -- separate from, side of the business that raises private dollars., With capital in hand, the investment firms are actively seeking out, concession projects., For example, Goldman is currently working on several concession projects, including seven Texas greenfield toll road facilities., JPMorgan has submitted a study to Harris County, which includes Houston, that explores a sale of its extensive toll network. The county is, considering, other financing studies and deciding what avenues to pursue., Also in Texas, two groups of private firms last week submitted proposals, to finance the extension of Interstate 69 through the state. Each one of, groups includes one of the two firms that worked together on the Chicago, Indiana deals., Morgan Stanley is part of a consortium led by Spain-based FCC, Construccion S.A. that is bidding to design, build operate and finance a, tunnel that will improve access to the Port of Miami. The other two bidders, include a group led by French firm Bouygues Travaux Publics, of which ABN, AMRO Bank NV is a partner, and a team led by Spanish firm Dragados, Concesiones de Infraestructuras SA., Under the proposed deal, the Florida Department of Transportation, once, the tunnel is built, would pay the winning team an annual payment over 35, years, instead of requiring drivers to pay a toll when using the tunnel., would be reduced by, number of hours that lanes are closed or the tunnel does not meet, negotiated, operating requirements. The technique has been used primarily in Europe., PARSONS, Parsons is traditionally known as an engineering, design, construction firm, as the privatization of the public infrastructure, sector has appeared on the horizon, they too intend to branch out from, project design, development, and delivery., We are trying to stay current with new approaches to financing and, said Jeff Squires, a vice president with, Parsons., At this stage we are starting to talk to concessionaires about being a, full, partner, not just in the delivery of the project, but also in the long-term, Squires -- a former aide to Sen. Jim Jeffords, I-Vt., on the Senate, Environment and Public Works Committee and the Senate Finance Committee --, stressed that discussions are still in their early stages. He also did not, specify what firms are involved or what projects were being considered., beyond project, as we expand the nature of our, participation,, As an example of the firm's interest in the growing business, Squires, pointed out that Parsons is part of a consortium building the Kicking Horse, Canyon project in British Columbia., The project involves phase two of the construction of the Kicking Horse, Canyon roadway and bridge, and a 25-year concession for the operation, maintenance and rehabilitation of approximately 26 kilometers of the, Trans-Canada Highway between the Highway 95 intersection in Golden, British, Columbia, and the western boundary of Yoho National Park., Squires noted that while foreign firms currently are the leaders private, I think there are a lot of familiar domestic [firms], that, He pointed out that the established foreign firms have an advantage, because they have a portfolio of assets that allows them to mitigate risk, associated with taking on these deals., Each of these projects has a different performance curve with different, points in time that are expected to yield different outcomes and if you, can blend that it helps you to advance more comfortably, Squires said., RISK OF REGULATION, Efforts by Congress to limit how states or cities could spend private, concession dollars or protect consumers from unreasonable toll increase, schedules could also pose risks for the fledgling business, sources said., Sources said that Democrats on the House Transportation and, Infrastructure Committee have been meeting with experts, but that it is, unclear if the lawmakers will draft or introduce legislation that would, regulate infrastructure privatization., At a hearing last month on private transportation infrastructure, financing before the committee's highway subcommittee, Rep. Peter DeFazio, D-Ore., raised concerns over allowing private firms to profit from the use, public infrastructure., During the hearing, Gov. Mitch Daniels, who appeared before the panel, said that tolls on the Indiana Toll Road, which is run by the state, been raised since *1985-, in part because no Indiana politicians wanted to, back, such a politically unpopular move., DeFazio argued that by leasing the Indiana Toll Road, Daniels was, to raise tolls to the private sector., In response, Daniels stressed that the $3.8 billion Indiana Toll Road, concession deal would allow the state to finance nearly $5 billion of other, badly needed road projects that it could not have done otherwise. The $5, billion figure includes the $3.8 billion upfront payment plus $900 million, interest the state expects to earn., Opponents to the toll road deal last week argued before the state Supreme, Court that the planned use of proceeds from the lease is unconstitutional, that the money should instead be used to pay off debt. A lower state court, recently ruled that under state law the opponents would have to post a $1.9, billion bond in order to pursue the case on its merits. The lease deal is, expected to close by June 30., More recently, another observer raised the possibility that congressional, partisan divisiveness could also rear its head in conjunction with, privately, financed greenfield projects because those projects would not have, requirements that come with using federal dollars, for example, compliance, with the Davis-Bacon Act requirements on prevailing wages., I think that the ability to do major projects without federal funding, could represents a concern in some quarters that maybe some of the, protections that are built into the federal program would be absent, As I listen to the early discussions I think it portends, Davis-Bacon is a Depression-era labor law that requires payment of, prevailing wages on projects financed with federal funds., The issue is controversial in Congress and often pits labor against, management and the interests of Northern and Northeastern states, which, have, a heavily unionized labor forces, against Southern and Western states, where unions are not as entrenched., MACQUARIE EYES U.S. AIRPORTS, Macquarie manages a $24 billion investment portfolio, which includes, investments in more than 90 infrastructure facilities in more than 20, countries. The firm specializes in different types of infrastructure, including toll roads, airports and airport-related assets,, telecommunications, water, rail, port, energy generation, transmission and, distribution assets, as well as water and wastewater., Given the scope of the types of infrastructure that have been privatized, around the world, some are looking to expand the phenomenon in this country, beyond toll roads., everyone is starting to look at power generation assets,, health care assets, surplus real estate, JPMorgan's Finnegan said., One area that the Macquarie hopes to develop in the U.S. is airport, privatization, according to John Cline, a lobbyist with C2 Group, which, represents the firm., Macquarie believes that now is the right time to explore that avenue, because the Vision 100--Century of Aviation Reauthorization Act expires at, the end of fiscal 2007. Debate on renewing the law, which governs the, Federal, Aviation Administration and authorizes funding for its programs, expected, to intensify as lawmakers focus on the issue next year., Cline said that the hurdles are higher for airport privatization than for, highways. He cites language in current law that mandates that revenues, generated from an airport have to be used on the airport. While a few, airports have deals with private operators to run their facilities, such as, Indianapolis International Airport with airport firm BAA, the language in, current law prevents private firms from owning or leasing U.S. airports on, It makes it very difficult for a private entity to come in, earn a profit, and not be able to take the money off of the airport, However, the firm sees an opportunity because airport infrastructure is, crumbling and traditional financing sources -- federal dollars and bonds --, will not be adequate to make the needed improvements., The landscape is also changing on the airport side, there are, insufficient resources for the capital investment that is needed, both for, airport runway redesign and additions, as well as terminal developments, [The FAA wants] to move from a, ground-based radar system to a satellite-based system, which is a $10, billion, to $15 billion investment. There are lots of investments in the aviation, world, Cline said that Macquarie, which owns shares in airports in Copenhagen, Rome, Sydney, and Brussels, is well-positioned to privatize U.S. airports., The lobbyist said discussions with lawmakers and the U.S. Department of, Transportation about the issue are underway., One issue that has concerned some public airport operators and airlines, over the prospect, according to Cline, is that cities would use the funds, they make from a long-term lease deal to pay for pension or post-pension, costs at the expense of growing airport and other transportation-related, needs., But restricting the use of proceeds from a concession deal to, reinvestment in infrastructure could alleviate the issue. Along with, seeking, airport deregulation, Macquarie plans to continue to seek out concessions, highways, Cline said., Certainly this [privatization movement] cannot be depicted yet as a, infrastructure projects are going forward as publicly financed traditional, But there is no doubt that with the Skyway and the Indiana toll road, transactions there are people out looking at all sort of deals, Cline, said.
