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Belle Haven in the News.
Trump ICE Raids Crimp Revenue for California Charter School Debt
By Max Rivera
A California charter school operator has asked for permission to miss a financial cushion target required to cover its bond payments after enrollment slid at its mostly Hispanic campuses amid President Donald Trump’s immigration crackdown.
Aspen Public Schools said that enrollment fell by 95 students in the academic school year that ended in May, costing it about $2 million in revenue, mostly from per-pupil state funding, according to regulatory filings. The operator runs three charter schools in Fresno, roughly 200 miles (321 kilometers) north of Los Angeles, in a region known for agriculture and farming.
Because of that revenue loss, school officials have requested a one-time waiver from its payment coverage ratio, which compares how much money must be available to pay bondholders with the amount of debt payments due in a year. Aspen borrowed about $13 million of revenue bonds in 2022 through the California School Finance Authority, a conduit issuer in the state treasurer’s office. Aspen has not defaulted on its debt and isn’t in any danger of doing so, school officials said.
Enrollment began to drop in the middle of the academic year as rumors about immigration raids circulated through the community. Aspen offers roughly 175 days of instruction, meaning the middle of the school year fell shortly after the November election and in the days ahead of winter break. Arrests, immigration sweeps and deportations escalated following Trump’s inauguration in January.
“They were afraid to come to school,” Shelly Lether, Aspen Public Schools chief executive officer, said during a Dec. 2 investor call. “The region was very unsettled and families were afraid.”
Aspen’s request shows how Trump’s immigration policies are rippling into school budgets and bond markets. Districts with large immigrant populations — from Chicago to Miami to Los Angeles — have reported declines in enrollment and attendance as families fearful of enforcement keep children home or relocate, threatening per-pupil funding that is a key revenue source for many public and charter schools. In California’s Central Valley, schools saw student absences climb by 22% in just the first two months of the year, Stanford University research found.
Declining enrollment had already been a challenge for public schools around the country as shifting demographics, largely due to the drop in birth rate, leaves them increasingly competing over a shrinking number of kids. School revenue can come from state funding that is doled out on a per-pupil basis so a drop in students has a direct impact on budgets.
The Los Angeles Unified School District, the second largest in the country, reported a 4% drop in overall enrollment, amounting to about $140 million less in per pupil funding. In Florida, Miami-Dade County Public Schools approved a $7.4 billion budget in September that included a $21.5 million reserve fund in anticipation that fewer students — especially fewer newly arrived foreign-born students — will enroll than projected.
The Chelsea Public Schools, a Boston-area school system that serves a city of roughly 40,000 where nearly half of its residents are foreign-born — and is an area that has been hit hard by ICE raids — has seen a $1.4 million drop in revenue because of enrollment, according to its latest budget.
“One could see the attendance data as a leading early indicator of other potential impacts, both for children who might be experiencing anxiety and longer run educational implications, but also for local economies, districts and employers,” said Thomas Dee, an economist and a professor at Stanford University’s Graduate School of Education. “There are multiple implications of this for child development, for the functioning of schools, but also for municipal finances.”
At the Aspen Public Schools, enrollment had declined to 793 students across its three campuses by the end of May, Lether said. It has since rebounded to about 964 currently, she said, after extensive community outreach and marketing efforts helped lure new families to its campuses. The charter operator cut 12 jobs and brought in an external financial consultant to help manage the unexpected drop in revenue.
“We are in good financial standing today. We are meeting our debt service, our obligations,” Lether said. “We’ve never missed or delayed our bond payments nor do we anticipate that happening at all.”
Fresno County, a vital hub to the state’s agricultural industry and home to California’s fifth largest city, has just over a million people, including nearly 215,000 born outside of the US. About 73% of Aspen’s students are Hispanic, 9% African American and 8% white, Lether noted. Roughly 80% of its entire student body is identified as socio-economically disadvantaged, according to the most recent Fresno Unified School District data.
Aspen’s plight “highlights the effects of these crackdowns on children — less enrollment means less money for the district,” said Dora Lee, director of research at Belle Haven Investments, which holds approximately $23.3 billion in assets, the majority of which is municipal debt. “But at the end of the day, those are children that are not getting the education that they need, which is very unfortunate.”
Read original article:
https://www.bloomberg.com/news/articles/2025-12-23/trump-ice-raids-crimp-revenue-for-california-charter-school-debt?srnd=homepage-europe&sref=dlv6Ue8o
A Warning from Chicago
A Warning from Chicago
Sometimes enough is enough.
When Goldman Sachs recently tried to sell $454 million of bonds issued by Chicago’s Sales Tax Securitization Corporation (the bonds are secured by sales tax revenues) it couldn’t find enough buyers. According to Bloomberg’s Shruti Singh, the bank ended up having to take $75 million of the bonds on its own books. This was despite STSC’s bonds being more highly rated (AAA for the top tier) than those of the city (A) from which they had sprung, and despite the price being reportedly “adjusted.” Not only that, Chicago’s sales tax revenues have been increasing and the STSC is structured as a “bankruptcy-remote” entity under Illinois State law, meaning that if Chicago were to go bankrupt, the STSC could still benefit from sales tax revenues.
Deals can struggle occasionally and there was a lot of new paper coming onto the local debt market at the time, but the yield premium of STSC bonds over benchmark Triple-A bonds has been widening.
Investors were getting twitchy.
I wonder why (not really).
Singh:
Tensions between Chicago Mayor Brandon Johnson and the city council are growing over how to close next year’s nearly $1.2 billion deficit. On Monday, the council’s finance committee rejected Johnson’s revenue plan, thwarting his budget proposal as the first-term mayor wants to levy new and higher taxes on companies and the ultra-rich.
