Category / bonds

by Hoosier Econ

Angie’s List Inc. is Perfect Example of Crony Capitalists

Angie’s List Inc.recently announced they put their Indianapolis project on hold due to the new RFRA law signed by Indiana Governor Mike Pence. This company has been bleeding money for quite some time and just went to the state begging for $18.5 million in public assistance. Here is snapshot I took this morning of how bad the stock has dropped in one year:
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Overall Angie’s List announcement on this matter is more desperation than practical. Crony capitalist companies like Angie’s List use tactics like this to hedge their bets in order to get more money out lawmakers then standing up for some social issue.

by Hoosier Econ

U.S. Government Hits Debt Limit on March 16th

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United States Government spends so much money these days that the debt is reaching its ceiling again. Do not expect Republicans put much of a fight up in stopping any raises as they usually join Democrats in governments spending addiction.

Via CNBC –

Unless Congress takes action, the U.S. will hit its debt limit on Mar. 16, but would begin taking “extraordinary measures” to finance the government on a temporary basis, according to the U.S. Treasury.
In a Friday morning letter to House Speaker John Boehner and other House and Senate leaders, Treasury Secretary Jack Lew said that his office will be forced to suspend the issuance of State and Local Government Series securities on Mar. 13 unless the debt limit is raised.

“Accordingly, I respectfully ask Congress to raise the debt limit as soon as possible,” Lew wrote in his letter.

The Congressional Budget Office said this week that if Congress does not raise the federal debt limit, the Treasury Department will exhaust all of its borrowing capacity and run out of cash in October or November, slightly later than a previous forecast.

by Hoosier Econ

City of Chicago Downgraded by Moody’s

RahmEmanuel

Via Economic Policy Journal:

Moody’s Investors Service has downgraded Chicago’s debt rating, citing its overwhelming pension burden. Moody’s dropped the city’s rating to Baa2.

A rating of Baa2 is eight notches below the highest debt rating of Aaa.

Moody’s said in its statement its outlook for the city remains negative. A drop of two more notches would make mean the city’s bonds would become“junk” bonds.

“We strongly disagree with Moody’s decision to reduce the city’s credit rating and would note that Moody’s has been consistently and substantially out of step with the other rating agencies, ignoring the progress that has been achieved,” a spokeswoman for Mayor Rahm Emanuel, Kelley Quinn, said in a statement.

Chicago has more than $8 billion in taxpayer-backed general obligation debt, as well as roughly $800 million in additional bonds backed by sales tax and motor fuel tax revenues.

by Hoosier Econ

Canada Investing in Indiana’s I-69 Project

Indiana currently is in the middle of the I-69 Highway project. Much of the financing for “Phase 5” made history but many didn’t take notice of why.

The I-69 Section 5 project will upgrade 21 miles of SR 37 (an existing four-lane divided highway) between Bloomington and Martinsville, Indiana to full Interstate standards. The $325 million project includes four new interchanges and four new overpasses, in addition to improvements at existing interchanges and additional travel lanes in urban areas along the corridor.

In April 2014 Canada’s Public Sector Pension Investment Board (which also holds a minority equity stake in Isolux Infrastructure) took a 49 percent equity stake in the concession company through its affiliate Infra-PSP Canada; this represents the first upfront direct investment in a U.S. P3 project by an international public pension fund. The partners reached financial close in July 2014, and construction is scheduled to take 28 months, with the project slated to open by the end of 2016.


JD Supra Advisor noted foreign investment in U.S. infrastructure projects like Indiana is a test run and stability is key for any future investments.

Given the long term nature of a P3 investment, political and regulatory stability is essential to encouraging investment. For overseas investors in the US market, this will require confidence that there is political and public acceptance of private sector investment in infrastructure.

by Hoosier Econ

Illinois Facing Debt Payments

Illinois is starting to get hit with rising interest payments on debt borrowed. Illinois Policy points out how compound interest is a vicious beast once it takes hold:

According to the fiscal year 2015 budget summary from the Commission on Government Forecasting and Accountability the cost of debt service in fiscal year 2015 is nearly $4 billion on outstanding bond debt of nearly $32 billion. The debt service amounts to more than 11 percent of the state’s anticipated revenues for the fiscal year – 11 percent that can’t be used for essential programs.