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by Adam L. CataldoNew Jersey Gov. Jon Corzine's administration is considering a proposal to, refinance debt issued by the financially strapped Transportation Trust, Fund Authority., Transportation funding is one of New Jersey's most pressing financial, dilemmas. The state estimates that its transportation infrastructure needs, will exceed $26 billion over the next decade. The problem: The TTF, which, finances highway and mass transit spending for the state, is effectively, out of borrowing capacity., The trust fund authority backs its debt, in part, with a hefty share of, the state's gas tax - nine out of every 10.5 cents flow to the trust., However, New Jersey's gas tax is among the lowest in the nation and, borrowing has outpaced revenue growth. The TTF has $7.37 billion of debt, outstanding., Faced with a tax-shy electorate that heard pledges of property tax relief, during the 2005 campaign for governor, Corzine - a former Democratic U.S., senator and Wall Street executive - is now weighing options to restructure, the state's transportation trust debt, Assemblyman John Wisniewski said, Friday., Wisniewski, who chairs the Assembly Transportation Committee and has, discussed the matter with state Treasurer Bradley Abelow, said the state, would free up bonding capacity by extending the maturities by up to seven, years. Such a move, could generate as much as $6 billion of, borrowing ability, at a cost estimated at $11 billion., Wisniewski said., The assemblyman said he thinks the administration is considering, administration has been receiving a stream of varying ideas and proposals, to help meet the state's transportation funding needs, Abelow said in a, There are different options and, different combinations of options that have been offered and all options, Corzine spokesman Anthony Coley also said various options are being, considered and that everything is on the table. Coley said investment, bankers have been pitching ideas and proposals on how the state can free, up capacity to finance its transportation needs., There are different options and banks and as well as other sources will, Wisniewski said legislation is required to extend the maturities on TTF, debt. Current law permits a maximum maturity of 21 years. While Wisniewski, said he was reluctant to discuss the plan in detail at this time, about a restructuring of such a magnitude., The notion of piling more debt upon debt, the notion of paying $11, billion for a bridge loan, the notion of not addressing the structural, flaws that have brought the TTF to this current crisis - all concerns me, Certainly my hope is that this is, increase in revenue to, solve the TTF's financial problems., a fair number of members of the, Legislature of both parties of both houses that have concerns over a, The TTF was last in the market on October with the sale of $953 million of, bonds that were priced to yield as high as 4.34% in 2020. Moody's, Investors Service rated the bonds A1, Standard & Poor's assigned a, AA-minus, and Fitch Ratings assigned a rating of A-plus., The TTF has been experiencing financial pressure for many years as, Fitch analyst Janet Martin said., In January *2005-, the TTF issued $1.2 billion of refunding bonds, under a, supplemental authorization of $1.65 billion. In *2004-, the TTF issued more, than $1.46 billion of refunding debt through two issues., Whenever you are in a position to restructure, it is symbolic of fiscal, But until we know of the type of plan and what, long-term solutions are embedded in the plan, we have to let the rating, Tom Dallessio, a vice president and New Jersey director for the Regional, Plan Association, said he has serious concerns about the possibility of, restructuring the TTF debt., There are certain things you should bond for, long-term infrastructure, But our debt, service level is tremendous at this point. If every New Jerseyan knew that, starting in July, every penny in gas tax they pay will go to pay debt
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by Adam L. CataldoWhen does an issuer sell nearly $2.8 billion of bonds? The answer: Anytime, it wants., However, the size of New Jersey's long-awaited Transportation Trust Fund, Authority transaction has led some issuers bringing much smaller deals to, market to rethink their plans., Whether or not they should hold off on bringing their deals, get into the, market ahead the TTFA, or go ahead as planned and let their deals stand on, their own, are just some of the questions that have been asked., The TTFA is set to sell about $2.78 billion of tax-exempt transportation, system bonds, and about $109.4 million of federally taxable bonds. The, proceeds will be used to refinance and restructure nearly $2.8 billion of, debt with proceeds doing to finance capital transportation projects across, the state., Princeton University sought to avoid any possible impact from the TTFA, deal by yesterday selling nearly $74.3 million of debt. J. Chester, Johnson, chairman of Government Finance Associates Inc., Princeton's, financial adviser, said he wanted to bring the deal to market yesterday, ahead of the TTFA., The reasoning was a $2.8 billion transaction is going to have an impact, There will be obviously an over-supply for a period of, time, and it is so large that it can impact the market for New Jersey, paper for some time following the actual bond sale. It takes a period of, The sale is part of Princeton's regular capital borrowing program. Moody's, Investors Service and Standard & Poor's rate Princeton triple-A. Fitch, Ratings does not assign a rating., It was either go, before or wait awhile, and we wanted to go before because of the, volatility in the interest rate market and not knowing exactly what the, direction of interest rates will be for sometime, to allow this large, Princeton is still looking to bring a refunding of at least $100 million, to market., We don't think it will have the impact another structure might have had, We are going to watch, However, the Monmouth County Improvement Authority decided to go forward, with today's sale of $40 million of general obligation bonds after, learning about the TTFA deal. The bonds will be sold competitively. Public, Resources Advisory Group is the authority's financial adviser., Monika Conley, a senior managing director with PRAG, said the sale had, been scheduled when she learned about the TTFA deal., Conley spoke with underwriters to get their opinion on how the authority's, deal might be affected by the TTFA transaction. The consensus opinion was, the deal could go ahead without a negative effect from the TTFA deal., The structure of the New Jersey bonds is 2019 through *2023-, the serial, My deal has a structure of 15 years starting in, 2007 with the last maturity being in 2021. Each bond, even in the back, $2.84 million. You only cover the years 19, and 21 in terms of the, And like Princeton, the authority's has a triple-A rating from Moody's and, Standard & Poor's, as well as one from Fitch., It's absolutely plain-vanilla GO of the highest possible credit, Conley
