Joseph Krist

Publisher

MTA

For a credit which has not received much good news in the last 2 ½ years, it will take what it can get. What it gets this week is a maintained rating of A3 from Moody’s with a stable outlook. The rating reflects “the system’s essential service to a vast and economically robust service area and strong political and financial support from New York State, New York City and the Government of the United States of America, which have been instrumental in supporting the credit through the coronavirus pandemic and recovery.

The rationale for why we have had concerns about the credit for some time are reflected in Moody’s comments. “Due to the structural increase in remote work, MTA’s forecast for its “new normal” ridership level has dropped to 80% of pre-COVID levels by FY2026. As a result, MTA’s large structural budget gap will remain 16% of budget, and the authority will exhaust its federal stimulus aid a year earlier than previously forecasted.

In addition, budget gaps could grow if ridership recovery underperforms, future fare increases are deferred or canceled, upcoming collective bargaining agreements exceed plan, and/or high inflation or a weakening economy depress dedicated tax collections. MTA’s high leverage position will remain well-above pre-COVID levels due to reduced revenues and new borrowing, and debt service costs will grow steadily to meet substantial capital and debt plans.”

The rating news comes as MTA reaches a post-pandemic high in ridership. Subway and bus ridership is roughly 60 percent of pre-pandemic levels on the weekdays. The LIRR and Metro-North commuter rail lines report daily ridership at 200,000 and weekend ridership is at 90% of pre-pandemic levels. At the same time, 1 million vehicles traveling on MTA bridges and tunnels on Friday Sept. 16 which puts the use of those facilities above 2019 levels.

Over the next 24 months while MTA draws down its remaining federal aid, some policy decisions will highlight a real dilemma for the Authority. New York is the only major metro system in the world which provides 24-hour service. Whenever the issue is raised it is usually concurrent with budget concerns for MTA. The reality is that a significant segment of lower income employment is held by people who rely on mass transit to get them to and from night shifts.

That is not going to change regardless of daytime office attendance. So, in deciding how to achieve long-term cost reduction, it will walk a fine line as it seeks to reduce service without hurting employment where it matters the most. The politics will reflect the fact that the same working class cohort which rides the subway at night is the same class cohort which was deemed “essential” during the pandemic.

D.C. TRANSIT EXPERIMENT

Over the last several years, the District of Columbia has undertaken a number of efforts to address concerns over traffic as well as issues related to the Metro. On traffic, the City established a program which linked traditional taxis with city employees. It was intended to reduce the size of the fleet of city cars and traffic while providing support to the taxi community impacted by Uber and Lyft. Another program established loading/drop off zones in the evening hours for Ubers and Lyfts around clubs and the like.

The operating issues which have plagued the Metro are well known and the process of reintegrating idled rolling stock is underway. Those issues have made pandemic recovery all the more difficult and limited demand and ridership. To stimulate demand, a bill has been introduced to offer direct payments to Metro passengers. It would provide a monthly $100 subsidy to D.C. residents to be used on Metro, building on the existing Kids Ride Free program, which serves more than 50,000 D.C. school children on an annual basis. 

Qualifying residents would get the initial $100 subsidy, and get monthly installments thereafter to keep them at that level. (So, if a rider only spent $25 on Metro in a given month, they would get $25 as a subsidy the following month to bring them back to $100.) Any expenses above the monthly subsidy would have to be covered by the user. According to the council committee analysis, the $100 a month would cover the transit needs of 92% of adult users in the city.

The city’s chief financial officer has estimated the cost of the subsidies at $373 million for the first four years. The council estimates that 78% of D.C. residents do not currently receive any transit subsidies from their employer.  Federal employees already get transit vouchers so they do not qualify. The concern over the program has to do with the issue of funding. The legislation says the costs will be covered by the additional (and unexpected) revenue that D.C. has been taking on a yearly basis, the committee report also concedes it is “by no means a predictable funding source” as federal pandemic funding runs out.

It’s another example of the impact of federal funding for pandemic-related issues which has allowed a short-term condition to become a long-term assumption. The bill is based in part on an assumption of steadily growing District revenues even in the face of a recession. That and the full draw down on pandemic aid would create real fiscal pressure.

AUTOMATION COMES TO PRISON

When one talks about automation it is usually about the negative impact on employment. The pandemic changed the view of a lot of people about the work they did, where they did it, and for how much pay. That phenomenon is being seen throughout the country as businesses and governments cope with new attitudes towards in-person work. Help wanted signs are everywhere.

The latest sector to experience the phenomenon is the field of corrections. Most of the reporting one sees in this sector revolves around efforts by usually rural localities to keep the local state prison open and providing secure jobs with pensions and benefits. As incarceration rates fall, the need for some facilities no longer exists and corrections officers lose their jobs.

Now changing attitudes towards the nature and value of corrections jobs is causing a rethink among potential employees. The situation is leading to understaffing of the guard function. It is estimated that some states see 25% of their corrections jobs unfilled. It is a combination of the nature of the work and improving pay at other jobs. In some jurisdictions, higher minimum wage requirements have raised wages such that they are becoming competitive with jobs like those in corrections.

So, what are states to do? Florida has “temporarily” closed three prisons. Nevada is taking a unique approach based on technology.  The Nevada Department of Corrections is seeking funding for the use of drones and surveillance bracelets to minimize the need for a physical presence. It is part of a plan called “Overwatch”. Ultimately through the use of technology, the DOC hopes that a centralized surveillance system could be established which would allow limited staff to see activity inside housing units and outdoor areas at facilities throughout the state.

Other states are taking a more traditional approach. Nebraska raised an officer’s typical annual salary from $41,600 to $58,240, under a 2021 law.  Pay matters in places like West Virginia where salaries for corrections officers are among the lowest in the country. Corrections officers in West Virginia currently start at a salary of $33,214, which is lower than the neighboring states of Virginia ($34,380), Ohio ($37,630), Pennsylvania ($40,270), and Maryland ($43,370). West Virginia estimates that it is short 1,000 officers in its system. Gov. Jim Justice declared a state of emergency earlier this year over staffing issues, bringing in 150 National Guard troops to provide support.