“The city’s current budget issues combined with soft market technicals from recent outflows did result in slightly wider levels which just shows that you can’t ever really insulate a bond from underlying fundamentals no matter how hard you try,” said Dora Lee, director of research for Belle Haven Investments, which owns Chicago general obligation and sales-tax bonds among its approximately $22.9 billion of muni assets.
And here’s John McGinnis in the Manhattan Institute’s City Journal:
[Chicago Mayor Brandon] Johnson’s challenge was to balance a city budget that is more than $1 billion out of whack. He blames the city’s plight on Donald Trump, though reduced federal grants constitute only a tiny portion of the deficit. In fact, the city’s red ink flows from the loss of federal subsidies designed to combat a pandemic that ended years ago, as well as from structural imbalances caused by a large workforce, whose pensions and wages are higher than necessary.
New taxes on business dominate Johnson’s proposals, showing that the mayor is indifferent to Chicago’s greatest need—attracting more businesses to increase economic growth. The most obnoxious is a $21 per employee per month “Community Safety Surcharge” on companies with more than 100 workers. Few other major cities impose such a tax. Of those that do, Chicago’s would be the highest.
Johnson touts his proposal as a tax on the “ultrawealthy,” but it will drive away new businesses and discourage existing ones from hiring more Chicagoans, including low-income workers. Mayor Rahm Emanuel’s elimination of the previous $4 per employee per month head tax was widely hailed as showing employers that the city was open for business. Johnson seems determined to send the opposite message.
The mayor’s budget also proposes raising the personal property lease tax on businesses from 11 percent to 14 percent. This tax hits any leased factors of production that a firm uses to provide its own products and services.
While other cities levy similar taxes, 11 percent is already higher than the rate in almost all of them; 14 percent is uniquely burdensome. Chicago services aren’t so great that the city can afford to price itself out of the market.
To balance a substantial portion of the budget, Johnson has also raided Tax Increment Financing funds. These funds accumulate over time from the city’s sales tax to support capital projects in specific districts. They’re designed to fund capital improvements; Johnson is using them for operational expenses.
And speaking of nervous bond investors, Veronique de Rugy has been writing about what will happen when the Social Security and Medicare Trust Funds run out of money, two bombs currently set to explode in the early 2030s. What to do? De Rugy sets out a number of options, some less politically painful than others. Unsurprisingly, she reckons that whoever is in charge in Washington at the time will shy away from pain, or, to put it more accurately, short-term pain:
Among longtime Washington hands, the conventional wisdom is that legislators will take the easy route: preserve every benefit, avoid serious tax hikes, and finance the gap entirely with new debt. Benefit cuts are politically unthinkable, and so are large tax increases.
That is probably right, but what would it mean?
De Rugy:
According to the Congressional Budget Office, maintaining all Social Security and Medicare benefits by borrowing would add roughly $115 trillion to the deficit over the next thirty years. That’s $70 trillion in shortfalls and the rest in interest payments. On a real basis, using a 2% real discount rate, the present value of that $70 trillion is on the order of $40 trillion—greater than the current $38 trillion national debt…
The danger, of course, is that Congress will borrow and then be unable or unwilling to repay such a massive amount of debt. A debt crisis will eventually erupt, leading to default or inflation. History has no shortage of examples of other countries’ unsustainable social spending causing debt collapses. It can happen here. And when people see that event coming, we will see a flight from Treasury debt and inflation in its anticipation.
So far, markets do not appear to believe that Congress will simply borrow everything, enact no reforms, and fail to restore fiscal order. If markets did, we would already see the repricing—rising yields, a weaker dollar, or inflation expectations, and inflation itself drifting upward. Surely, as the saying goes, America will do the right thing, even if after trying everything else.
Perhaps.
But like those investors growing wary of STSC debt, are investors in Treasurys beginning to fret? In a Capital Letter from April 2024 entitled “Warning Light Flashing Gold,” I looked at the gold price:
After rising sharply during the financial and eurozone crises (it traded above $1,800/oz in 2011) for the usual “safe haven” reasons, as well as QE-fueled inflation concerns, it drifted quite a bit of the way back. However, [the price of gold] has, with an interruption or two, moved up since September 2018 (when it was trading not far below $1,200). Gold hit $2,000 during Covid-19 (more inflation fears, this time vindicated) before giving up ground again, trading down toward $1,600 in August/September 2022. The price then moved up again, a rise which has been accelerating. Priced at roughly $2,000 in February, gold is now trading at or around $2,400, touching all-time highs in nominal terms.
That was then.
Among the reasons I gave for the increase were the persistence of U.S. inflation, growing geopolitical tension, and increasing worries about the amount of debt that OECD countries were piling up. Were some market players hedging themselves against (or speculating on others doing so) the arrival of “fiscal dominance” in the U.S. and elsewhere by looking for somewhere else to put their money?
“Fiscal dominance” was, as I noted, a concept that had been neatly defined by Charles Calomiris of the St. Louis Fed in 2023 as follows:
The possibility that the accumulation of government debt and continuing government deficits can produce increases in inflation that “dominate” central bank intentions to keep inflation low.
“To put it bluntly,” I wrote, “it refers to a situation in which a country’s finances have deteriorated so badly that its central bank can no longer keep control.” Calomiris had warned that “the prospect of this occurring soon in the United States is no longer far-fetched.”
I returned to Calomiris in the most recent Capital Letter, quoting among other passages from 2023 this:
[I]f global real interest rates returned tomorrow to their historical average of roughly 2 percent, given the existing level of US government debt and large continuing projected deficits, the US would likely experience an immediate fiscal dominance problem. Even if interest rates remain substantially below their historical average, if projected deficits occur as predicted, there is a significant possibility of a fiscal dominance problem within the next decade.