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by Their decision paves the way for the plaintiffs in the lawsuit -- a group of small tobacco companies -- to move forward with their lawsuit that alleges the MSA is an illegal agreement., The lawsuit is considered by many tobacco investors and analysts as one of the most crucial litigation concerns for the tobacco bond sector, because a successful challenge to the MSA could dry up the revenue stream that backs those bonds., Officials from Philip Morris USA and R.J. Reynolds Tobacco Co. have said if the agreement was ever ruled illegal, they would be unlikely to continue making annual payments to states., Without a revenue stream, bondholders who hold debt backed solely by securitized MSA payments would have no recourse to state governments or tobacco companies., The Grand River lawsuit names as defendants those attorneys general for states in which the plaintiffs do business -- Alabama, Alaska, Arizona, California, Colorado, Delaware, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, North Carolina, Ohio, Oregon, South Carolina, South Dakota, Tennessee, Washington, Wisconsin, and Wyoming., In their arguments to the high court, The appropriate course is to end the wrongful exercise of jurisdiction as soon as possible, The Second U.S. Circuit Court of Appeals ruled last year that the companies could challenge all of the attorneys general plaintiffs in New York, because that is where those officers hammered out the MSA and signed it over a five-month period in 1997 and 1998., The MSA settled a number of individual state lawsuits against tobacco companies. In the agreement, That revenue backs more than $30 billion of outstanding tobacco bonds sold by issuers in 17 states., The Supreme Court's decision yesterday -- which was issued without comment -- does not take into account the merits of the Grand River action. Instead, the court focused solely on the issue of jurisdiction raised by the defendants., In their lawsuit, the plaintiffs -- Grand River Enterprises Six Nations Ltd., Nationwide Tobacco Inc., they argue, their companies were not included in the round of lawsuits that resulted in the MSA, and therefore they should not be subject to any legal settlement stemming from those legal actions., In addition, they argue that because the MSA governs interstate commerce, it is tantamount to an interstate commerce agreement, and as such, is a violation of the commerce clause of the U.S. Constitution. Because the MSA offers favorable treatment to those companies that signed on to the agreement, it also represents a violation of federal anti-trust laws, they argue., Under the agreement, tobacco companies that signed the agreement must make annual payments each April 15 to participating states and territories. The amount of those payments is based on annual tobacco shipments., In addition, to keep the participating manufacturers' cost of doing business competitive during the duration of the MSA, that require companies that did not sign the agreement -- non-participating manufacturers or NPMs -- to make payments into state-overseen escrow accounts., Those accounts would be tapped if any of the NPMs were ever sued by sick smokers. However, For instance, Grand River's escrow payments have increased by 1, 000% since the amendments to the Allocable Share Release provisions were signed., Also, payments by NPMs are not tax-deductible as are payments by NPMs., A New York federal district judge originally dismissed the plaintiffs' companies' lawsuit, citing lack of jurisdiction. The Second Circuit's reversal of that decision put the Grand River lawsuit on the radar screen for tobacco bond buyers and analysts, though, and many tobacco bond analysts believe that lawsuits such as Grand River -- which challenge the legality of the MSA -- could be the biggest threat to the tobacco bond sector., However, many analysts also believe that before the agreement was nixed entirely, it is likely that Congress would step in and approve it, overriding the arguments about the violation of the commerce clause. In addition, tobacco could become a regulated industry
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by Shelly SigoFlorida's Citizens Property Insurance Corp. now expects to issue $3.05, billion of taxable auction-rate bonds, because bond insurance bids, received last week provided more than $5 billion in capacity., Citizens has been structuring a $3 billion finance plan to pay high-risk, account claims, if needed, during the upcoming hurricane season., Initially, the insurer considered selling $1.5 billion of auction-rate, bonds and using various liquidity and credit support arrangements., Negotiations with liquidity providers were under way when the bond, insurance bids came in with unexpected capacity, said chief financial, officer Terri Slack., We received bond insurance for over $5 billion in capacity ... with, pricing that was lower than what we received for the 2004 pricing, said, Slack, referring to Citizens' sale of $750 million of taxable auction-rate, So because of that, staff's recommendation for the, The proposal will be presented to Citizens' Board of Governors for, approval when they meet Wednesday. The board will also be asked to approve, a slate of co-managers for the deal, which is expected to sell the week of, June 26., Bear, Stearns & Co., Citigroup Global Markets Inc., Merrill Lynch & Co., and UBS Securities LLC will be senior managers on the upcoming, transaction. The same team senior managed Citizens' auction-rate sale in, 2004., We're very excited about the deal and we're looking for strong market, Slack said, noting that recent ratings for the deal should, help with pricing., Standard & Poor's last Wednesday raised its rating on Citizens' high-risk, account to A-plus from A., The agency also assigned an A-plus preliminary rating and stable outlook, to the $3.05 billion auction-rate bonds., The rating is preliminary due to ongoing revisions to the bond documents, prior to the bond pricing, Standard & Poor's said., The upgrade reflects state involvement with Citizens, including providing, funds to offset statewide assessments on policies to pay for a large, portion of a deficit from last year's hurricane season, and significant, growth in the state's population, which supports the assessments that, secure the debt, said Standard & Poor's analyst Robin Prunty., Strong state oversight and a significant statewide assessment base, continue to provide a high level of bondholder security, Prunty said., The assessment base is geographically