While the nature of the job may not be typical, the issue of government wages in a period of inflation is still a problem. It is legitimate to ask what would someone rather due for $15/hour with benefits – load shelves at Home Depot or spend 8 hours + in a state corrections facility? The corrections officer gets $15.97/hour to work in a de facto mental health/corrections system. It’s one example of the realities facing government employers which implies higher costs and revenue demands for taxpayers going forward.

MILEAGE FEE SETBACK

San Diego and its neighboring municipalities announced a wide-ranging plan for transportation in the greater San Diego region. The price tag was $160 billion. It is designed to fund a variety of initiatives through 2050. The plan included the imposition of a “road usage charge.” The fee was planned to be implemented in 2030.

The plan includes building out more than 800 miles of express or “managed” lanes designated for service buses, carpools and toll-paying customers. It also funds the completion of improvements a 70-mile regional bicycle network. Mass transit investment would fund a proposed Purple Line rail project between National City and the San Diego neighborhoods of City Heights, Kearny Mesa and University City. In total, the plan calls for building a 200-mile commuter rail system stretching from the U.S.-Mexico border to downtown San Diego, El Cajon and Oceanside.

Designed to placate as many constituencies with stakes in the rollout of a significant capital construction program, the plan has instead created some unexpected alliances and pitted historical political allies against each other. The plan assumes that voters will approve three half-cent sales tax increases by 2028. The first proposed tax increase under the plan was to be voted on this November.

Interest group politics got in the way. Organized labor and environmental groups supported the plan but they were unable to get enough voters to sign petitions this summer to qualify the first such tax hike for November’s ballot. It seems that “progressive” officials don’t like the idea of removing the usage fee. If that pattern continues, the plan will have a $14 billion hole in the agency’s spending plan. The debate exposed all of the potential political hurdles facing efforts to thwart climate change in the transportation space.

WORKER SHORTAGES IMPACT LOCAL OPERATIONS

The worker shortages plaguing local governments continues to impact operations. A number of transit agencies are having to cut back service as the result of an inability to hire workers. The result has been reduced service in a variety of jurisdictions impacting both local needs as well as long established commuter routes. The latest examples of the problem come from the western US.

The Utah Transit Authority has announced that beginning in December, it will reduce or eliminate service on 20 bus routes in Salt Lake, Davis and Weber counties.  The move reflects the inability of the Authority to attract drivers. The agency is down 85 bus drivers from a roster of 1,200 budgeted positions. That is a vacancy rate of 7%. UTA pays trainees $20 an hour and increases the wage to more than $21 an hour after training. 

In Colorado, the CO Department of Transportation (CDOT) has announced that it will develop housing in an effort to lower the cost of housing for snow plow drivers and other workers. CDOT is current short of some 300 maintenance workers who fill potholes, fix guardrails, and plow snow. The Department is planning to spend $6.5 million on housing projects along the Interstate 70 corridor and in mountain towns. Some of this reflects competition from the wealthy villages for the same workforce at either higher wages or affordable housing.

PORTS

Ports have been at the center of the post-pandemic trade recovery. Volumes have shown steady increases as demand ramped back up for consumer goods. There has been much focus on activities at the West Coast ports especially those at LA and Long Beach. Between labor stoppages, container backups, and issues related to air pollution, the two San Pedro ports have been under pressure. Put all of that together and add US/China trade issues to the mix and changes were bound to occur.

Now, the Port of New York and New Jersey moved 843,191 TEUs (imports + exports) in August, its busiest August ever. The Port of Long Beach and LA were second and third in cargo volume as more trade moved away from the West Coast due to ongoing concerns about labor strikes and lockouts. The Port of Los Angeles ranked third in the nation in August, moving 805,314 total containers. That was 37,877 less than the Port of New York and New Jersey. The Port of Long Beach came in second, moving 806,940 export and import containers.

The Port of Los Angeles diverted 40,000 containers to the Port of Long Beach in August when dockworkers at the Port of LA refused to work at the automated section of APM Terminals, the largest container-handling facility citing safety concerns. An International Longshore and Warehouse Union slowdown is claimed to have resulted in reduced productivity at the Oakland and Seattle-Tacoma ports.

PIPELINE HEADLINES

Officials in 44 Iowa counties have now taken action to express concerns about the three proposed carbon pipelines for the Hawkeye State. The latest counties to do so expressed “concern about training for emergency crews who’d have to respond to pipeline ruptures, as well as potential construction damage to land and drainage.” A second letter from Adair County said that “its board is not opposed to the purpose or construction of the pipeline, but is opposed to eminent domain being used “as a way of achieving it.”

Everyone acknowledges that state law allows the pipeline developers to use eminent domain currently. Those laws were practically intended to support public utilities. Pipeline opponents as well as impacted landowners contend that the carbon pipelines are not “public utilities”.

In Illinois, the Navigator CO2 developer of its planned pipeline to transmit captured carbon dioxide from ethanol plants. Navigator CO2 has refused to make public the list of landowners along a proposed half-mile-wide corridor covering 250 miles in Illinois. The company has informed many landowners that “Navigator CO2 would be seeking right-of-way “on or near” their property, and noted that if it can’t reach voluntary agreements with landowners to allow permanent easements, “we may need to request the right of eminent domain (‘condemnation’)” from state regulators. 

They already are. Navigator Heartland Greenway LLC, a wholly-owned subsidiary of Navigator, in July filed with the Illinois Commerce Commission seeking permission to build the pipeline and request eminent domain powers.  

The Commission will ultimately decide the eminent domain issue. A 2011 Illinois state law – the Carbon Dioxide Transportation and Sequestration Act – requires the Illinois Commerce Commission to consider local landowners’ concerns about public safety, infrastructure, the economy, and property values before approving permits for carbon dioxide pipeline projects to use eminent domain. 

Ironically, the law was enacted primarily to facilitate a prior attempt at successful sequestration which ultimately failed in 2015. There are systems being tested at the municipally-owned Prairie States Energy Campus but results to date are underwhelming.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

PUERTO RICO

It is tempting to go back five years and take what we wrote about the electric system in Puerto Rico and simply cut and paste it here. The news that a new hurricane had dumped 30 inches of rain on Puerto Rico raised all of the same issues with PREPA which arose in 2017. Housing conditions remain poor, the government’s finances have still not entirely been sorted out, and the politics of the Commonwealth have not gotten much better than was the case when it filed under Title III.