The moment of crisis then occurs “when the bond market begins to believe that government interest-bearing debt is beyond the ceiling of feasibility,” a moment brought closer as the interest rate needed to attract buyers moves up, a process that cannot continue indefinitely. At some point, a government bond auction will “fail” in the sense that the interest rate required by the market on a new bond offering is so high that the government withdraws the offering and turns to money printing as its alternative.
And so we come back (sort of) to that Chicago bond deal or, far more ominously, to De Rugy’s warning of a “flight from Treasury debt.”
Gold is now trading at about $4,115, off its recent dollar peak of $4,350, but far above April 2024’s $2,400.
This has triggered talk of the “debasement trade,” the search by investors for alternate safe havens for their capital due to the danger that governments will not only fail to tackle their debt, but attempt (essentially) to inflate a good portion of it away.
Writing in the British left-of-center magazine, the New Statesman, Will Dunn introduced his readers to the “bond vigilantes,” a concept that probably came as a shock to some of them. Readers of Capital Matters are better informed, but some may not be aware that the term “bond vigilantes” (which was long predated by the phenomenon) is attributed to economist Ed Yardeni.
As historian Adam Tooze explained some years ago:
“Bond Investors Are The Economy’s Bond Vigilantes”, Yardeni once declared. “So if the fiscal and monetary authorities won’t regulate the economy, the bond investors will. The economy will be run by vigilantes in the credit markets.” As Yardeni later spelled out: “By vigilantes, I mean investors who watch over policies to determine whether they are good or bad for bond investors … If the government enacts policies that seem likely to reignite inflation”, Yardeni elaborated, “the vigilantes can step in to restore law and order to the markets and the economy.”
Scott Sumner in EconLib elaborates:
This is an example of reasoning from a price change. If bond traders fear that government policies are likely to lead to higher inflation, this may result in higher interest rates (via the Fisher effect). But higher interest rates due to the Fisher effect are not a contractionary policy. In order to prevent… inflation from occurring, the government must stop engaging in inflationary policies. Bond vigilantes won’t solve the problem.
This is true, but their presence (evidenced by rising yields) can be a useful warning sign that trouble may lie ahead. If bond investors (who are de facto lenders or buyers of loans), believe that a country is borrowing too much and/or that its inflation rate is accelerating, they will want a higher interest rate in return for lending it their money. A prudent government would do well to heed the signal contained in that rising yield. Another important price signal is relative interest rates. If a country’s interest rates are moving up when compared with its peers, that is often a bad sign.
One of the many reasons that the eurozone crisis (of which we may be approaching another installment, but more on that some other time) was allowed to brew for so long was that the European Central Bank effectively set the tone for interest rates throughout that zone, a (quasi) one size fits all approach that did not fit the very different economies within the currency union. The idea that all these economies had “converged” was an absurdity in which only a central planner could have believed. The result, reinforced by the simultaneous muffling of the signals that different currencies would once have sent meant that lenders kept on lending too cheaply to countries that needed to cut back, not spend still more. Making matters worse was the unspoken understanding that there would be bailouts if things got too grim. The result was catastrophe.
But back to Will Dunn in the New Statesman:
At a meeting in No 10 in September of this year, one source heard a special adviser ask: “What are gilt yields?” A government whose opponents were destroyed by the bond markets, and which is paying those markets £300m a day in debt interest, apparently employs people who have not taken five minutes to understand how they work.
A gilt is a British government bond.
Britain’s debt/GDP ratio is about 100 percent. Its budget deficit is about 5 percent of GDP.
Earlier this year, Britain’s Labour government, which has a massive parliamentary majority, was unable to push through some welfare spending cuts.
One investor shared with me the analysis they’d done on the cost of the Labour rebellion. With around 100 Labour MPs prepared to rebel against the government when it attempts fiscal consolidation, they thought it was reasonable to expect that this would add 75 basis points (or three quarters of a percentage point) to the interest on government debt. Over the course of the parliament, they said, this works out to an additional premium on debt of £1bn per rebel MP.
What these rebel MPs fail to understand, the investor said, is that “the role of ministers and chancellors and MPs has changed, because anyone could be speaking to the markets.” There is now a much greater potential for an MP or minister to “say the wrong thing” and incur a market reaction, they told me. “We’ve never been in that scenario before, really, as a country, where that much scrutiny has been placed on people with no training or background… It’s like a child playing with a nuclear reactor.”
Despite James Carville’s quote (“I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody), the U.S. is, due to its economic and military strength, somewhat immune from bond vigilante pressure.
As I explained the other day:
The dollar, and by extension, Treasuries typically benefit from being, as one senator once put it, the healthiest horse in the glue factory. And so it is less surprising than it might seem that, for all the recent turbulence, foreign ownership of treasuries has increased. Most of the other “horses” are it appears even closer to, so to speak, their sticky end. The euro, for example, is a fundamentally flawed currency, and many EU states are heavily indebted. Japan is battling inflation, and its debt/GDP ratio is over 200 percent. Crypto currencies are what they are (opinions differ). The problem with the Swiss Franc (which has trended up against the dollar for years) is that it is too illiquid (there are not enough Swiss Francs around). The problem with the offshore yuan? Do I really have to explain?
In some respects, this blessing has also been a curse. It has allowed the U.S. to pay (relatively) little attention to the bond vigilantes and to borrow (and to build up unfunded liabilities, such, soon, as Medicare and Social Security) to a degree that is far from prudent.
In the end there will be a reckoning.
