Joseph Krist

Publisher

FLORIDA AND CHARTER SCHOOLS

Broward County Public Schools (FL) claims to have more than 49,000 vacant classroom seats this year. That is almost equal to the number – 49,833 – of students attending charter schools in the area. The school district has been experiencing steady declines in enrollments since 2010. Over the period since. enrollment in charters increased by nearly 27,000 students since 2010, according to Broward school officials.

Private school enrollment across Florida rose by 47,000 students to 445,000 students from 2019-20 to 2022-23, according to the latest data available from the state. Enrollment declines for Broward, Duval and Miami accelerated during the Covid-19 pandemic, which sent parents seeking new education choices for their children. Homeschooling increased significantly as this population grew by nearly 50,000 students between 2019-20 and 2022-23, totaling 154,000 students in the latest Florida Department of Education data.

Traditional public schools in the area are projected to enroll some 10,000 less students in 2024-25, compared with five years ago, according to Duval County Public Schools. Enrollment in traditional public schools across the state decreased by 55,000 students from 2019-20 to this year, state data shows. This is leading to a growing inventory of unused space and facilities. This at the same time that Florida schools are at the center of many of the cultural war disputes one sees in many places.

MILLIONAIRE TAX

An additional 4% charge on any income over $1 million a year and was approved by Massachusetts voters in 2022. The Tufts University Center for State Policy Analysis, in January 2022, released a report that found the tax would apply to less than 1% of Massachusetts households in any given year. The approval generated the usual cries of doom and gloom about the likelihood of taxpayer flight among those who might be impacted. The argument is raised just about any time now that an effort is made to raise rates for the highest tax brackets.

That notion is being revisited in light of the first year of income tax collections including the new higher top bracket. The Commonwealth Department of Revenue said that Massachusetts is on a course to collect some $1.8 billion from the surtax on the state’s highest earners through the first nine months of the fiscal year. That is some $800 million above prior estimates. Surtax collections must be used on education and transportation needs under the constitutional amendment that voters approved in 2022.

The fiscal 2024 state budget included agreements that any surtax revenues above the budgeted threshold would be placed into one of two accounts established as part of the tax approval. Fifteen percent of the overage is deposited into a savings account, set aside to maintain investments if surtax collections decline in future years. The other 85 percent goes into an “Education and Transportation Innovation and Capital Fund.”

Those funds are directed to several purposes “including, but not limited to, pay-go capital” or one-time projects “related to quality public education and affordable public colleges and universities and for the repair and maintenance of roads, bridges and public transportation,” 

SAN FRANCISCO SCHOOLS

Over the last few years, the San Francisco Unified School District has been best known for its role in the school renaming debate that was a part of the country’s post- George Floyd reckoning. Arguments over historical inaccuracies, name removals, and a host of other social concerns seemed to the main points of contention. They led to resignations and change to the school board. Given this and the other pandemic related problems which took such a toll on the City as a whole, it was inevitable that something would fall through the cracks.

On September 15, 2021, Fiscal Experts were assigned to the SFUSD by the California Department of Education. Recently, these CDE overseers drew attention to the SFUSD and its continuing financial decline. The State Superintendent noted that the SFUSD is projecting deficit spending in the unrestricted general fund for the current and two subsequent fiscal years. Without budget adjustments to bring the expenditures in line with revenues, the SFUSD will be unable to meet its financial obligations in the 2024–25 fiscal year. That creates a negative finding which supports state supervision.

In December 2023, the SFUSD adopted a Budget Balancing Solution Plan with the 2023–24 First Interim Report that included unrestricted general fund one-time reductions, $103.1 million of ongoing reductions for 2024–25, and an additional $88.8 million of unidentified ongoing reductions for 2025–26.

As a component of the oversight process, a Second Interim Report was issued which reflects that of the $103.1 million in expenditure reductions identified at First Interim for 2024–25, $28.3 million were not achieved and were added back to the unrestricted general fund for 2024–25. At the First Interim Report, the SFUSD projected estimated ongoing savings of $40 million from eliminating vacant positions in the 2023–24 fiscal year. As of the Second Interim Report, $15.8 million of the vacant positions were eliminated.

The SFUSD plans to achieve $29 million of savings in 2024–25 through changes to their staffing model for elementary, middle, and high schools. The SFUSD stated that these reductions would be achieved through layoffs and attrition. The SFUSD Board of Education adopted a resolution to issue layoff notices that included $14 million in estimated savings for certificated staff. The CDE has been informed that the SFUSD will no longer pursue these layoffs.

Statutory restrictions on debt issuance for school districts that have qualified or negative interim report certifications have their debt issuance limited. SFUSD may not issue, for the 2023–24 and 2024–25 fiscal years, certificates of participation, tax anticipation notes, revenue bonds, or any other debt instruments not requiring the approval of the voters, unless the State Superintendent of Public Instruction (SSPI) determines that repayment of that indebtedness is probable.