Once again, the Puerto Rico Electric Power Authority (PREPA) is experiencing an island wide power failure. Roads, bridges and other infrastructure have been damaged or washed away as a result of the downpour. More than 775,000 residents also have no access to clean water. After Maria in 2017, the island’s utility regulator, the Puerto Rico Energy Bureau, approved a plan that would require 40 percent of power to come from renewables by 2025.  The island has made little progress in its effort to decentralize the power system. PREPA has been seen as a significant obstruction to progress. The private operator of the system has been resisting those efforts and has been pushing an agenda based on increased natural gas.

The timing of the storm and power failure come amidst legal efforts to resolve PREPA’s ongoing debt default. Puerto Rico Electric Power Authority bondholders asked the bankruptcy court Monday to dismiss the proceedings as a step to appointing a receiver for the authority. The move comes after a six month mediation effort conducted under the auspices of the oversight Board.

The board asked bankruptcy Judge Laura Taylor Swain to set aside several months to litigate issues in the bankruptcy. The Ad Hoc Group of PREPA Bondholders, Assured Guaranty (AGO), Syncora Guarantee, and National Public Finance Guarantee (together the “bondholders’ group”) rejected this instead asking for dismissal of the bankruptcy or a lift on the stay on litigation and the subsequent appointment of a receiver.

If the judge disagrees with that approach, the bondholders asked that the judge require the board to propose a plan of adjustment by Nov. 1 and a timetable with a plan confirmation hearing scheduled no later than May 1, 2023. Litigation is not the preferred approach but it increasingly looks like the parties cannot resolve their differences without an imposed solution. The differences are real. Bondholders believe they are entitled to PREPA’s gross revenue while the Authority sees the revenue pledge as one of net rather than gross revenues.

The storm and its destruction only serve to highlight the management and policy issues holding the island back. It is pretty clear that an electric grid composed of some centralized base load power and a large dose of renewables is what will allow Puerto Rico to move forward. The exposure to storms will not go away so the need to decentralize the grid and localize access to renewable power becomes even greater.

CARBON CAPTURE PIPELINE RISK

Opponents of carbon capture pipelines proposed for Iowa are focusing on issues associated with these facilities in other areas. They are especially interested in the issue of potential leaks or pipeline ruptures. They have seized upon the results of an investigation into an actual rupture of a carbon pipeline in Mississippi.

In 2020, a carbon pipeline near a small Mississippi village ruptured. The incident was blamed on “natural occurrences” which led to a section of pipeline breaking. That incident, in which there were delays in emergency notifications, led to the start of that investigation by the US Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) to establish new measures to strengthen its safety oversight of carbon dioxide (CO₂) pipelines around the country and protect communities from dangerous pipeline failures.

The incident highlighted the many concerns that landowners have over carbon capture pipelines potentially impacting their properties. The 2020 incident was characterized by the lack of timely notification to the National Response Center to ensure the nearby communities were informed of the threat; the absence of written procedures for conducting normal operations, as well as those that would allow the operator to appropriately respond to emergencies, such as guidelines for communicating with emergency responders; and a failure to conduct routine inspections of its rights-of-way, which would have fostered a better understanding of the environmental conditions surrounding its facilities that could pose a threat to the safe operation of the pipeline.

CLIMATE CHANGE DATA REALITIES

The pressure to reduce the carbon footprint of the power generation industry has been relentless. The debate over fossil fuels has gotten so intense it is easy for some neutral, non-political points to get lost in the debate. We see one example of this phenomenon in recent data from the US Energy Information Administration (EIA) regarding natural gas.

One of the issues which confronts climate change activists is the trade-off between rapid electrification needs if we decarbonize. The shift of home and/or commercial usage of natural gas to electric will create significant increased demand for power. That power has to be generated at least at a base-load level to support a majority renewable electric grid. Right now, there is a significant mismatch between the timing of electrification and the development of a mature reliable generation and transmission infrastructure that is not fossil fuel based.

Activists who oppose fossil fuels tend to also oppose nuclear power on “environmental” grounds. They also object to hydroelectric power from dams. When the efforts to reduce coal and nuclear coincide, it should not be a surprise as to the fuel of choice for replacing those sources. Natural gas, despite seasonal pricing issues still comes out to be the financially most beneficial choice for utilities.

That has resulted in increases in natural gas usage and declines in hydroelectric generation. It is reflected in natural gas production statistics from EIA. U.S. natural gas producers are operating more drilling rigs now than at the beginning of the COVID-19 pandemic in early 2020. Before the pandemic, the number of operating rigs in the United States had generally been declining. On January 31, 2020—when the U.S. Department of Health and Human Services first declared a public health emergency related to COVID-19—it was reported that 112 natural gas rigs were operating in the United States.

The number of natural gas-directed rigs continued to fall in the first half of 2020, reaching a low of 68 rigs on July 24, 2020, the fewest in the historical data, dating back to 1987. Since then, the natural gas rig count has generally been increasing, returning to pre-pandemic levels in January 2022. On September 9, the industry reported that 166 natural gas rigs were operating in the United States, 54 more than at the outset of the pandemic in the United States.

NUCLEAR SITE STUDY

The US Department of Energy has released research that finds that about 80% of operating and recently retired coal-fired power plant sites could host an advanced nuclear power reactor, with nearly 265 GW in total potential nuclear capacity. Use of existing transmission and connection infrastructure would reduce capital cost. The research found 190 operating coal plant sites that could host nearly 200 GW of nuclear capacity and 125 recently retired plant sites that could handle about 65 GW of nuclear capacity. 

The repurposing of former coal generation sites helps to address the economic impact side of the climate change debate. Whether it be property tax revenues, sales or income tax revenues and the fees associated with residential and economic development, those revenues could continue to exist through a nuclear repurposing.