Read original article:
https://www.nationalreview.com/2025/11/a-warning-from-chicago/amp/
Chicago Schools Come Back to Muni Market in High Yield Rally
Chicago Schools Come Back to Muni Market in High Yield Rally
Chicago’s junk-rated public school district returned to the municipal bond market after a two-year hiatus, with its sale coming as the high-yield market for state and local debt turns positive.
The board of education sold $650 million in bonds Thursday for capital projects, ranging from roof repairs to technology upgrades. The deal is the first by the district, the biggest US issuer of junk muni bonds, since October 2023 and comes on the heels of the board’s passage of a controversial budget.
While spreads of bonds for Chicago Public Schools have widened in secondary trading in recent weeks, the sale lands as returns for the high-yield muni market have improved and bonds have broadly rallied on mounting expectations that the Federal Reserve will cut rates.
“There have been only a few high yield deals coming to market,” said Ryan Ciavarelli, a senior municipal analyst for Belle Haven Investments. “So, from a technical perspective the timing is good to get the attention of market participants.”
From the credit standpoint, however, fiscal challenges for Chicago Public Schools and the city have flared up again, Ciavarelli said.
The penalty on the bonds sold Thursday was higher than on debt with a similar maturity issued two years ago in one of the series, but the level tightened from preliminary pricing on Wednesday. The district sold bonds maturing in 2050 in two series: one with a 6.25% coupon carrying a spread of 149 basis points and the other with a 5.75% coupon, offering a spread of 166 basis points, according to data compiled by Bloomberg.
The broader high yield market may act as a tailwind. Bloomberg’s high-yield muni index is now up 0.9% for the year given that a recovery that started in August accelerated to a sharp rally this week. The index is now up more than 2% in September, which — if gains hold — would be the best month since June 2024, according to data compiled by Bloomberg.
Meanwhile, challenges remain for the fourth-largest US public school district. The Chicago Board of Education late last month approved a budget for the year that started July 1 to close a $734 million deficit. The district is expecting more shortfalls in the coming years.
The district is in the midst of shifting from a seven-member mayor-appointed board to a 21-person fully-elected body in 2027. Currently, the board is split between elected and appointed members. The first elected members took office in January.
As the schools move toward full independence, the city is looking to reduce its financial support. Chicago Mayor Brandon Johnson has been pushing the district to take on a $175 million contribution into a city municipal pension fund that includes non-teacher school employees as he seeks to close a $1.15 billion deficit for next year.
While CPS’s struggles may give some investors pause, many have confidence because the district has fallen on hard times before and found solutions, Ciavarelli said.
“The city, state and board of education have been here before,” he said.
Read original article:
https://www.bloomberg.com/news/articles/2025-09-11/chicago-schools-muni-market-comeback-lands-in-high-yield-rally?sref=dlv6Ue8o
BART Plans $930 Million Muni Bond Sale as Budget Deficits Loom
BART Plans $930 Million Muni Bond Sale as Budget Deficits Loom
One of California’s largest public transit systems is tapping the municipal bond market as it contends with a looming fiscal cliff created by dwindling federal aid and ridership that’s stuck at about half its pre-pandemic level.
San Francisco Bay Area Transit District is selling $930 million of bonds to improve infrastructure and refinance outstanding debt, according to bond documents on MuniOS. The deal is set to price for retail investors on Tuesday.
Proceeds from the sale are intended to help fund a $3.5 billion system renewal project that was approved by voters in 2016. The planned refurbishment includes 90 miles of track upgrades and control system replacements. The bonds are backed by a voter-approved property tax levied within Alameda, Contra Costa, and San Francisco counties.
The transaction is set to include three tranches of general obligation bonds, one for $652 million of tax-exempt bonds, another for $48 million of federal taxable bonds and a third for $230 million of tax-exempt refunding bonds. Moody’s Ratings assigned the bonds a Aa1 rating and Fitch gave them a AAA.
BART, which opened in 1972, has been plagued by fiscal and mechanical challenges since the expiration of pandemic-era federal aid, leaving it vulnerable to dips in rider usage. The agency lost its Aaa rating from Moody’s Ratings in June due to a lack of new sustainable revenue sources to make up for the losses at the farebox. Its projected annual budget deficit has ballooned to $400 million in the upcoming years.
“BART had historically received an outsized portion of its revenue from ridership but has relied on emergency assistance to manage its budget in recent years,” said Christopher Brigati, chief investment officer at SWBC Investment Services. “On a longer-term basis, I am concerned about the steps that can be taken to mitigate this challenge to its historical revenue generating model.”
The Bay Area’s largest train system is currently looking for fresh funding sources. Voters in the counties served by BART will consider a ballot measure in 2026 that would impose a new local sales tax for a period of 10 to 15 years to help balance its budget. If the ballot measure fails, and BART cannot find alternative funding to close its operating deficit for fiscal year 2026-2027, the system might file for chapter 9 bankruptcy, bond documents say.
BART’s chief financial officer, Joseph Beach, said there were $975 million of orders for the bonds on Monday, with 7% of the retail orders coming from the counties where BART operates.
“The institutional orders are also demonstrating a robust appetite for BART bonds,” Beach said. “We believe this reflects substantial confidence in BART’s high investment grade credit.”
The debt’s offering documents include nine pages of risk factors, including potential labor disruptions, earthquakes and changes in federal trade policy.
On top of that, President Donald Trump’s aggressive cost-cutting, opposition to California’s sanctuary laws and ongoing confrontation with Governor Gavin Newsom are casting uncertainty over Federal Transit Administration grants, which are a significant source of funding for the transit system.
Dora Lee, the director of research for Belle Haven Investments, said the agency’s high rating is based more on its solid tax base than its troubled finances. This, she said, “highlights the limitations of relying solely on ratings and the need for investors to come up with their own opinion of the credit.”