In spite of the report, SFUSD is expected to approve a ballot initiative for this November’s ballot to approve an $800 million bond sale.

MORE HOSPITAL BAD NEWS

Massachusetts-based Tufts Medicine confirmed plans to lay off 174 of its employees. Persistent capacity issues, high contract labor expenses and rising supply chain costs were the primary items cited by management. Tufts Medicine recorded a $171 million operating loss and 71 days of cash on hand at the close of its most recent fiscal year, which ended Sept. 30, 2023. This was an improvement over the prior year, when it recorded a $399 million operating loss. In February Fitch Ratings downgraded Tufts Medicine from “BBB” to “BBB-.

Pittsburgh-based UPMC is an integrated health system and one of Pennsylvania’s largest employers. Its provider, insurance and other business arms logged $27.7 billion of revenue across 2023 as volumes rose and insurance membership grew. In spite of the increases in utilization, the nonprofit reported a $198.3 million operating loss (-0.7% operating margin) last year as insurance claims expenses jumped 13.6% and labor costs rose 6.4%. It had posted a $162 million operating gain (0.6% operating margin) the year before.

Now it has brought in McKinsey as a consultant to help manage its “transformation”. If you’ve ever been in a McKinsey reimagination, you’re not shocked to see 1,000 layoffs announced. (1% of its 100,000-person workforce) It is after all what they do. UPMC is a $27 billion annual operation with operating revenues roughly split between its 40 hospital health services division, and its 4.2 million-member insurance services group. A third segment runs a division supporting development of commercial venture enterprises and an investment portfolio.

The system’s operations have been losing money. For the 2023 fiscal year, ended Dec. 31, the organization logged a $198.3 million operating loss (-0.7% operating margin) on revenue of $27.7 billion due in part to rising health plan utilization and insurance claims expenses. Its bottom line showed a $31 million loss, reflecting investment returns.

Relying on the investment portfolio and the risks which result were reflected when UPMC had recorded a $162 million operating gain across 2022 but a $1 billion net loss due to that year’s investment markets. It reported a $103 million operating loss (-1.4% operating margin) for its first quarter of 2024 and 103 days of cash on hand as of March 31.

Last week we documented the cyberattack on Ascension Health. Going into its fourth week, IT operations have been minimally restored but there remains no estimate as to full restoration. Systems that are currently unavailable include some electronic health records systems, some patient portals (which enables patients to view their medical records and communicate with their providers), some phone systems and various systems utilized to order certain tests, procedures and medications.

The cyberattack comes as the system faces an exodus of providers as the result of changes to Ascension’s structure which includes an investment vehicle and ownership of for-profit entities to provide for staffing and other services. It is a phenomenon that is increasingly shaping the industry as private equity takes an increasingly large position in the ownership of physician practices and other providers. These takeovers often lead to significant disruption to the provider base with expected negative impacts on service.

HIGHER EDUCATION MERGER

Marymount Manhattan began as a two-year women’s college in 1936, became a four-year school 12 years later and awarded degrees to its first male graduates in 1973. The college had about 1,450 students last fall, down from 1,915 in 2017. MMC has run annual deficits of more than $1 million a year since 2020 after posting a surplus of roughly $900,000 the year before. The board has cited declining enrollments and rising operating costs for an outlook that was “not sustainable”. The school has a $28 million endowment. 

Northeastern University (NU or NEU) is a private research university with its main campus in Boston. Established in 1898, it was founded by the Boston Young Men’s Christian Association as an all-male institute before being incorporated as Northeastern College in 1916, gaining university status in 1922. With more than 38,000 students, Northeastern is the largest university in Massachusetts by enrollment. Management has been pursuing a policy of expansion across the country through the absorption of smaller local institutions. It currently has “satellite” campuses in six U.S. cities and one each in Toronto and London.

Rather than close Marymount, that school decided that a merger represented the best chance of keeping it open. “Recognizing the significant headwinds facing small liberal arts colleges, MMC’s Board decided to pursue this path to ensure the continuation of MMC’s student-centered approach to education for generations to come,”.  The “path” is a merger with Northeastern.

Students enrolled and in good standing at the time of the merger will be eligible for automatic enrollment at Northeastern and can continue working toward completion of their intended degree program. MMC’s full-time faculty members at the time of the merger will become Northeastern faculty, receive one-year contracts, and be considered for available tenured, tenure-track and non-tenure-track positions. All staff employed by MMC upon the effective date of the merger will become Northeastern employees.

In 2022, Northeastern merged with Mills College in Oakland, California, providing the university with a comprehensive campus in the Bay Area.