COAL REALITIES IN NEW MEXICO

Public Service Company of New Mexico, Tucson Electric Power Company, the County of Los Alamos, New Mexico and Utah Associated Municipal Power Systems are defendants in a lawsuit filed by the City of Farmington, MN. The San Juan Generating Station in the city is a huge, dirty coal generating facility which is scheduled to close on September 30. The plant and the coal mine which supplied the plant through its operating life are both scheduled for closure.

Now, the City is hoping to get the courts to issue an injunction forcing Public Service Company of New Mexico to continue to operate the plant. Ultimately the City hopes to transfer ownership of the plant and continue to operate it with carbon capture technology. It’s all about economics. The plant and the mine were substantial long-term employers. PNM has about 100 employees remaining at the plant. Approximately half of these employees will be laid off September 29^th.

The mine owner announced earlier this month that that its “underground crews have mined the last ton of coal destined for the San Juan Generating Station.” PNM said that 48 employees will stay at the plant through mid-October “for safe shutdown of the last unit and then around 10 employees will remain onsite for activities such as continued running of the switchyard, managing inventory reduction, closing down computer systems, and decommissioning.” A San Juan County ordinance requires PMN to file a demolition plan within 3 months of permanent plant closure.

The situation puts one joint action municipal power agency right in the middle of another debate over the future of electric generation. Utah Associated Municipal Power Systems finds itself being stymied in its effort to decarbonize at the same time it is pursuing a possible replacement for fossil fueled power in the form of modular nuclear reactors.

WHILE PHILADELPHIA GAS WORKS IS UNDER PRESSURE

The Philadelphia Gas Works has always been a somewhat problematic credit in that it provides an essential service to some of the City of Brotherly Love’s most economically challenged areas. This has always created a challenging environment for PGW’s ratemaking and revenue collecting process. In recent years, environmental activists have called for the utility to be shut down given the role of natural gas in climate change.

Those are more long-term issues. In the immediate future, PGW faces scrutiny and calls to refund some charges due to overly high bills related to natural gas for usage in the month of May of this year. PGW this summer refunded about $12.4 million to customers after some residential customers in June got bills in excess of $200 for May usage, including weather charges that were more than five times their monthly delivery charges.

The Pennsylvania Public Utility Commission (PUC) voted in favor of a broad ranging investigation and analysis of the changes requested by PGW to the weather normalization adjustment. That charge on the bill automatically adjusts customer bills (up or down) when the actual weather varies from “normal” temperatures. Beyond the issue of the normalization process, the PUC also is asking for a broader review of PGW’s existing rates, rules, and regulations, extending the inquiry beyond weather normalization.

It continues a process which followed an August request asking the PUC to approve a revised tariff that would cap its monthly weather adjustment to prevent the excessive charges in the future. PGW proposed limiting the weather adjustment to no more than 25% of a customer’s monthly delivery charges. None of this is credit positive. It highlights the potential for longer term pressure to shut the utility down.

RHODE ISLAND TOLLS IN COURT

A U.S. District Court Judge ordered Rhode Island officials to stop collecting truck tolls within 48 hours. The judge wrote a 91-page decision finding that the collection of tolls is unconstitutional under the dormant Commerce Clause of the United States Constitution. The judge found that the tolls discriminated against out of state truckers.  Tolls are not collected from automobiles.

Therein lies the rub. The trucking industry has used that provision as a basis for a discrimination complaint. The authorizing legislation included an explicit prohibition against tolls on automobiles. This ruling did not address the issue of revenue repayment. The state has collected $101 million in truck tolls since the first one launched in 2018. 

Changes the General Assembly made to the original 2015 tolling bill exempted all vehicles except tractor trailers – including dump trucks and box trucks. Tolls were limited to $40 per day and charged a vehicle only once in each direction at each gantry. All of those changes were found to have benefited local businesses over out-of-state operators. Rhode Island is the only state in the country with a truck-toll system like the one struck down. 

SPECIALTY COLLEGE AT RISK

New Jersey City University (NJCU) occupies a unique role in the state’s public university system. It is the only state university in Hudson County. It is also designated – like several other public institutions around the country – a Hispanic Serving Institution (HSI) for the state of New Jersey. The University’s recent history has been characterized by executive leadership turnover, as well as changes in other key administrative positions. The current management team has not yet had time to establish a track record of fully addressing the university’s significant financial challenges or implementing improved risk management practices. 

The pandemic hit the University’s prime demand base quite hard as was true for minority/immigrant communities throughout the country. This has driven demand and enrollments down. The university enrolls around 5,900 students, over 80% of whom are undergraduates, with operating revenue of approximately $162 million in fiscal 2021. The resulting pressure on an institution with historical financial difficulties has drained cash balances to a dangerously low level of some 30 days. The hope is that the University’s role in the overall university system will generate support for state assistance while the new management is able to install its own financial plan.

The University issues unsecured general obligation debt. Total outstanding debt for fiscal 2021 was $148 million. This week, Moody’s downgraded the University’s debt to Ba2 and maintained a negative outlook. The declines in enrollments and cash have driven the credit close to covenant default. If cash goes below 30 days, the University must hire a consultant to review operations.

Preliminary unaudited information for fiscal 2022 shows a significant operating deficit driving a reduction in liquidity to under 30 days cash on hand. Management has declared a financial emergency and is taking steps under its fiscal 2023 budget to adjust expenses. Returning to financial stability in the near term will prove difficult given the magnitude of the projected deficit, forecasted continued enrollment declines, an inflationary environment, and labor constraints. 

Disclaimer:  The opinions and statements expressed in[JK1]  this column is solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

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Joseph Krist

Publisher

NEW YORK CITY

The first quarter of fiscal 2023 has not been kind to the fiscal outlook for New York City. The pace of recovery in terms of employment and presence in the office significantly lags that of the country overall. We have documented the return of the cultural and entertainment sectors of the local economy which are still generating revenues but at rates which reflect lower attendance relative to pre-pandemic levels. Now, the economy in general and inflation specifically are pressuring retail sales. It is being accompanied by sharp declines in the financial markets. That sector is in the process of considering layoffs in response to lower merger activity and trading.