diverse and has expanded, However, the potential exists for significant additional debt issuance, Prunty added., Gov. Jeb Bush last week signed a bill into law that appropriates $715, million in cash to reduce Citizens' deficit., Bush's action was also a major reason that Fitch Ratings revised the, outlook for Citizens on May 10 to stable from negative and affirmed the, A-minus senior-debt rating for its high-risk account. Fitch said it, expects to assign an A-minus to the upcoming auction-rate bond sale., Citizens is a state-run agency that provides windstorm and property, insurance where the private market will not. The high-risk account, consists of windstorm and property insurance policies in Broward, Dade, Monroe, and Palm Beach counties., As of April 30, the high-risk account had 362, 256 policies collecting, premiums totaling $801.5 million covering an exposure of $139.3 billion., In an account separate from the high-risk policies, Citizens also provides, residential and commercial-residential insurance in the state's remaining, 63 counties if people cannot get it from private insurers. Those accounts, consisted of 488, 000 policies with premiums of $748.5 million covering a, total exposure of $87.4 billion as of April 30., Moody's Investors Service currently rates Citizens' high-risk account A3, and the residential and commercial-residential accounts A2, with a, negative outlook., As of press time Friday, Moody's had not released a rating report for the, upcoming sale., The Florida Hurricane Catastrophe Fund, a state-run reinsurance agency, that provides coverage to private companies and Citizens, plans in early, June to sell $1.22 billion of tax-exempt revenue bonds to pay reinsurance, claims from last year. The Cat Fund is also preparing a $2.75 billion, liquidity program to pay claims this hurricane season, if needed., Although Citizens and the Cat Fund are state-created entities, they, operate and produce financing plans separately.
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by Elizabeth AlbaneseA request for proposals expected to be released last Friday by the Federal, Bureau of Prisons seeking bids to house nearly 7, 000 inmates in West Texas, spurred revisions to the credit outlooks of two municipal bond issuers in, West Texas., Standard & Poor's revised its outlook last week to negative from stable on, approximately $94.9 million of taxable lease-rental certificates of, participation issued by Reeves County in West Texas and approximately, $64.73 million of tax-exempt lease-revenue bonds issued by the Garza, County Public Facilities Corp., The lowered credit outlooks reflect the latest version of a, pre-solicitation notice sent May 12 by the Federal Bureau of Prisons, indicating its intent to issue a request for proposals for facilities that, could house about 7,000 federal inmates., In the past, the interlocal government agreements have always just been, Bids are due, July 12, but it's not clear how long the process would take after that., Many of the inmates included in the RFP are currently housed in, bond-funded, private lockups in Garza and Reeves counties, but those, interlocal agreements with the Federal Bureau of Prisons expire next year., Included in the outlook revisions are $7.435 million of Series *2001-, certificates of participation and $46.350 million of Series 2001A COPs, issued by Reeves County, as well as $41.095 million of Series *2005-, certificates of participation issued by the Reeves County Law Enforcement, Center Trust., The agency maintains BBB-minus ratings on the uninsured debt. The *2001-, debt is owned by funds managed by 40, 86 Investment Co., Investors, Management Group, and Safeco Investment, while the 2005 debt is owned by, funds run by Bankers Insurance Group and Mutual Beneficial Association., The agency also revised ratings for $29.8 million of revenue bonds issued, the Garza County trust in 1998 and $31.9 million issued by the trust in, 2005. Those uninsured bonds also carry BBB-minus ratings., The Series 1998 debt issued for Garza County is owned by Oppenheimer, Funds, while the Series 2005 debt is owned by a number of bond funds, including those managed by AllianceBernstein, Lord, Abbett & Co., Wells Capital Management Co., According to a May 10 report written by Standard & Poor's analysts, the negative outlook reflects the, The projects were built to cater to federal and other prison contracts, and rely on revenues from those sources to meet debt service., The per-diem revenues for housing inmates is the primary revenue stream, Any slowdown or halt of that, The Standard & Poor's report stated that if federal officials opt to move, forward with the RFP and ultimately award contracts to house the 7, inmates currently being held in West Texas facilities, the Garza and, Reeves lockups would have to identify other means of filling those jail, beds., Currently, the Reeves lockup houses about 2, 000 federal prisoners, while, the Garza detention center holds about 1, 000 federal detainees. The, remaining West Texas prisoners are held in two privately owned facilities, in Big Springs and Eden., Any prolonged period of the facilities not operating at, or near, their, individual capacity could cause financial problems for the facilities, place their debt service payments in jeopardy, and cause their ratings to, Breeding said., The Standard & Poor's report stated that while interlocal government, agreements with such agencies as the Federal Bureau of Prisons and the, U.S. Marshals Service are recognized as short-term agreements, agencies had traditionally counted on the extension of those agreements to, guarantee their debt payments, expecting the agreements to be renewed., However, Breeding said that it remains unclear whether the Reeves and, Garza prisons would be able to win back all or part of their existing, federal inmate numbers via the competitive bid process., The current per-diem rates charged under the existing interlocal, government agreements are competitive and should allow the facilities to, aggressively compete should bureau officials issue the request for, There, however, is no certainty regarding, the award of any contract should the bureau shift from the traditional, interlocal government agreement model to a competitive bid procurement, Congressional delegates are currently discussing the issues in an attempt, to support the debt issued to finance the jails. President Bush has, recommended cutting $142 million from the Federal Bureau of Prisons budget., Moody's Investors Service does not rate the prison debt for either issuer., Fitch Ratings does not rate the Garza trust's debt, but maintains an, underlying rating of B for the Reeves County Series 2001 certificates., Telephone calls seeking comments from the Federal Bureau of Prisons and, the counties were not returned by press time.