Read original article:
https://www.bloomberg.com/news/articles/2025-08-26/bart-plans-930-million-muni-bond-sale-as-budget-deficits-loom?srnd=homepage-europe&sref=dlv6Ue8o
LA Schools, County to Borrow More for Billions in Abuse Payouts
LA Schools, County to Borrow More for Billions in Abuse Payouts
By Maxwell Adler
Los Angeles Unified School District and Los Angeles County plan to take on more debt to cover the mounting costs from a wave of childhood sexual assault settlements, officials said.
Earlier this month, the school district — the second largest in the US — sold $308 million of taxable bonds to pay victims who filed lawsuits after the California legislature made it easier to sue public entities for old abuse cases.
The district is already authorized to borrow $500 million to pay for the settlements, but it will need additional money and plans to seek approval for further debt sales, according to Pedro Salcido, the district’s deputy superintendent for business services and operations.
LA County officials also anticipate selling bonds to help cover the costs of a recent $4 billion settlement with abuse victims, the county’s chief executive, Fesia Davenport said in an interview. She said specific details on how much the county will borrow are not yet available, but that it is likely to be significant enough that it will be a long-term issue for the government’s budget.
“It will require hundreds of millions of dollars over 20 years to repay this debt,” said Davenport. “That will deprive us of the opportunity to do lots of other things.”
The lawsuits are just one of several large expenses hitting governments in the Los Angeles area. The region is still reeling from historic wildfires in January, which have already cost the county at least $1 billion, officials said in April. The Trump administration’s immigration raids, tariff policies and budget cutbacks — in areas like health, housing and education — have also just begun to ripple through municipal finances across the state.
Even against this backdrop, though, there are likely to be sizable ongoing costs from California Assembly Bill 218, a 2019 law that extended the statutes of limitation for claims of childhood sexual assault against public entities. Victims now have 22 years from the time they become adults to sue, rather than eight years previously. The law also lowered the burden of proof required in such cases.
Many cases that resurfaced after the legislation was passed have only recently come to a head in the courts. California’s Financial Crisis and Management Assistance Team warned in a January report that the law will have a substantial and ongoing financial impact on public agencies across the state, likely forcing cuts to programs and services.
LA County approved a $4 billion agreement with victims in April to settle more than 6,800 sexual abuse claims dating back to 1959 that took place in juvenile detention centers and children’s group homes, including the now closed MacLaren Children’s Center.
The deal is the largest ever involving sexual assault claims against a public entity. For reference, the Boy Scouts of America — now Scouting America — reached a 2022 agreement that paid out $2.6 billion to more than 80,000 victims who were abused as children by scout leaders.
The county cited both the wildfires and the sexual assault claims when the board of supervisors voted in April to implement 3% cuts across all departments in the budget for the next fiscal year. This will lead to a shortened swim season at public pools and reductions in the public defenders office and the department of animal care and control, among other rollbacks.
Manageable Costs
S&P Global Ratings, though, said the county’s AAA rating remains unaffected by the settlement, citing the county’s strong reserves, manageable debt load, and broad tax base. The ratings firm expects the county to absorb the cost without a significant hit to financial performance through a mix of budget cuts, reserves, and borrowing.
Dora Lee, the director of research for Belle Haven Investments, said “the recent issuances are manageable for both the county and the school district, but it will crowd out other capital projects that may need debt funding in the future.”
Local governments and other public borrowers have turned to the $4 trillion muni market to fund settlement payments in the past, including high-profile cases involving abuse and environmental harm. Michigan State University sold debt to help cover a $500 million settlement with more than 330 victims of former university doctor Larry Nassar. And in 2021, the state of Michigan tapped investors for roughly $600 million of bonds to finance payouts related to the Flint water crisis.
LA’s school district is currently defending nearly 300 sexual misconduct claims and estimates its liabilities from the cases will exceed $650 million, according to bond documents.
The recently issued bonds from the district represent about a quarter of the total amount the district has borrowed so far this year, according to data compiled by Bloomberg. Proceeds from other sales in the last year were used to repair and modernize existing schools. More than 60% of district campuses are at least 50 years old and there are more than $80 billion “of unfunded school facility and technology needs,” according to a 2024 Board of Education report.
Salcido, the deputy superintendent, said the 2019 law is having “unintended consequences” by imposing costs on current students for the behavior of staff members who are no longer in the system.
“These legal actions, while rooted in rightful grievances, have the potential to bankrupt entire school systems, undermining our ability to serve today’s students and future generations,” Salcido said.
Read original article:
https://www.bloomberg.com/news/articles/2025-07-11/la-schools-county-to-borrow-more-for-billions-in-abuse-payouts?srnd=all&embedded-checkout=true&sref=dlv6Ue8o
The Muni Lowdown - Municipal Musings with Dora Lee
The Muni Lowdown - Municipal Musings with Dora Lee
On the latest episode of the Debtwire Municipals Muni Lowdown podcast, Managing Editor Paul Greaves and Reporter Kunal Kamal speak with Dora Lee, Director of Research at Belle Haven Investments about the outlook for the municipal market.
Dora starts the podcast with an overview of Belle Haven’s investment strategy during this current period of uncertainty in the municipal market.
The discussion shifts to Dora examining the likelihood of the capping or elimination of the muni tax exemption.
Dora then segues into ongoing federal policy shifts and the potential consequences.
Dora provides her thoughts on whether bond pricing is fully capturing burgeoning risks such as cybersecurity and climate change.
The podcast closes with Dora providing her views on the adequacy of disclosure by municipal issuers.