In terms of the return to the office, the City’s experience with its own employees is telling. Many do not see the role played in government by behind the scenes professional career staff. Jobs like those performed by the City’s lawyers, accountants, and other specialized professionals. The jobs which have real counterparts in the private sector which are generating better pay and much more flexible working conditions including remote work. Consequently, NYC reports significant shortages in departments which have legal or enforcement activities. The top reason cited – lack of flexible work requirements. The fiscal impact is to force the City to consider higher pay for those sorts of jobs as well as better working conditions generally.

At the same time, the Adams Administration has initiated its first PEG – Program to Eliminate the Gap – to address imbalances between revenues and expenses. It is troubling development that before the end of the first quarter of the fiscal year that a PEG – this one calling for a 3% cut in all agencies – is seen as needed. It raises overall governance concerns. While PEGs are not new to NYC government, the timing makes the recent budget process appear flawed. We already know that it was a contentious process with the City Council going to court over budget cuts it made only weeks before.

NUCLEAR

We have noticed an increasing amount of comment regarding the potential for nuclear power to address climate change. Much of that comment has been about traditional large-scale plants and has been colored by the fact that plants of that scale have been under the microscope lately for reasons not entirely linked to climate. Yes, large nuclear power has once again been viewed to be economically not feasible.

It is hard to argue against that point. The reasons for cost increases are many and varied but it is also hard to put a specific price tag on the cost of inept management by investor-owned managers of these projects. The Votgle plant in Georgia is seen as the poster child for these problems. It has not helped that many of the recent delays were based in poor management and record keeping. The regulatory history for that project is littered with examples of poor work that should have been done right the first time. The management issues which plagued the Sumner plant expansion in South Carolina were what stopped that plan.

So, now proponents of carbon-free generation are hoping that many of the issues which face the nuclear industry can be addressed through scale. The key difference is that we usually associate larger scale with economic efficiencies. In the case of nuclear, economics of scale may actually refer to small modular reactors. For some municipal energy consumers, their day as a test case could be on the horizon.

On a carbon impact basis, the case for nuclear is clear. That is what makes the knee jerk reaction to the potential use of these reactors so amazing. It is as if the critics are trapped in a 1970’s time warp. It’s not like there is no experience with small reactors. What do people think powers the Navy? The Navy has a strong record of operations and safety with its submarines and aircraft carriers. The largest carriers are powered by two reactors which have a generation capability of 125 MW. That is not to say that you just take a Navy reactor and stand it up on a land-based site but there is much that can be applied to land-based modular technology.

That is why some of the opposition seems more to reflect the past rather than the future. The argument is being made that renewables (wind, solar primarily) are intermittent and that there is a need for sustainable larger scale base-load generation. Another argument opponents make is that power demand growth in the US has slowed to a pace which will allow renewables to catch up and fill the supply void.

That’s great if you believe that battery technology, scale, and cost will be available within a reasonable time frame. Renewable advocates point to improvements in battery technology and lower costs. Here the issues over scale come back to bite opponents. Batteries will require significant development of lithium supplies. The mining of lithium in the US is running into major opposition on both environmental and cultural grounds. This could be a major impediment for the expansion of electrified transit.

One argument that we find astounding is the position taken by some that the case for nuclear power is offset by flat electric consumption. Yet many of those same people are the one’s pushing harder for more rapid EV adoption, more electric appliances all of which indicate a need for more power. The debate is also colored by the fact that the move to change electric use for environmental reasons may require some environmental damage to develop lithium supplies. Could that be a greater environmental threat than nuclear?

NUCLEAR FUNDING RACE

The Civil Nuclear Credit Program (CNC) was funded at $6 billion with a purpose of helping preserve the exiting U.S. reactor fleet in operation and saving jobs as a part of the Inflation Reduction Act. Pacific Gas and Electric was the first utility to announce that it intended to apply for some of the subsidy funds included in the Inflation Reduction Act for nuclear generation facilities. That funding would be used to keep the Diablo Canyon nuclear plant generating for some five more years as we noted last week.

Now, the owner of a recently shut down nuclear generator has announced that has applied for a federal grant under the CNC program. The Palisades Nuclear Power Plant near South Haven was shut down in May of this year after a fifty year operating life. Holtec, the private entity which took over ownership with a goal of decommissioning the plant by 2041 points to the CNC as a useful subsidy. Grant money alone would not be enough to get the reactor started.

GIG WORKER SETTLEMENT

The well documented efforts by the transportation network companies (TNC) to minimize the costs of their drivers have hit another road block in the state of New Jersey. A NJ Department of Labor and Workforce Development audit had found that Uber and a subsidiary, Raiser, owed four years of back taxes because they had classified drivers in the state as contractors rather than employees. The payment covers as many as 91,000 drivers who have worked in New Jersey in one of the years covered by the settlement. 

The process was complicated by the fact that Uber followed the TNC playbook. First, disrupt. Second, do it without regard for state and local laws and practices. Third, fight tooth and nail against all efforts by government to secure legal compliance. In the end it may have paid for Uber. Initially, the state represented that it had found a tax liability of over $500 million. That was based on data derived over the refusal of requests to provide information. Once Uber did, it allowed the Department to offer a lower liability figure.

THE WHEEL STOPS ON ATLANTIC CITY

Long one of the more regularly troubled local credits, Atlantic City has experienced recent credit improvement. Now that improvement has yielded positive news for holders of the City’s debt. Moody’s Investors Service has upgraded the City of Atlantic City, NJ’s long-term issuer rating to Ba2 from Ba3. The outlook remains positive. The improved patronage of the City’s gaming establishments has allowed the City to begin recovering from the pandemic. The upgrade also comes after continued scrutiny of the City’s operations and the oversight of the State of New Jersey.

The upgrade of the long-term issuer rating to Ba2 reflects the city’s improved financial performance and liquidity. The positive outlook reflects Moody’s expectations that, despite the lingering effects of the pandemic, the rise of inflation, and the risk of recession, Atlantic City will continue making strides in improving its governance and finances. While the economic headwinds have caused issues, the negative credit consequences are offset by the improved management of city operations and the more predictable PILOT payment structure for casinos.

