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Abstract: 

Confronted by fast-changing political, legal, and economic dynamics and the overhang of a broader interpretation of debt and liabilities, municipal bondholders are increasingly exposed to new risks and opportunities. This panel examines the mounting burden of direct and indirect liabilities emanating from labor costs and capital needs, including retiree promises and infrastructure, to assess their impact on municipal credit quality, sectors, and individual credits. It asks to what extent bondholders are on a collision course with pensioners and taxpayers and if, in light of the new political environment in Washington, the landscape for federalism and insolvency has changed the potential outcomes for worst-case situations. Richard Ciccarone is president and CEO of Merritt Research Services, LLC, and co-owner/co-publisher of MuniNetGuide.com. Gabriel Petek is managing director at S&P Global Ratings. Thomas Kozlik is managing director and municipal strategist at PNC. Steven Malanga is George M. Yeager Fellow/Senior Editor at the Manhattan Institute/City Journal. This discussion is based on the authors’ presentations in the panel titled The New Municipal Debt Reality at the 34th Annual Conference of the National Federation of Municipal Analysts held in Washington, DC, May 16–19, 2017.

Keywords: Labor costs and capital needs, municipal bond risk and opportunities, new political environment, federalism, municipal insolvency

Affiliations:  1: Merritt Research Services, LLC; 2: S&P Global Ratings; 3: PNC; 4: Manhattan Institute.