NYC’s Bond Investors Calm Wall Street Anxiety Over Mamdani Rise
NYC’s Bond Investors Calm Wall Street Anxiety Over Mamdani Rise
By Martin Z Braun and Sri Taylor
New York City mayoral hopeful Zohran Mamdani has rattled Wall Street with his plans to raise taxes on the rich, freeze rents and boost spending to pay for free childcare and education at the city’s public universities.
Still, bond investors are tempering concerns for now. That’s because many of Mamdani’s core polices — like hiking levies on corporations, providing free bus service and borrowing an additional $70 billion for affordable housing — are outside of his direct jurisdiction, requiring approval from state or local leaders that have a range of ideologies.
“While he has big plans, the practical realities of governance, legal constraints, market reactions, and political opposition are likely to temper the extent to which his agenda can be realized and, therefore, limit the fallout such full realization would have on credit quality,” said Richard Schwam, a municipal credit analyst at AllianceBernstein Holding LP, which holds New York City bonds.
There’s also the general election in November where Mamdani, who is poised to win the Democratic nomination for mayor, will have to beat Republican and Independent candidates, including current mayor Eric Adams.
Those hurdles are limiting investors’ concern that Mamdani’s agenda will materially impact the city’s credit quality. Plans for aggressive new debt or drastic fiscal changes could spark concern over ratings downgrades or higher borrowing costs.
The risk premium on New York City’s debt barely budged following the election results. Spreads on the city’s general obligation bonds maturing in 10 years widened by 2 basis points Wednesday, according to data compiled by Bloomberg. The city, which spends about $7.7 billion annually for debt service, had about $104 billion of outstanding debt as of June 30, 2024.
Not all markets were as placid. Shares of companies linked to real estate in the city fell on the same day as analysts fear Mamdani’s agenda could stifle corporate investment and hiring, reducing demand for office leasing. Meanwhile, a rent-freeze may force property owners to put off maintenance, hastening disrepair.
Budget Picture
New York City and state are facing billions of dollars in federal spending cuts for programs like Medicaid, housing vouchers and food stamps, and their ability to keep funding those programs at current levels, much less spend more, will be challenging. The city also has to comply with a state law mandating smaller class sizes, which may require spending an additional $1.9 billion for teachers and billions more for new class rooms.
“The ideas of things like free city buses and lower cost housing are not free from a credit perspective because they have to be paid for,” said Dan Solender, head of municipals at Lord Abbett & Co.
New York State Comptroller Thomas DiNapoli has warned that the state’s high taxes may already be pushing wealthy residents out of the city, providing little wiggle room for the state to raise more revenue during an economic slowdown.
“While people and businesses do not flock to NYC because it is a tax haven, there could be a point where the tax burden is too much, resulting in businesses leaving and city revenues declining,” said Howard Cure, director of municipal bond research at Evercore Wealth Management.
To be sure, New York City is becoming increasingly unaffordable for many residents and Mamdani’s social-media driven campaign centered on reducing that burden. His website, branded with flashy signage, articulates a simple mission: “Zohran Mamdani is running for Mayor to lower the cost of living for working class New Yorkers.”
The message energized the electorate, particularly young people. Mamdani could harness that enthusiasm to put pressure on lawmakers.
When former progressive Democratic Mayor Bill de Blasio took office in 2014, he proposed raising taxes on the rich to fund pre-kindergarten for four-year-olds. Former Governor Andrew Cuomo, who conceded the Democratic primary to Mamdani, successfully resisted a tax increase, but the state legislature agreed to fund the program without raising taxes.
“Investors should take comfort in the myriad of fiscal controls that are embedded into law to enforce fiscal discipline upon the city,” said Dora Lee, director of research at Belle Haven Investments.
— With assistance from Amanda Albright
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https://www.bloomberg.com/news/articles/2025-06-26/nyc-s-bond-investors-calm-wall-street-anxiety-over-mamdani-rise?sref=dlv6Ue8o
The Largest Money Managers 2025
The Largest Money Managers 2025
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https://www.pionline.com/largest-money-managers/2025-full-list
US Public Transit Systems See Ratings Hit as Fiscal Woes Mount
US Public Transit Systems See Ratings Hit as Fiscal Woes Mount
By Sri Taylor
US mass-transit agencies are struggling with weak ridership numbers and dwindling pandemic aid, putting pressure on their credit ratings.
The San Francisco Bay Area Rapid Transit District lost its Aaa rating from Moody's due to a projected budget deficit of up to $400 million in the upcoming fiscal years.
Transit authorities in major US cities face a fiscal shortfall of up to $6 billion, and may consider service cuts, fare hikes, or layoffs if they can't secure long-term funding.
US mass-transit agencies are already grappling with weak ridership numbers and evaporating pandemic aid. Now, their credit ratings are under pressure.
The San Francisco Bay Area Rapid Transit District was the latest to take a hit when it lost its Aaa rating from Moody’s Ratings last week. The system’s operations depend heavily on fares, and the dip in daily usage — which has not recovered to pre-pandemic levels — has ballooned its projected budget deficit to as much as $400 million in the upcoming fiscal years.
Moody’s downgrade to Aa1 was spurred by that outlook, as well as the lack of “a new, sustainable revenue source or significant expenditure reductions,” analysts led by Madeline Atkins wrote on June 5. BART has $3.1 billion of debt outstanding, approximately $2.3 billion of which is general obligation debt, Atkins said.
Transit authorities in major US cities collectively face a fiscal shortfall of as much as $6 billion. Service cuts, fare hikes or layoffs could be considered as soon as July 1 — the start of the next fiscal year — if agencies can’t secure enough long-term funding. Also, lower credit ratings generally portend higher borrowing costs when an issuer seeks to tap the bond market. Investors typically require higher yields to hold debt after a downgrade.