The outlook also incorporates the continued state oversight. Those changes along with resolution of long-standing tax disputes with the City’s major employer the casinos have relieved destabilizing pressures on the credit.

SECOND CHANCE FOR TAMPA TRANSIT

In 2018, voters in Hillsborough County, FL approved a 1% sales tax to fund various transit facilities in the County. Opponents of the tax got it overturned when the Florida Supreme Court ruled that the referendum was unconstitutional because it relied on prescribed spending allocations set forth by voters, rather than elected members of the Board of County Commissioners. Now in 2022, proponents will have another chance to get voter approval.

It’s not clear if the new referendum will pass ultimate legal muster. It has been noted that this item includes a division of the revenues among several transit agencies in the County. 45% of proceeds are earmarked for the Hillsborough Area Regional Transit Authority (HART), 54.5% for the county and its cities — including Tampa, Temple Terrace and Plant City, divided based on population — and 0.5% for the Hillsborough Transportation Planning Organization.

Further, the referendum is more specific about the uses of the funds (estimated at $320 million in year 1 of full collections) in that it specifies spending levels for each agency receiving funds. Unlike in 2018, this referendum was placed on the ballot by a vote among Hillsborough County Commissioners. Since the 2018 ballot initiative was placed before voters by voters — not the County Commission — the spending allocations were ruled unconstitutional. The hope is that the vote of the County Commissioners gets around that obstacle.

THE COST OF RESILIENCE

The State of NJ will receive $26 million in grant funding for a road project designed to mitigate flood risk. The funds will pay for a two-mile section of Route 7 between Jersey City and Belleville, which periodically floods because of its proximity to the Hackensack River. The project will raise the bed of the road by some 3.5 feet. Floodwalls and pumping equipment are part of the project.

The $26 million represents the first year of project costs for the three year project. The total cost is $82 million. The grant program is intended to get construction going while the various impacted government entities complete a funding package. The project provides a window on the realities of the costs of this sort of infrastructure issues face communities dealing with climate change. $40 million per mile will give some communities pause.

RURAL HOSPITAL PRESSURES CONTINUE

Long before the pandemic, many rural hospitals and systems found themselves in difficult financial straits. Now that demand has faded with the decline of the pandemic, it is becoming clear that the pressure on these providers continues to increase. We cite two recent examples from the rural West.

Moody’s Investors Service has downgraded Yakima Valley Memorial Hospital Association’s (WA) revenue bond rating to Ba3 from Ba1. The outlook has been revised to negative from stable at the lower rating. It cited material and recent decline in operating performance, resulting in negative operating cash flow, and a significant drop in unrestricted cash through the first two quarters of 2022. This has placed the association at risk of covenant default. The reduced cash flow has put it very close to its days in cash on hand covenants. Failure to meet the days cash on hand covenant could lead to immediate acceleration of debt.

Like almost every other hospital, Yakima faces higher employee costs as the result of labor force shortages and inflation. The status of being a sole community provider makes the situation more pressing. Moody’s notes that these factors have had a higher than typical impact on Yakima. All may not be lost. Yakima is currently in negotiations to join MultiCare Health System. That Tacoma based system does not have a substantial presence in the Yakima region so from that standpoint it could make sense.

In rural Oregon, St. Charles is a four-hospital, not-for-profit, regional healthcare system headquartered in Bend, Oregon and serving the Central Oregon region.  The population of the region is approximately 230,000. Recently, Moody’s affirmed the system’s rating at A2 but assigned a negative outlook. The factors are familiar: chronic understaffing; the heightened use of travelers and increased rates; pronounced COVID surges in this part of the country; increased length of stay due to the shortage of post-acute beds; and high inflation. 

Like Yakima, the operating environment has pressured the balance sheet and reduced cash. The system is in danger of defaulting under its loan agreements concerning required cash levels. ailing to satisfy its 1.1 times debt service coverage requirement at the end of the fiscal year, which under its direct placement agreement with JPMorgan would result in an event of technical default. 

CALIFORNIA TRANSIT ON THE BALLOT

The focus is rightly on the mid-term election for Congress as we approach the election. There are a number of jurisdictions however, where transit funding is competing for attention and votes. We will focus here on some transit ballot initiatives on ballots in California.

Voters in San Francisco will be asked to approve the renewal of a half-cent sales tax which was first approved back in 1990. The tax was authorized for thirty years. Measure L would continue the local tax for another 30 years. The tax is estimated to raise $100 million annually. The amount is projected to increase to $236 million annually by fiscal year 2052-53. If approved, the transportation authority would be authorized to issue up to $1.19 billion in bonds that would be repaid with the proceeds of the tax. A vote of two thirds of those casting ballots is required to extend the life of the tax.

Across San Francisco Bay, Measure F in the city of Alameda would increase the transient occupancy tax from 10% to 14%. The tax collected from visitors would raise about $700,000 to $900,000 annually. Tax revenue would be applied for city services that include repairing potholes and deteriorating streets. The tax would continue until ended by voters. A simple majority is needed for passage. Measure L in the city of Berkeley would authorize issuance of $650 million in general obligation bonds for projects that include street repair. Two-thirds voter support is required for passage. Measure U in the city of Oakland would authorize issuing $850 million in general obligation bonds for city services. About $290 million would be allocated for street repair. A two-thirds supermajority is required for passage.

Several Marin County communities are being asked to authorize general obligation debt which would finance among other things road upgrades in their communities. Measure G in Larkspur would increase the city’s 1% sales tax by one-quarter cent. The tax is estimated to raise about $700,000 each year and would continue until ended by voters. Measure L in Sausalito would double the city’s 0.5% sales tax to 1% for essential services that include street maintenance. The increase is projected to raise $2.8 million yearly for the next decade. Measure J in San Anselmo would double the town’s sales tax from a half-cent to one cent. Additionally, the tax would be extended by nine years.

All of the local items will require a simple majority for approval.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.

