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Belle Haven Investments has its headquarters in Rye Brook, New York.
AUM as of June 30: $12.4 billion
Employees: 35
Years won: 2018, 2019, 2020
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https://www.pionline.com/best-places-work/belle-haven-investments-2020
Chicago’s $12.8 Billion Budget Plan Raises Taxes, Cuts Jobs
Chicago’s $12.8 Billion Budget Plan Raises Taxes, Cuts Jobs
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https://www.bloomberg.com/news/articles/2020-10-21/chicago-s-12-8-billion-budget-relies-on-higher-taxes-job-cuts-kgjk2gl7
New York’s MTA Plans 2021 Budget Without Federal Help
New York’s MTA Plans 2021 Budget Without Federal Help
The clock is ticking for the nation’s biggest mass-transit system.
New York’s Metropolitan Transportation Authority needs $12 billion of federal funds by late March to avoid drastic cuts to subway and commuter-rail service because the coronavirus has decimated revenue and ridership. While mass-transit providers will have an advocate in President-elect Joe Biden, a long-time Amtrak rider, he doesn’t take office until Jan. 20, one month after the MTA approves its 2021 budget.
A Democratic-controlled Senate could also provide a bigger stimulus package for public transportation systems, but the fate of that chamber rests on two Georgia run-off elections in January. Biden said Monday that Congress should immediately pass a Covid relief package but there’s no active negotiations between House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell.
The MTA is seeking federal funds to help cover budget deficits this year and next. It’s set to unveil Wednesday its 2021 budget proposal during a monthly board meeting, followed by a vote next month. Without more federal help, that plan will include service cuts of as much as 40% on subways and buses and 50% on commuter-rail lines.
“We’re going to continue to fight and advocate,” Pat Foye, MTA’s chief executive officer, said in a phone interview about the $12 billion request. “As the largest public-transit agency in North America, our losses caused by the pandemic are greater than any other.”
Transportation needs dominate the New York City region, where officials are waiting for federal funds to begin work on the Gateway project, a $11.6 billion commuter-rail tunnel under the Hudson River that connects Manhattan and New Jersey. The MTA is also waiting for federal guidance to implement congestion pricing, a new revenue source originally pegged to support $15 billion of debt for capital needs but could also help cover operating costs.
Layoffs Loom
In addition to massive service reductions, the MTA has warned it will be forced to issue debt to cover operating expenses and also lay off more than 8,000 workers. Those changes could result in an estimated $65 billion loss in gross domestic product annually for the New York City region, costing a potential 450,000 jobs by 2022, according to a report released last month by the NYU Rudin Center for Transportation Policy and Management and New York-based consulting firm Appleseed.
Biden’s already focused on mass-transit. Phillip Washington, chief executive officer of the Los Angeles County Metropolitan Transportation Authority, is heading Biden’s transportation panel within his transition team. That group also includes Polly Trottenberg, New York City’s Transportation Commissioner.
“Long term there is a lot of political support for the MTA to remain a viable system,” said Dora Lee, director of research at Belle Haven Investments, which manages $13.3 billion of municipal securities, including insured MTA debt. “It’s very integral to and essential to the New York City economy and by proxy the New York State economy.”
‘Suffocating’ Debt
Still, investors are skeptical the MTA will receive the full $12 billion from Congress. The agency, which owed nearly $46 billion of debt as of Nov. 4, is set to vote Wednesday on borrowing as much as $2.9 billion to cover budget gaps if it doesn’t get more federal aid, according to board documents posted on the MTA’s website.
The MTA debt already faces “suffocating levels,” with principal and interest payments forecast to take up 25.7% of revenue in 2021, according to state Comptroller Thomas DiNapoli.
The MTA plans to borrow for a second time through the Federal Reserve’s Municipal Liquidity Facility. The MTA and Illinois are the only entities to use that program as low interest rates have limited such borrowing to the most financially-stressed credits. The lending facility is set to expire Dec. 31.
An increase in MTA debt shouldn’t scare away bondholders as the agency’s ridership and revenue should return to more normal levels over time, said Richard Schwam, a municipal credit analyst at AllianceBernstein LP, which manages $49 billion of state and local debt, including MTA bonds. The MTA estimates pre-pandemic ridership may not return until almost 2023.
