Chris Christie is reckoning with a cracked crystal ball, the municipal-bond market is following Economics 101, and Detroit -- trying to rise from the ashes -- is taking stock of its ruins.
On May 28, New Jersey’s State Investment Council, which oversees the pension, holds its first meeting since Governor Christie decided to cut payments into the underfunded retirement system to solve a more immediate concern: an $875 million shortfall in the budget for the year that ends next month. He cited income-tax receipts falling short of projections.
Blame the economists.
More than half a dozen other states, including Connecticut, Pennsylvania and North Carolina in recent weeks found that hundreds of millions of expected money never arrived. One reason: As tax increases loomed at the end of 2012, households sold off stocks and collected bonuses early before higher rates kicked in. Income-tax receipts soared in 2013. While states knew that wouldn’t be repeated, some are still being caught off guard.
Recession shock and a political shift toward fiscal restraint caused the municipal-securities market to shrink by $100.9 billion from 2011 through the end of last year, according to the Federal Reserve Board’s figures. It’s continuing. New issues are down 28 percent this year.
With money flowing into muni mutual funds, the result has been predictable. Last week, 30-year muni yields slid 0.01 percentage points to 3.4 percent, an 11 month low.
Leading this week’s bond sales: Chicago’s Midway International Airport sells about $784 million; the Massachusetts Water Pollution Abatement Trust offers $561 million of AAA debt; and Metropolitan Washington Airports Authority, which runs the capital’s two major airports, is set to raise $542 million.
The real-estate market has been a bright spot for cities and counties, as rising prices rebuild property-tax collections hammered by the housing bubble’s bust. A clue to where tax bases are headed: The S&P/Case-Shiller index of property values in 20 cities, which is scheduled for release today.
Detroit, a bankrupt postcard of post-industrial ruin, is still awaiting a rebound. Last week, the U.S. Census Bureau reported that Detroit lost 9,881 residents in the year ending July 1, 2013, leaving it with a population of about 689,000, fewer than Austin, Texas, Charlotte, North Carolina, or Columbus, Ohio.
That implosion to a fraction of its 1950 heyday has left much of the city a ghost town. Just how much is unclear. So workers from a blight-removal task force fanned out, armed with tablet computers, counting its ruins.
Today, the task force is set to release a census of the city’s decay, a map of what the city wants to eradicate.
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