Joseph Krist

Publisher

RUM TAX UNCERTAINTY

The federal tax revenue collected from rum produced in Puerto Rico, the U.S. Virgin Islands, or internationally is transferred to the governments of Puerto Rico and the U.S Virgin Islands. This transfer of revenue from the United States back to the location of production is called a “cover-over.” After hurricanes Irma and Maria, Congress placed a five-year increase of the cover over from $10.50 to $13.25 in the Bipartisan Budget Act of 2018, which is the public law that gave the Virgin Islands and Puerto Rico increased funding to rebuild the territories after the storms of late 2017. That temporary increase in cover over expired in December of 2021. 

That was supposed to be addressed through the build Back Better Act. When that legislation failed, the tax increase was one of many casualties resulting from that failure. this has a direct impact on the already shaky credit of the US Virgin Islands. The USVI borrows against receipts from a $13.50 per gallon tax on rum exports collected by the federal government and transferred to the territory. The risk is that the government of the Virgin Islands has budgeted as though the tax will be renewed at $13.50 and that the amounts subject to transfer from the federal government will be calculated retroactively.

Now, many tax credits and other tax provisions that have or will expire by the end of this year that need to be extended – such as low-income housing credits, pharmaceutical company credits and others. Legislation to do that will be taken up but unless it is included in that legislation, the extra $3 per gallon will not be renewed. In the interim, the U.S. Department of the Interior’s Office of Insular Affairs has announced the approval of the payment of $226,165,037 to the U.S. Virgin Islands representing 2023 estimated rum tax-cover over payments for the USVI.  

THREE HEADLINES ILLUSTRATE THE DILEMNA

Amid Heat Wave, California Asks Electric Vehicle Owners to Limit Charging, California to ban sales of new gas cars in 2035. Diablo Canyon legislation

Amid Heat Wave, California Asks Electric Vehicle Owners to Limit Charging – Timing is everything. Just as the state was legislating the end of sales of internal combustion vehicles, the state’s electric grid operator was asking Californians to avoid charging their cars between 4 and 9 p.m. This at a time when diminished hydro resources increase dependence on carbon emitting power sources. It is against this backdrop that we view the need for green energy proponents to move to the execution phase of their plans. They need to show a practical path to carbon reductions.

Diablo Canyon legislation – Legislators voted to extend the life of Diablo Canyon and continue to generate 9% of the state’s power requirements from its two units. The two reactors were originally scheduled to close in 2024 and 2025, but the new plan extends those deadlines to 2029 and 2030. It also authorizes an agreed upon $1.4 billion loan to Pacific Gas & Electric, the utility that operates the plant. PG&E is also expected to apply for money from a new $6 billion federal program designed to keep open existing nuclear plants.

California to ban sales of new gas cars in 2035 – California been required to slash its greenhouse gas emissions 40 percent below 1990 levels by 2030. Under new legislation passed Wednesday, the state will now have to cut emissions at least 85 percent by 2045 while offsetting any remaining emissions. Under those conditions, electric cars and nuclear power are likely necessities.

JACKSON WATER

The City of Jackson, MS – the capital of the Magnolia State – has long had issues with its water and wastewater systems. The aged systems may be serving the state capital but overall, the service area reflects below average demographics. The water and sewer system serves an area of approximately 150 square miles, including the City of Jackson (Baa3 stable) and portions of Hinds, Rankin, and Madison counties. The lack of steady and at least decent service to communities like those which the systems serve, provides a prime example of the issues which drive the issues of environmental justice and equity.

The systems have been long plagued by inadequate investment in plant both for maintenance as well as improvement/expansion. It is true that the below average economics of the wide service area keep pressure on rates and that there is not a very strong capacity to support significant debt. That is reflected in the Ba2 rating assigned to the debt backed by utility revenues.

In late December Moody’s said that “The confirmation of the Ba2 rating and assignment of the stable outlook reflects our review of the unaudited financial results for fiscal 2020, which includes the benefit of the receipt of approximately $60 million in settlement monies that have allowed the water and sewer system to repay the city general fund, restore its contingency fund, and boost days cash and debt service coverage to 192 and 2 times respectively. The confirmation also incorporates the system’s ongoing challenges, which include implementation of an effective billing and collection system, management of a very large consent decree, and substantial capital needs that will continue to create narrow operating margins.

Very early indications for fiscal 2021 suggest that these obligations have reduced cash to approximately 99 days and sum sufficient coverage. However, these figures are very preliminary and subject to additional refinement as the city closes the fiscal year. Operating revenues will be boosted by an approved 20% rate increase anticipated to take effect in March 2022 and are not factored into the otherwise balanced budget.”

IS PREEMPTION ALWAYS BAD?

We’ve talked about preemption a lot over the last couple of years. It has come up mainly around the issue of the local regulation of the use of fossil fuels and equipment which runs on them. A particular recurring target has been restrictions on the ability of localities to ban the use of natural gas in newly constructed buildings. It has been easy for some to rail on about how these laws reduce local control and impose unwanted policies on people. But what happens when the “other side” wants to impose its will?

In California, Assembly Bill 205 (“AB 205”) makes available to qualifying renewable energy, energy storage and alternative fuel power projects (and their transmission lines) a “one-stop” permitting and environmental review process at the state level. Under the new law, renewables, energy storage and alternative fuel power plant developers have the option to go directly to the CEC to obtain local, regional and state permits and approvals, rather than going to each agency individually and separately.

The California Energy Commission (“CEC”) is empowered to prepare the project’s Environmental Impact Report (“EIR”) pursuant to the California Environmental Quality Act (“CEQA”) and must complete the environmental review process and “certify” (i.e., approve) projects within 270 days of receiving a complete application. A certified project automatically qualifies as an “environmental leadership” project if the CEC finds that certain criteria are met. This designation provides significant benefits by expediting CEQA litigation—including the general standard that all legal proceedings, including appeals, be resolved within 270 days.

ETHANOL AND THE ENVIRONMENT

Ethanol is at the center of the ongoing debates over where and how to locate pipelines for the transmission of captured carbon underway in the Midwest. One of the arguments being used by carbon capture advocates is that it would enable ethanol plants to reduce their substantial carbon footprints. The positive impact on corn growers is cited as a reason to use the technology in that region.