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by The local compromise, announced June 15, is winning support in Congress, with most of the Texas delegation on board to secure its passage. The decision by Sen. John Ensign, R-Nev., to ask the bill's nine co-sponsors to also back the local proposal indicates that it could be embraced by a majority of lawmakers., Sen. Kay Bailey Hutchison, R-Tex., is drafting legislation that would turn the local agreement into federal law. Under the deal hammered out by the two cities, Southwest Airlines, and American Airlines, Congress must approve the deal by the end of the current calendar year., While I would prefer the immediate and full repeal of the restrictions, this compromise is the best and most reasonable option available to bring competitive, free-market forces to bear on commercial air travel to and from the Dallas-Fort Worth Metroplex, Ensign wrote in a letter to co-sponsors such as Sens. John McCain, R-Ariz., Joe Lieberman, D-Conn., and Sam Brownback, R-Kan., The Wright Amendment, approved by Congress in *1979-, allows flights from Love Field only to points inside Texas, Louisiana, Arkansas, Oklahoma, New Mexico, Alabama, Mississippi, Kansas, and Missouri. The measure was written to protect bondholders for the then-new Dallas-Fort Worth International Airport by limiting competition from Love Field, which had been scheduled for closure., The new agreement includes a plan to reduce the number of gates at Love Field to 20 from 32, limiting the number of airlines that could relocate there once the Wright restrictions are eliminated, preserving most of DFW Airport's current business., However, the deal also calls for about $200 million in improvements to the aging and perennially shabby Love Field., Also included in the agreement is a ban on passenger service from regional airports within 80 miles of Love Field - such as Alliance Airport in north Fort Worth, currently a cargo facility
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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 Elizabeth AlbaneseR.J. Reynolds Tobacco Co. and Lorillard Tobacco Co. on Monday placed a, combined $755 million of their 2006 Master Settlement Agreement payments, into escrow accounts pending arbitration that will determine how well, participating states have enforced certain mandates of the agreement., Complete information about the amount of MSA revenue available this year, to the 46 states and six territories that signed the agreement in *1998-, will not be available until tomorrow. Although payments were due yesterday, for the original companies that signed the MSA - Reynolds, Lorillard, Philip Morris USA - payments by smaller manufacturers, known as subsequent, participating manufacturers or SPMs, are not due until April 19., Eleven SPMs last year withheld a portion of their 2005 MSA payments or, placed money into escrow accounts. The companies claimed that their, participation in the MSA caused them to lose market share in 2003 - and, some companies also withheld MSA payments based on market share they claim, they lost in 2004., A clause in the MSA allows participating companies that have lost market, share to those that did not sign the agreement - known as, non-participating manufacturers, or NPMs - to reduce their payments by, three times the amount of market share lost if market share loss is, greater than 2%., Market share loss in 2003 for tobacco's Big Three was 6.2%. On March 28, the Boston-based Brattle Group, which served as mediators for the, companies and the states and territories that signed the agreement, ruled, that the MSA was a determining factor in market share loss by the, companies. As such, the companies could reduce their payments by a total, of 18.6%. Had all three companies opted to withhold that amount or place, it in escrow, the predicted MSA payment of about $6.5 billion would have, been reduced by $1.2 billion., Analysts predicted that such a reduction of revenue to states expecting, those payments would have spurred several tobacco bond issuers to dip into, reserves in order to meet debt service obligations this year. Among the, issuers analysts predicted might have difficulty meeting interest and, principal payments should the entire NPM adjustment have been taken were, Rhode Island's Tobacco Settlement Financing Corp., the California County, Tobacco Securitization Agency for its issue on behalf of the Sonoma County, Securitization Corp., and the Puerto Rico Children's Trust Fund., However, on March 31, Philip Morris, by far the largest participant in the, agreement because of its significant market share, announced that the, company had made a full $3.4 billion MSA payment., At the time, the National Association of Attorneys General, which oversees, all MSA issues, commended the company for its full payment, which accounts, for about 50% of all annual MSA revenues. The NAAG did not have any, comment yesterday regarding the NPM adjustments taken by Reynolds and, Lorillard., Although Reynolds made its full $2.016 billion payment, the company placed, $647 million of that amount into a dispute account. Lorillard also made, its full $666 million payment, but placed $108 million into a dispute, account., David Howard, a spokesman for Reynolds, said that the company made a, $1.369 billion MSA payment on March 31, but opted to wait until the, deadline to determine whether it would take its NPM adjustment or pay the, entire 2006 payment., Sources close to Lorillard said that company also made its payment of $558, million on March 31 but waited until yesterday to announce its decision to, take the NPM adjustment., Under the terms of the MSA, participating tobacco companies will pay the, states and territories a total of $246 million over a period of no fewer, than 25 years., The payments are meant to compensate states for the cost of caring for, indigent sick smokers. The companies must make those payments as a, condition of selling tobacco products in the U.S., The settlement precludes further action by any participating state for, such monies in the future., To reduce the possibility that NPMs could lower their prices significantly, and take market share away from those companies whose price structures, included the burden of MSA payments, model, Those statutes require companies that did not sign the MSA to make, payments into escrow funds that would be tapped if those companies are, ever sued for the cost of caring for sick smokers. However, unlike the MSA, payments, NPM escrow payments are not tax-deductible., Many NPMs have sued or are in the process of suing various attorneys, general, maintaining that they should not be forced to make payments into, a lawsuit account because they have never been sued., One of the terms of the MSA requires states and territories to ensure, of the model statutes. Attorneys general for a, number of states have sued NPMs to force escrow payments., The issue of