Before the pandemic, riders packed shoulder to shoulder into subways, buses and commuter rails as the network serves more than 15 million people across New York City, southeastern New York State and Connecticut. A coronavirus vaccine would help regain riders’ trust that the MTA system is safe.
‘Bumpy’ ride
Even if Congress declined to give the MTA any funding, the system can temporarily rely on deficit financing and the MLF program to raise necessary cash, Schwam said. Investors who can ride out the MTA’s financial stress may see a benefit for staying with the credit, he said.
“People will want to own it and are generally confident that even though it’s going to be bumpy for a couple of years, eventually you’re going to get a really nice gain out of an investment like that,” Schwam said.
Some MTA bonds are trading at cheaper levels than they typically do. While the additional yield that investors demand to hold MTA debt rather than top-rated municipals has decreased since the pandemic struck in mid-March, that yield difference is still wide compared to how the bonds traded before the virus.
An MTA bond sold in February 2016 with a 5.25% coupon and maturing in 2056 last traded on Monday at an average yield of 3.8%, 224 basis points more than AAA-rated municipal debt, according to data compiled by Bloomberg. That yield difference is much wider than when the debt traded in January of this year at an average 3 basis points above top-rated munis.
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https://www.bloomberg.com/news/articles/2020-11-17/new-york-s-mta-plans-2021-budget-without-federal-help?sref=dlv6Ue8o
Muni Market Niche Faces Biggest Test With Sales Taxes Crumbling
Muni Market Niche Faces Biggest Test With Sales Taxes Crumbling
The shutdown of businesses across the country is casting a pall over a segment of the $3.9 trillion municipal-bond market that had been seen as more insulated from risk: debt backed by sales-tax collections.
Illinois, Chicago, Puerto Rico and the state of New York are among governments that have issued such bonds. That allowed them to borrow at a lower cost than by selling debt backed only by the promise to repay, given that the dedicated revenue stream provided investors an extra bit of protection.
But the business closures that have raced through the American economy along with the coronavirus since March are promising to mark the biggest test yet of that premise. In May alone, the sales tax collections of states tumbled by $6 billion, or 21%, from a year earlier, according to an analysis by the Urban-Brookings Tax Policy Center.
Matt Fabian, an analyst for Municipal Market Analytics, said the sales-tax bonds were designed to be insulated from the state and city budgets, with the revenue behind them typically well above what’s needed to cover the debt payments.
“But sales tax bonds weren’t built with the pandemic in mind,” Fabian said. “You can’t have sales transactions go down 80% for months without problems.”
The risk hasn’t yet had a big effect on the price of the securities, which have rebounded along with the broader market from the March crash triggered by the first wave of shutdowns.
Bonds sold by Chicago’s Sales Tax Securitization Corp. that mature in 2040 are trading for yields around 3.6%, down from as much as 4.24% early last month, according to data compiled by Bloomberg. The prices of those sold by still-bankrupt Puerto Rico have also rallied sharply back since March.
Fabian said the unprecedented declines in sales taxes makes it “very likely” that some governments will need to draw on reserves or see the ratings of the securities cut.
Dora Lee, director of research at Belle Haven Investments, which manages $12.4 billion in muni bond assets, said the economic rout has cast some doubts on how the securities will fare.
“Now that there’s a potential for large revenue declines, I think investors are looking for credits that have more financial flexibility than a rigid pledged revenue stream,” she said. “We have been extremely cautious when looking at special tax bonds because it’s hard to know where the declines will bottom out and I suspect that other investors are in the same boat.”
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https://www.bloomberg.com/news/articles/2020-07-15/muni-market-corner-faces-biggest-test-with-sales-taxes-crumbling?sref=dlv6Ue8o
California Lawmakers Pass Budget That Depends on Federal Aid
California Lawmakers Pass Budget That Depends on Federal Aid
By Romy Varghese
California’s legislature passed a $143 billion general-fund budget for the next fiscal year that counts on federal aid before triggering spending cuts, a rejection of Governor Gavin Newsom’s proposal to slash services ahead of more money from Washington.
The bill was approved 61 to 13 in the Assembly and 29 to 11 in the Senate Monday. Both chambers are controlled by Democrats.