Now in the middle of that debate, Reuters has released an analysis of the relative carbon footprints created by oil refineries and ethanol production facilities. The 2007 law, the Renewable Fuel Standard (RFS) requires individual ethanol processors to demonstrate that their fuels result in lower carbon emissions than gasoline. The Environmental Protection Agency (EPA) however, has exempted facilities built before the law was enacted.

These grandfathered plants produce more than 80% of the nation’s ethanol, according to the EPA. The agency found that the average ethanol plant generated  1,187 metric tons of carbon emissions per million gallons of fuel capacity in 2020, the latest year data is available. The average oil refinery produced 533 metric tons of carbon. A study published by the National Academy of Sciences in February, for example, estimated that ethanol produces 24% more carbon. The agency acknowledged the higher production emissions of ethanol, compared to gasoline.

Some 240 of 251 U.S. ethanol production facilities are exempted from emissions-reduction requirements. The RFS requires that the ethanol industry demonstrate that the fuel delivers a 20% reduction in carbon. exempted ethanol plant produced 1,203 tons of carbon. One of the factors driving the issue is that EPA uses statistical models developed by academics funded by the ethanol industry. Shockingly, using those data points lead to a conclusion that gasoline blended with ethanol had a low carbon footprint.

CARBON CAPTURE PIPELINES MOVE TO THE COURTS

Navigator CO2 Ventures, one of three companies that have proposed liquid carbon pipelines in Iowa, recently sued four sets of landowners to gain access to their properties to survey the land. Iowa law does say that “a pipeline company may enter upon private land for the purpose of surveying and examining the land to determine direction or depth of a pipeline by giving ten days’ written notice. The entry for land surveys … shall not be deemed a trespass and may be aided by injunction.”

In the meantime, Summit Carbon Solutions is finding that there is much opposition to its plans in South Dakota. Here is what Summit offers a landowner. Summit provides an annual payment for construction, based on 100% of crop loss in the first year, followed by 80% for the second year and 60% for the third year — all paid up-front. This is figured on income, based on each crop. And the one-time payment is 115% of the property value — not for the whole property, but just for that 50-foot-wide strip.

FLORIDA TOLL POLITICS

The continuing populist efforts on the part of Florida’s Governor to shore up support for a run for higher office are putting the state’s toll roads in the spotlight. Governor DeSantis has proposed a plan to provide toll rebates to frequent users of several of the state’s toll roads. They include Florida’s Turnpike, toll express lanes on Interstate 95, Interstate 75, and Interstate 595, along with the Sawgrass Expressway.

They do not include roads operated by the Miami-Dade Expressway Authority and Central Florida Expressway Authority. Those roads have been under political pressure from the Governor over his entire term. The governor is asking state lawmakers to approve an expansion of the SunPass Savings Program, which would allow any roads operated by expressway authorities — like the Dolphin Expressway and Rickenbacker Causeway in Miami-Dade County — to also be included in the package.  SunPass and E-ZPass commuters who pay a certain number of tolls each month will get a 50% discount on their tolls for the entire year.

MASS TRANSIT

The New York Metropolitan Transportation Authority has been seeing gradually better utilization as more residents are being returned to their offices. Now, the State of New York has announced that the requirement that patrons wear masks on public transit is no more. It is a sign of a return to at least a portion of normality as the summer vacation season ends and the city’s public schools reopen. Now, the focus turns towards the proposed congestion fee which is garnering significant opposition.

The closure of the MBTA’s Orange Line for a month for significant repairs to be undertaken generated mixed reviews. “Transit advocates” cited the fact that bicycle usage was up significantly. Nonetheless, the Mayor of Boston (a major proponent of free fares on the “T”) has acknowledged that the closure has not received well by many. The real test will come with the onset of colder weather and the return of the line to service.

San Francisco has announced that it hopes to have a newly constructed extension to open before year-end. The new stations extend the City’s Metro subway service. The announcement comes as the city continues to be impacted by a lower than hoped return to the office.

In late July, a significant storm impacted the greater St. Louis area resulting in much damage from the resulting floods. St. Louis Metro Transit reported nearly five miles of damaged light-rail trackbed; the total loss of one MetroLink train; and significant damage to the signal system. It will be several months before the system can fully restore MetroLink service on the Red and Blue Lines in the city of St. Louis City and in St. Louis County.” 

COAL RESUMES ITS DECLINE POST-PANDEMIC

New data from the Energy Information Administration shows that the perceived revival of coal was short-lived. The numbers for the second quarter of 2022 show that renewable energy rose to make up 24.8% of the electricity generated in the United States in the second quarter this year.  Coal-fired power plants generated 190,547 gigawatt-hours in the second quarter, down 7.1 percent from the second quarter of 2021. 

It is interesting that coal continues to decline even in the face of efforts to emphasize the base-load nature of that generation vs. renewables. Coal-fired power plants, operated at an average capacity factor of 52%. That is down from June of 2021, when there were 210 gigawatts of coal-fired power plants and their average capacity factor was 59%. Utility-scale renewable electricity sources generated 254,754 gigawatt-hours in the second quarter.

Hydropower plants generated 71,123 gigawatt-hours in the second quarter, up 7.6% from the second quarter in 2021. Those numbers do not tell the story of regional concentration of hydro resources as nearly all of the increase was in the Bonneville Power system. That growth offset declines in hydro power attributable to the drought plaguing the Colorado River hydro assets.

Natural gas remains the leading fuel for electricity, with 37.9% of the country’s total in the second quarter; ahead of renewables, which include wind, hydropower, solar, biomass and geothermal, at 24.8%; coal, 18.5%; and nuclear, 17.9%. Gas became a “go to” source of generation in the face of coal and nuclear plants being shut down.

That is why utilities continue to expand their investigation of small modular nuclear reactors. The Grant County Public Utility District in Washington will undertake a study of the potential for modular nuclear to support growing demand in its service area. It also comes as the debate over hydroelectric plants at dams generates pressure to remove some capacity. The studies so far have eliminated one proposal from Next Era energy for a reactor. A current proposal would locate a reactor at the Hanford Reservation where nuclear generation already exists.

Disclaimer:  The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column.  The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned.  Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice.  Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed.  Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.