diligent enforcement will determine whether the disputed, payments will be returned to tobacco companies or distributed to states., According to Section XI.c. of the MSA, the Brattle Group's March 28, shall be submitted to binding arbitration before a panel of, three neutral arbitrators, each of whom shall be a former Article III, federal judge. Each of the two sides to the dispute shall select one, arbitrator. The two arbitrators so selected shall select the third, arbitrator. The arbitration shall be governed by the United States Federal, Howard said that Reynolds expects the arbitration to be handled as, outlined in the agreement, rather than being determined in venues in all, participating states and territories., He said that while the company is actively pursuing its NPM adjustment for, *2003-, the company has not determined whether Reynolds would seek an NPM, adjustment for *2004-, during which time the company's market share loss, also exceeded 2%., I can't, speculate as to what the company might do, but the MSA certainly allows us, Analysts say that unless there is a surprise regarding the SPM payment on, Wednesday - for instance, if those companies opt to withhold or dispute, payments for multiple years - all tobacco bond issuers should be able to, meet their debt service obligations this year., All told, unless we have any surprises on the SPM front, we're looking at, said Dick Larkin, a municipal, All the issuers will be able to make, their interest and principal payments without going into reserves. Some of, them will be able to just by the skin or their teeth - my research tells, me that Rhode Island will have just about $200, 000 to use for turbo bonds, He said that if all of the SPMs, however, decide to take NPM adjustments, for multiple years, the adjusted payments could reduce MSA payments by, about $1 billion, which could throw cold water on tobacco bonds., Despite the added pressures caused by the adjusted payments, tobacco bonds, continue to fare well in the market., Tobacco bond prices were down the first two weeks of April - since this, whole thing started - but not more than the market as a whole, said Ron, Fielding, a senior vice president with OppenheimerFunds Inc. Fielding, oversees the firm's municipal bond fund group, was an early investor in, tobacco bonds., With the payments that have been made, however, the only difference that, we'll see is that perhaps fewer turbo bonds will be paid, those are trading at a premium thanks to the flat yield curve, so that's, not a bad thing. Mathematically speaking
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by Shelly SigoThe Volusia County School District will jump-start what promises to be an, active year for financing new schools in Florida with a two-day pricing of, $134.5 million of certificates of participation beginning today., Two other school districts will sell COPs during the next two weeks. The, Hernando County School District on Wednesday prices $104.7 million of COPs, and the Hillsborough County School District is preparing to price $86.8, million of certificates next week., Eagerness to enter the bond market early in the new year is partly, attributable to the January effect, when retail investment is usually, strong, and interest rates trend slightly lower, one underwriter suggested., However, Florida school issuers are still driven by a state law mandating, smaller class sizes and the state's fast population growth., Citigroup Global Markets Inc. heads up an underwriting team composed of, UBS Financial Services Inc. and Banc of America Securities LLC to price, Volusia's COPs today and tomorrow. Proceeds will finance two new schools, one replacement school., The COPs, insured by Financial Security Assurance Inc., mature between, 2012 and 2031 and wrap around the district's existing debt to keep, aggregate, debt payments level and provide flexibility for future issuance. They will, secured primarily by property taxes., Public Financial Management Inc. is the financial adviser. Bryant Miller, & Olive PA is special counsel and Nabors, Giblin & Nickerson PA is, underwriters' counsel., The district's finance team believes investors will be receptive to the, sale, said William Kelly, deputy superintendent of financial and business, services for Volusia., They think it will track a little closer to the [Municipal Market Data], Kelly said., Volusia County, on the east coast of central Florida, is home to Daytona, Beach, where the National Association for Stock Car Auto Racing got its, start., Commercial and residential development has fueled double-digit tax base, growth over the past five years with fiscal 2006 taxable value at $30.1, billion. Between 1990 and *2000-, the county's population increased 19.6%, 343. The population, estimated at 478, 670 in *2004-, is projected to, reach, 513,800 by 2010., Ratings of A-plus and A2 were assigned to the deal by Fitch Ratings and, Moody's Investors Service, respectively. Standard & Poor's did not rate, today's COP issuance., Analysts believe the district's financial operations are adequate and, stable, with surpluses in the last three years and a moderate debt burden, despite dealing with escalating material and labor costs due to, reconstruction efforts caused by the hurricanes that hit the Southeast in, past two years., Like other school districts in the state, limited revenue-raising ability, and sizable expenditure pressures, particularly related to reducing class, size, make the district vulnerable to state-funding declines, said Fitch, analyst Ricky Wai., After the current issuance, the district will have about $484.2 million, of outstanding debt. The district plans to issue as much as $60 million of, sales tax revenue bonds later this year and $117 million in COPs during the, next four years, according to Moody's analyst Baye Emery., Moody's expects the district's debt position to remain manageable given, favorable tax base growth and approval of a separate discretionary sales, Emery said., On Wednesday, the Hernando County School District prices $104.7 million, of COPs with Citigroup as co-senior manager and Raymond James & Associates, Inc. as co-manager. Ford & Associates Inc. is financial adviser. Bond, counsel, is Nabors Giblin, and Bryant Miller is underwriters' counsel., Proceeds from the COPs, to be insured by MBIA Insurance Corp., will be, used to build two new schools as well as additions to existing schools., Fitch assigned a BBB-plus to the Hernando deal, representing a downgrade, from A-minus, because of declining credit characteristics. Standard &, Poor's, assigned an A-minus to the deal, Moody's did not rate it., Next week, the Hillsborough County School District is planning to price, $86.8 million of COPs to build four new schools. A specific sale date was, available. The COPs are expected to be insured., As of Friday, ratings of A-plus and A1 had been assigned to the offering, Fitch and Moody's, respectively.