State lawmakers are required by a constitutional amendment to pass a budget by June 15 or forfeit their pay. The bill they approved is a placeholder of sorts for the fiscal year beginning July 1 as they said they will continue to negotiate with Newsom and can make changes later in the summer. Newsom has veto power over spending.
California is grappling with a $13.4 billion budget shortfall this year and $40.9 billion in the next as pandemic-related shutdowns slam the economy of the most populous U.S. state. In just two months California lost more jobs than it did through the Great Recession. Its leaders are faced with balancing the books while trying to minimize the burden on residents who now desperately need services.
“Californians today need help more than ever. We shouldn’t as an institution or a state retreat,” said Phil Ting, the Democratic chair of the Assembly’s budget committee, before the vote. “We have to go help. This is the right budget for this time.”
State and local government officials across the country are urging President Donald Trump and Congress to help ease the crippling economic losses. A Democrat-backed bill that would give states and cities more than $1 trillion has stalled in Congress.
Newsom said talks with state lawmakers have continued.
“We are making real progress,” he told reporters Monday, adding that he is still holding out hope that Trump and Republicans who control the U.S. Senate will advance another rescue package soon.
Newsom, a Democrat, said in May that money would reverse the need for around $14 billion in cuts. Those include reducing pay for all state workers by 10% as well as less money for education and safety-net programs such as health care for low-income residents.
But Democratic leaders of both legislative chambers took a different approach: the budget passed Monday counts on $14 billion in additional federal aid and only triggers cuts in October if it doesn’t materialize. Their plan, if Congress fails to act, relies on measures such as deferring payments and moving the June payroll date for state workers into the next fiscal year.
Benefiting the state is its record $16 billion rainy-day account, which while far short of closing the budget shortfall, can still help defer some painful decisions.
“The state’s reserves give them some time to decide on spending cuts,” said Dora Lee, director of research at Belle Haven Investments.
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https://www.bloomberg.com/news/articles/2020-06-15/california-assembly-passes-budget-that-depends-on-federal-aid?sref=dlv6Ue8o
Illinois Investors Seek Pension Fix Clues in Budget Proposal
Illinois Investors Seek Pension Fix Clues in Budget Proposal
By Shruti Singh
February 19, 2020, 9:44 AM EST
Illinois Governor J.B. Pritzker will deliver his second budget address on Wednesday, when investors will be looking for specifics on how the Democrat plans to chip away at the government’s growing pension debt and raise new revenue for the lowest-rated U.S. state.
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https://www.bloomberg.com/news/articles/2020-02-19/illinois-investors-seek-pension-fix-clues-in-budget-proposal?sref=dlv6Ue8o
Chicago’s Bond Penalty Plunges as Investors Hunt for Yields
Chicago’s Bond Penalty Plunges as Investors Hunt for Yields
By Shruti Singh
January 15, 2020, 2:57 PM EST Updated on January 15, 2020, 3:03 PM EST
Chicago boosted the size of its first sale of general-obligation bonds since March as heavy demand for higher-yielding securities slashed the interest penalty that investors extracted to own the city’s debt.
Chicago, the nation’s third-biggest city, sold about $466 million of the bonds, according to data compiled by Bloomberg, about $100 million more than initially had been offered. The yields were steeply lower than what Chicago paid during its last such sale, with the 10-year bonds priced for yields of 2.38% on Wednesday, or 1.03 percentage point over top-rated debt. That extra interest, a key measure of perceived risk, was down from 1.69 percentage point in March.
By seizing on lower interest rates, the sale will help Mayor Lori Lightfoot close an $838 million shortfall in the budget of a city that has struggled for years with mounting pension bills. The sale comes as yields in the municipal market hold near a more than half-century low, leaving investors clamoring for lower-rated securities like Chicago’s that pay higher yields.
“The investor search for yield continues,” Tamara Lowin, an analyst for Belle Haven Investments, which holds about $11 billion of municipal bonds, including Chicago’s. “The the spread tightening since March speaks more to technicals than credit quality.”
Chicago is planning to follow Wednesday’s sale with an offering of sales-tax-backed bonds this week.
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https://www.bloomberg.com/news/articles/2020-01-15/chicago-s-bond-penalty-plunges-as-investors-hunt-for-high-yields?sref=dlv6Ue8o