Illinois will not be the only heavy spending state to start getting hammered on debt payments. But here is how a debt situation gets out of control:

Primarily as a result of these nontraditional uses of bond debt, the state began fiscal year 2015 saddled with $32 billion in bond debt requiring $4 billion, or 11 percent of its general funds budget, to pay the annual debt service. This represents nearly a 400 percent growth in debt service, more than 300 percent growth in outstanding bond debt, and more than 200 percent growth in debt service as a percentage of general revenues since 2002.

by Hoosier Econ

Federal Government Spending For the Next 10 Years

Economics 21 had an interesting graph in their article titled “How to Fix the $960 Billion Budget Deficit”.

Here is how federal government spending will be broken up the next ten years.

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Almost two-thirds of additional spending will be driven by entitlements, primarily Social Security, Medicaid, and Medicare. America’s aging population is the primary contributor to the growth of Social Security and Medicare, while the Affordable Care Act substantially expanded the scope of Medicaid.

Adding interest payments to the budget brings the total increase in the debt from mandatory spending to 85 percent. Spending is projected to grow by $2.3 trillion annually by 2024.

by Hoosier Econ

Indiana City Pays Off Bills and Becomes Debt Free

One city in Indiana is announcing it has no debt. Mishawaka, IN is now claiming it has paid off all its loans and is completely debt free.

Mayor Dave Wood announced today that The City of Mishawaka is debt free! For the first time in over 100 years, Mishawaka begins 2015 with no general obligation bond debt after making final bond payments in late December. The City’s latest bonds, originally issued between 2005-2007 for $12.3 million to finance various projects such as the City’s radio communication system and major park improvements were paid off several years early.

Back in 2012, Mayor Wood announced one of the major initiatives of his administration was the ambitious goal of paying off debt early to becoming debt free as a means of helping to insulate the city against unforeseen circumstances such as economic downturns, emergencies, and state funding source changes. Mayor Wood stated: “The City’s debt free status is not only rare, but it’s an obvious indicator of our ongoing, strong commitment to fiscal responsibility. This was only possible based on our ability to work together as a team. Clearly, this wouldn’t have been possible without the work of our Department Heads and the Common Council.”

You can read the rest here.

by Hoosier Econ

United States YTD Interest on Debt Payments

Via @USGovtInterest Twitter page:

Month of December Interest on Debt payment $86,460,237,565.98

Fiscal YTD payments $118,589,429,039.05

by Hoosier Econ

President Obama’s Coming Budget Showdown

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With President Obama having a disastrous 4 years of losing Democrats in the House and Senate, he will now have to face his opponents in the federal budget ring. The media and his supporters have given him a pass on not getting a budget implemented in the last six years. This year will be different with the House/Senate being revamped with budget conscious members.

Rebecca Shabad at TheHill.com has an excellent timeline of what the President faces in the next coming months regarding the 2016 budget. I suggest taking a look at the article for the detailed write up after each date listed.

February 2: Obama’s budget deadline

February 27: DHS funding runs out

March 15: Debt limit suspension expires

April 1: GOP budget resolution?

September 30: Shutdown deadline

October 1: Fiscal 2016 begins

by Hoosier Econ

New Ponzi Scheme: Invest in Government

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Government wants you to invest in them. President Obama talked of a new investment fund in the past and now, without consent of Congress, has started it up through the Treasury Department. Here is more from the Wall Street Journal:

A form of Roth Individual Retirement Account that allows people to save after-tax dollars and watch them grow tax-free until retirement, the new myRA offers a single investment option. It’s a private version of the G Fund that is available to federal workers and has lately been delivering annual returns of about 2% on its portfolio of Treasury securities.

Government is guaranteeing no fees to the investor. That is political code for the taxpayer will subsidize it.

Treasury is funding the program out of the budget for its Bureau of the Fiscal Service. The assertion here is that existing law allows this part of the Treasury to hire financial agents as part of its mission to efficiently finance the federal government.
Taxpayers are covering the costs, though their elected representatives in Congress never voted to create the program. So far Treasury also hasn’t told us the fees it is paying Comerica.