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by Jim WattsAn Oklahoma budget dispute that pits the Democratic majority in the Senate, against Democratic Gov. Brad Henry and the Republican-controlled House, could, result in a special session if it is not resolved in the next two days., The dispute must be resolved by Wednesday if the 49th session is to end, at 5 p.m. Friday, as required by the state's constitution., Everybody's saying that if we can get around this by Wednesday, then we, can pass everything we need to pass, so that we can adjourn on Friday, said, Ray Carter, media director for the Oklahoma House., The impasse has resulted from Senate Democrats' wish to spend record tax, revenue on improved health care and better schools, and a compromise plan, proposed by the governor and supported by the House Republican leadership, that would deliver the biggest tax cut in Oklahoma's 99-year history as a, state., There were no budget negotiations over the weekend, and nothing seems to, Legislators are working on the largest budget in state history, totaling, about $7 billion, including $1.1 billion in surplus revenue and windfalls, to strong economic growth and high oil and gas prices., Negotiations between the House and Senate were stalled for weeks as House, Speaker Todd Hiett, R-Kellyville, pushed for a package that included, elimination of the estate tax and reduction of the top income tax rate to, 4.9% from 6.25%., The budget compromise proposed early last week by Henry and state, Treasurer Scott Meacham, his chief financial adviser, was intended to, resolve, the budget impasse between the House and Senate, but seemed to sharpen the, dispute., Hiett agreed to drop his proposal for a top 4.9% state income tax rate, and endorsed the plan to cut the income tax rate to 5.5%., However, Senate Democrats, who instead proposed increasing Oklahoma's, standard income tax deduction to the federal level, rejected the, compromise., The Democratic tax reduction plan in the Senate would raise the standard, deduction to $5, 150 from $2, 000 for an individual, and to $10, 300 from, $4,000, for a married couple filing jointly. The Democrats also proposed a 5% pay, raise for state employees and an increase in teacher salaries of $3, 000 a, year, compared with the compromise plan's no across-the-board raise for, state, employees but an additional $2,400 a year for teachers., When fully annualized, the Democrats said, increasing the standard, deduction would reduce taxes by $172 million. Under their plan, according, Senate president pro tempore Mike Morgan, D-Stillwater, the vast majority, Oklahomans will receive a larger tax cut than they would under the $255, million plan proposed by the governor., I'm not willing to throw the people of the state of Oklahoma under the, Morgan said., Both plans eliminate the state's estate tax, which brings in about $66, million a year., Morgan said the proposal advanced by Henry and Hiett was an effort to, tell the Senate what to do., There is still time, to reach a budget agreement, but all parties need to be at the table. The, Senate has negotiated in good faith throughout the session and we will, Henry said his budget compromise would result in record investments in, education and roads and bridges. The governor shelved a series of targeted, tax reductions he had proposed in February, and reduced funding for several, of his investment initiatives., My compromise proposal strikes a good balance between tax relief and, the governor said in a statement, urging, I've attempted to meet House and, Senate leaders in the middle, implementing a major portion of each, chamber's, The House speaker said Senate leaders rejected the plan because they fear, Democrats will lose control of the upper chamber at the November elections, the first time since Oklahoma became a state in 1907., Senate Democratic leaders have controlled this state for 100 years with, an iron fist, and they've spent a century holding Oklahoma back. Now as, they, face losing power for the first time, Senate Democrat leaders are being, The plan I worked out with the governor achieves great things for our, state -- the largest tax cut in state history and investments in priorities, like salary increases for teachers. It is time for Senate Democrat leaders, accept bipartisan tax relief, or step aside so that we can have new, leadership, Hiett said.
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by Lynn HumeIn a blow to the Securities and Exchange Commission, a federal judge in Milwaukee has thrown out insider trading charges against the founder and president of Heartland Advisors Inc., and an investor, ruling the SEC did not provide enough evidence to proceed with the charges., However, the ruling, which Judge Charles N. Clevert Jr. issued Thursday in favor of Heartland president William J. Nasgovitz and investor Raymond R. Krueger, involves only a small part of the case in which several serious charges of securities law violations are still pending., The SEC filed suit against Heartland, nine of its current and former officers and employees, and Krueger in December *2003-, which urged Clevert to dismiss the insider trading charges the commission had filed against them before any trial is held., Lawyers for Nasgovitz and Krueger declined to comment. But Heartland issued a statement Friday, saying it welcomed the ruling and that it continues to dispute the remaining SEC charges., We are very pleased to see these troubling claims dismissed, said Paul Beste, SEC lawyers also could not be reached for comment. They can appeal Clevert's ruling, but not until the other charges are resolved, said one lawyer connected with the case., The insider trading charges revolved around a Sept. 8, *2000-, luncheon meeting between Nasgovitz and Krueger, as a result of that tip, Krueger liquidated his 2, 768 shares in the fund that same day to avoid losses of $11, 900., But Nasgovitz and Krueger denied the charges, Clevert agreed with the two men's argument in his ruling., In its effort to persuade Clevert not to drop the insider trading charges, the SEC had cited a court case, Freeman v. Decio, But Clevert, in his ruling, noted that Freeman also states, In this case, Clevert said, Krueger had a pattern of liquidating his shares in the Short Duration Fund. He sold about one third of the funds in April 1998 and another third in August 1999 and the remaining one third on Sept. 8, 2000., Krueger claimed he liquidated the bond holdings because he needed the money to purchase a car and some jewelry, to make some tax payments, Clevert noted that Krueger was able to provide documents showing that he bought a car shortly before liquidating the bonds, bought some jewelry, paid taxes, and purchased Ansys and Exabyte stock. In addition, on Sept. 14, Krueger liquidated a $25, 712 account with American Express Financial and a $2, 621 account with T. Rowe