BART Chief Financial Officer Joseph Beach said in a June 5 letter that he expects the rating change to have minimal impact on its future bond sales.
Moody’s revised its outlook on the Chicago Transit’s Authority’s debt to negative earlier this year, saying it doesn’t expect that the system will close its $539 million operating deficit with spending cuts and fare increases alone. Kroll Bond Rating Agency also cut its outlook on CTA’s debt to negative from stable in April. And Fitch put the Washington Metropolitan Area Transit Authority — the system that shuttles riders around the nation’s capital — on rating watch negative after doing the same for Washington, DC a few days earlier in March.
More downgrades could be on the way, according to Dora Lee, director of research at Belle Haven Investments. Financial pressures are mounting for systems such as the Southeastern Pennsylvania Transportation Authority (SEPTA) — a Philadelphia mass-transit hub that is facing a $213 million deficit in fiscal 2026 — and the Massachusetts Bay Transportation Authority, which runs the cash-strapped system in Boston.
More than trains
S&P Global Ratings revised the outlook to negative from stable on bonds for the Maryland Transportation Authority, which operates the Francis Scott Key Bridge in Baltimore. The roughly $1.7 billion cost of rebuilding the vital artery following its collapse coupled with a potential ease in federal support could lead to financial issues, and potentially, a downgrade.
The revision came as “project cost escalations and uncertain timing of future federal reimbursements weaken the authority’s ability to sustain financial metrics at levels comparable with those of peers,” said S&P analyst Andrew Stafford. There’s a one-in-three chance of a rating cut if risks materialize and funds worsen, he added.
Transit officials are trying to figure out budget solutions. SEPTA officials will hold a board meeting later this month to discuss what’s at stake. Leaders of Chicago’s three transit systems will meet throughout June after state legislators failed to pass a key transit package.
“Stakeholders weren’t willing to increase funding when they were flush with record revenue growth in the past couple of years knowing that this fiscal cliff was coming,” said Lee, of Belle Haven. “How likely will they be to step in and support these systems when they’re facing budget shortfalls and uncertain federal aid?”
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https://www.bloomberg.com/news/articles/2025-06-10/us-public-transit-systems-see-ratings-hit-as-fiscal-woes-mount?utm_source=website&utm_medium=share&utm_campaign=copy
LA Utility's First Bond Sale Since Wildfires
LA Utility's First Bond Sale Since Wildfires
The Los Angeles Department of Water and Power is returning to the municipal bond market with a $1 billion offering, roughly three months after shelving a sale in the immediate wake of historic wildfires that began burning in Southern California on Jan 7. Belle Haven Investments Partner Director of Research Dora Lee has more on the story. (Source: Bloomberg)
Watch the full clip here: LA Utility's First Bond Sale Since Wildfires
LA Utility Returns to Muni Market for First Time Since Wildfires
LA Utility Returns to Muni Market for First Time Since Wildfires
The Los Angeles Department of Water and Power is returning to the municipal bond market with a $1 billion offering, roughly three months after shelving a sale in the immediate wake of historic wildfires that began burning in Southern California on Jan 7.
The power system revenue bonds are set to price for retail investors on April 30, a day before institutional buyers. The department will use proceeds from the sale to ramp up its capital investment program and refinance some outstanding debt.
The issue is shaping up to be a major test of how muni investors view climate risk. The utility’s bonds used to trade better than AAA credits, though the wildfires raised the prospect it will be facing higher costs. The utility will likely need to increase infrastructure spending and it could owe billions in damages as the cause of the flames is still unknown. The department can’t rely on the safety net that investor-owned utilities have through California’s wildfire insurance fund, which would mean higher rates for customers and credit strains for bondholders.
“I’m eager to see whether climate risk gets priced in,” said Tom Doe, founder and president of Municipal Market Analytics, an independent research firm. He said that the muni market tends to shake off climate risk, typically considering the likelihood of default instead. “Even with the recent volatility, we’ve had demand for California bonds because there’s such great demand from high net-worth investors.”
A spokesperson for the Los Angeles Department of Water and Power declined to comment on the upcoming bond sale.
Following the wildfires, prices on power system bonds sold by the utility dropped, and their spreads widened, signaling investors were unloading the securities. Spreads have since tightened but the average gap between benchmark securities and LADWP debt due in 2045 is 137 basis points, up from as little as 95 basis points in December. The spread on an LADWP bond due in 2033 widened to an average of 87 basis points on Friday, compared to -18 on Jan. 2.
The fires also exposed vulnerabilities in LADWP infrastructure and opened up the utility to litigation stemming from its response to the disaster. LADWP faces at least a dozen lawsuits filed related to the Palisades Fire. Legal experts are suggesting the municipal utility may be held accountable under a legal argument called inverse condemnation, which could pave the way for property owners to collect damages from the utility for leaving fire crews without enough water.
S&P Global Ratings lowered its rating on municipal bonds sold by LADWP two notches to A from AA- in January, and warned that more downgrades may be ahead once litigation is complete. Fitch Ratings also downgraded LADWP’s water system revenue bonds to AA- from AA, citing increased liability risk tied to wildfires and limited financial headroom to absorb additional costs.
The utility has a bevy of capital needs tied to a 2022 blueprint aimed at transitioning its power portfolio toward renewable energy, strengthening grid resilience, and adapting to climate-related threats.
“There hasn’t been any ‘turning point’ for climate risk in terms of significant price concessions so far,” said Dora Lee, director of research for Belle Haven Investments. “Not just for LADWP but for other climate prone areas as well. You see places devastated by hurricanes repeatedly that come to market with little change if anything.”
Lee says a web of safety nets have supported climate prone credits during recovery, warding off price concessions.