Price, according to the ruling., The SEC's lawyers had claimed insider trading was indicated by the fact that Krueger told Mary Sokolow, Nasgovitz's administrative assistant, that he wanted to see her about business after lunch, and that she, in turn, prepared a summary of all of his holdings at Heartland., negates the insider trading implication more than confirming it, A pre-lunch intent to manage an account is not indicative of an insider tip-off, Clevert said., The judge also said that the evidence shows Sokolow had previously prepared investment summaries for Krueger and other clients., The SEC's lawyers pointed out that Krueger and Nasgovitz made inconsistent statements in affidavits about whether Krueger's bond account was discussed during lunch, with Nasgovitz saying it was mentioned and Krueger saying it was not. They also said that the affidavits should be considered unreliable because they are self-serving., Even if [the] defendants had mentioned Krueger's SDF holding, The SEC lawyers also claimed that Nasgovitz tipped off several other clients. However, Clevert said the commission lawyers provided no evidence of this. Instead, the evidence shows that, as of Sept. 30, Nasgovitz had $14, 583.51 in the bond fund, his mother, Sylvia Nitschke, had $86, 982.18 in the fund, and his mother-in-law, Erma Cushing, had $92, 861.19 in the fund., In sum, the SEC has not proffered any evidence to demonstrate a genuine issue of material fact entitling it to a trial on its insider trading claim against defendants Nasgovitz and Krueger, Clevert concluded in his ruling., Other SEC charges remain against Nasgovitz and Beste as well as Heartland Advisers, Jilaine Bauer, Heartland's former general counsel, Kenneth Della, the firm's former treasurer, Kevin Clark, senior vice president of trading, Thomas Conlin, former portfolio manager, Greg Winston, former portfolio manager: and Hugh Denison
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by Jackie CohenWashington Attorney General Rob McKenna said he is filing an appeal, against King County Superior Court Judge Mary Roberts' June 13 ruling that, Initiative 747 is unconstitutional. The effect of the ruling would be to, relax caps on annual property tax levy increases., said McKenna in a prepared, First, because it overturns the will of the people in, approving property tax relief through Initiative 747 and second, because it, sets an impossible hurdle for those seeking to exercise their, constitutional, On Tuesday the Superior Court ruled Initiative 747 unconstitutional, because it amended I-722, a law that was declared unconstitutional in, September *2001-, long after I-747 had been filed and circulated and just two, months before it was approved by voters., This ruling puts initiative drafters in an impossible box whenever they, seek to amend a law which might be changed after their initiative has, already, been drafted and filed, but before the election. The constitution does not, said McKenna., Initiative 747 had capped property tax levy increases at 1% annually, unless voter approval was achieved., the property tax levy is determined at the aggregate, level so even though the levy is capped at 1%, an individual taxpayer's, taxes, can increase by more or less than 1% due to a number of factors, said, Cameron, Comfort, a senior assistant attorney general for the state., If the Superior Court's overturning of Initiative 747 were vindicated, would make effective Referendum 47, passed by voters in *1997-, limiting, increases in property tax levies to no more than 6% unless a request were, on the ballot., However, the 6% cap from Referendum 47 would only apply to taxing, districts with populations under 10, like Whitman County, co-plaintiff, the lawsuit resulting in the overturning of Initiative 747 and the, effective, default to Referendum 47., Under Referendum 47, taxing districts with at least 10, 000 in population, could raise property tax levies up to 6% annually only with a two-thirds, majority vote by the local governing body., Without such a vote, Referendum 47 says that taxing districts with, populations of at least 10, 000 may raise taxes no higher than the lesser of, either 6% or the implicit price deflator, or IPD, an annual measurement of, inflation produced every September by the Bureau of Economic Analysis of, U.S. Commerce Department., During the five years in which the Initiative 747 tax cap of 1% had been, in effect, the IPD has ranged from 1.16% to 2.54% per year., That could mean that taxing districts with populations of at least 10, would be able to raise 2007 property tax levies 4.82% plus whatever, percentage, the 2007 IPD turns out to be, said Mike Gowrylow, spokesman for the, Washington, Department of Revenue., However, that increase could not be levied retroactively to collect, additional tax money from previous year's assessed valuations, said, Gowrylow., Local taxing districts decide upon annual property tax levy increases, every fall, which could end up preceding the decision from the state's, Supreme Court on the appeal., The high court could rule in the first month of 2007 at the earliest, that time the state Legislature will have reconvened for the next, legislative session., That will effectively result in somewhat of a race between the appeal, the state legislature and Washington's local taxing jurisdictions to decide, on the outcome of 2007 property tax levy increases., State legislators have already said they may introduce a bill reinstating, Initiative 747 in the next legislative session., Hopefully, an appeal will fall on the side of the taxpayers. If not, other option is for legislation. I'm ready to use that option, necessary,, to preserve the voters' wishes and protect the taxpayers of our state, said, Rep. Dan Roach, R-Bonney Lake, a member of the House Finance Committee., House Republican Leader Richard DeBolt of Chehalis cited the example set, the state government's reinstatement of Initiative 695, a $30 vehicle, excise tax had originally been approved by voters in 1999., The governor signed a bill on March 31, 2000 reinstating the tax, just, two weeks after King County Superior Court overturned the tax. And then the, state Supreme Court upheld that decision on October 26, 2000., But with the next legislative session six months away, it's too early to, tell whether the 1% ceiling on property tax levy increases will be, reinstated, a ruling of the state's Supreme Court, an act by the legislature, decisions, local districts or any combination thereof., Many of our local property owners in the 31st District have received, their tax assessments in the mail this week and are already having sticker, shock at the tax bill. If that burden is further increased, it may force, some, citizens who can't afford the bill to sell their homes and properties, Roach, said.
Published in Bond Buyer (2006)
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