The new bonds are rated Aa2 by Moody’s Ratings and AA- by Fitch, according to bond documents. Both ratings carry negative outlooks, signaling the possibility of future downgrades.
The negative outlook reflects Fitch’s “view that wildfire credit pressures remain, including the potential for a rating downgrade if LADWP equipment is found to have ignited the Palisades wildfire or if LADWP’s protocols are found to have been a contributing factor,” analysts wrote in a April report.
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https://www.bloomberg.com/news/articles/2025-04-29/la-utility-returns-to-muni-market-for-first-time-since-wildfires?sref=dlv6Ue8o
Belle Haven Investments Named PSN Top Guns "Manager of the Decade" FIVE Times
Brightline West's $2.5 billion bond pricing 'too attractive to ignore'
Brightline West's $2.5 billion bond pricing 'too attractive to ignore'
Brightline West, the Las Vegas- Los Angeles bullet train, hit the market Thursday with $2.5 billion of unrated private activity bonds that sported nearly double-digit yields in what's likely to be the largest high-yield municipal bond borrowing of the year.
The deal was structured with a single $2 billion CUSIP, a relatively rare structure in the municipal market that investors said would enhance its liquidity. More than $3.4 billion orders came in for the $2.5 billion deal, with 75 accounts participating, according to two buyside sources.
"To compare this deal with other opportunities in the high-yield market, you're getting more liquid trading bonds, an excellent yield and good sponsorship with a very good economic premise behind it," said Jim Lyman, senior vice president at Belle Haven Investments, which participated in the deal.
All the bonds featured 9.5% coupons, were priced at a discount and are callable at premium, noted a high-yield portfolio manager who asked to remain anonymous. "They made it too attractive to ignore," the manager said, calling the yields and structure "eye-popping."
"It gives you coupon, yield performance, a lien on an exciting project, liquidity, it's lowish on the duration front, and government support and support from the equity sponsor," the manager said. "Those are lot of bells and whistles."
The $2 billion California tranche was bumped four basis points between preliminary and final pricing, according to traders.
DesertXpress Enterprises LLC, which does business as Brightline West and is owned by Fortress Investment Group, aims to own and operate the nation's first privately-owned, all-electric high-speed train. The most recent timeline has it running by December 2028, a date that misses the original target of opening in time for the Los Angeles Olympics.
The $2.5 billion borrowing marks the first step toward full financing of the $12.4 billion train. The team now has 180 days to secure a $6 billion bank facility, which will be senior to the A s and which may include a $1.5 billion tax-exempt tranche, as well as additional equity. If the company fails to secure the additional funds, there will be a mandatory bond redemption at 101, according to an investor presentation accompanying preliminary bond documents.
The sponsor has a total of $4.5 billion of private activity bond allocation, including $2.5 billion that expires at the end of March and $2 billion that will expire at the end of December.
Morgan Stanley, the lead underwriter on all of Brightline West and Brightline Florida financings, was senior manager on a team with eight co-managers. The bank declined comment and Brightline West did not return a request for comment.
In remarkably good timing for the borrowing, the Trump administration singled out the project for praise Thursday as the administration announced it may rescind $4 billion of federal grants for the California high-speed rail line .
"The slow progress by [California High Speed Rail Authority] contrasts with the impressive work of Brightline West to build a high-speed rail system," the U.S. Department of Transportation said in the press release announcing the California probe.
Some investors had been concerned about uncertainties around the Trump administration's approach to federal transportation grants. Brightline West secured a $3 billion federal grant from the iden administration in late 2024 that's the same Federal Railroad Administration grant as the one now the White House may now terminate for California.
The financing team talked with investors and updated bond documents, which note that the Trump administration has already released its first reimbursement of $14 million.
The bond documents mentions under its "risk factors" that the A grant "may not be available to the company and the receipt and use of such grant funds are subject to various conditions and uncertainties."
"Of the $3 billion grant, approximately $2.67 billion has been obligated in the 2022-2025 federal fiscal years and approximately $326 million has been appropriated by Congress under the Infrastructure Investment and Jobs Act as part of an 'advance appropriation' that becomes available for obligation in federal fiscal year 2026," the updated bond documents said.
Lyman said the firm was following the administration's signals closely.
"The California high speed rail train has been mentioned in very negative ways by Trump during this campaign and we were always concerned they would think about all the rail deals in the same way," Lyman said. "As we started to dig deeper, we felt there was clear differentiation between the projects," he said.
"One of the big concerns in the marketplace among all investors was the federal grants being rescinded and there were conversations about the management team about it and we went in depth about how those grants were already funded technically in prior-year Congressional funding agreements, so to rescind it is to break a contract," he added.
Prior to the deal pricing, Jeff Devine, a municipal research analyst at W& Investment Management, said the firm was unlikely to participate.
W& usually participates in "more traditional structures," and some of the deals that have those products aren't "appealing" to the firm, especially with where it is with its separately managed account business, Devine said.
W& took a "hard look" at the Brightline Florida passenger train financing deal from last year and ended up passing on it based on uncertainties around ridership projections and the underlying economics. He added that the backing of Fortress Investment Group was a positive.
Brightline West plans to begin construction early this year. After construction is complete, the company may seek investment-grade ratings for all the outstanding tax-exempt bonds, similar to last year's Brightline Florida deal.
"They want this deal to be the cheapest deal they ever bring to the market for this name," said the high-yield portfolio manager. "Each subsequent deal they'd like to bring at a lower yield and then eventually get a really good refinancing activity and credit rating at the right point in time."
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https://www.bondbuyer.com/news/brightline-west-sells-2-5-billion-of-unrated-bonds-at-prices-too-attractive-to-ignore