PUBLIC TRANSIT’S CHALLENGE

Public transportation agencies kept many buses and trains running during the height of the pandemic, especially to support the travel of “essential workers,” but ridership and fare revenues plummeted. Public transportation agency budgets, particularly operating expenses, were supported by federal supplemental appropriations in FY2020 and FY2021 totaling $69.5 billion. This amount was about five times the annual federal public transportation support of $12 billion in 2019, the final full year before the pandemic, and more than three times the $19 billion coming from fares and other operating revenue.

In a survey of its members, the American Public Transit Association (APTA) found that about half of transit agencies and more than two-thirds of large agencies said they would experience severe budget problems (a so-called “fiscal cliff”) in the next five fiscal years (FY2024-FY2028). After declining through the late 1990s, the average operating cost per vehicle mile increased slightly from a low in 1999 through 2019. The operating cost per passenger trip (a measure of service consumed), however, has more than quintupled over this 50- year period.

Ridership rebounded to 79 percent of pre-pandemic levels in March 2024, according to the latest data from the American Public Transit Association (APTA). Public transit ridership was 7.1 billion total trips in 2023, a 16 percent increase from 2022 to 2023. Current data remains limited, but indicators in several metro regions point to transit recovery being led by trips to and from residential and commercial areas as opposed to office/work centers. According to the Federal Highway Administration, travel on U.S. roads and streets in 2023 was higher than 2019 levels by one tenth of one percent.

CARBON CAPTURE LEGISLATION

Illinois has enacted legislation regulating carbon capture pipelines. The final bill would establish a moratorium on new pipeline construction until July of 2026. The moratorium would expire on July 1, 2026, if the U.S. Pipeline and Hazardous Materials Safety Administration doesn’t finalize safety rules by then. The bill requires monitoring of injection wells for at least 30 years after they close, a process that must be approved by the state and federal government. It also grants the Illinois Commerce Commission expanded authority to impose fees and require certain safety models to be used during permitting for carbon sequestration and transportation projects.

The Illinois Farm Bureau, an interest group representing farmers and other large landowners, and the Illinois Soybean Association opposed the final bill, largely because of how it handles eminent domain. Under the proposal, the state’s Department of Natural Resources can issue a binding order on “nonconsenting” landowners to force them to let carbon sequestration companies use their land – specifically, the “pore space” thousands of feet underground – to store carbon dioxide. Companies would be required to give “just compensation” in exchange.

BATTERIES ON THE BALLOT

It’s pretty well agreed that a future electric grid which depends on renewables depends on storage. Storage requires batteries. Therein lies the rub. A series of incidents involving battery fires – large batteries for grid storage and small lithium ion batteries for electric bikes – has stoked fear over battery storage. This has sparked significant community opposition to efforts to site these facilities. It is a debate being played out in communities large and small.

The latest example is in California. Vistra Corp. has proposed a 600-megawatt battery storage project on a portion of the former generation site in Morro Bay, CA. It is already an industrial site even if it is on the coast including its three large smokestacks still standing at the generation plant. All of that would be removed and replaced by the battery storage. Project opponents say they’re concerned about its impacts on tourism and the potential for fires at the facility.

The project is currently in the draft environmental impact report stage, with that document open for public comments through this week. The project is awaiting consideration by the city’s planning commission and city council. Opponents want to take that approval power away. A ballot initiative on this November’s ballot would do just that.

It could all be for nought. Recent legislation that allows large battery storage facilities to opt in to an approval process from the California Energy Commission (CEC), instead of going through a local process, could provide a backup pathway to Vistra. 

In 2021, the city changed the land-use designation of the site of the power plant from “Industrial” to “Visitor Serving/Commercial”. The energy storage project is considered industrial so the city council would need to vote to change the designation to again allow industrial uses. The ballot measure proposes to freeze the current land-use designation of the property and a few others in the area. It would then require a majority of voters to approve another change in the land-use designation. 

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 POWER PLAY

The U.S. government is spending over a billion dollars to accelerate renewable-energy adoption in Puerto Rico, including a $156.1 million grant through the Solar for All initiative that focuses on small-scale solar. Since the disastrous storms of the last decade exposed all of the weaknesses in Puerto Rico’s electric infrastructure. One of the easiest fixes available to address issues of both resilience and sustainability, has been rooftop and small scale solar (microgrids). As we have pointed out before, the island has both wind and solar resources in abundance.

In January, Governor Pedro Pierluisi signed a bill extending the island’s existing net-metering policy through 2031. Those rates have supported significant development of solar across the island especially in more isolated and usually poorer communities. As those resources come on line, it doesn’t help Puerto Rico Electric Power Authority (PREPA) to generate enough revenue to meet the demands of its creditors. Especially, creditors in the PREPA bankruptcy.

It is not any different from the situation many mainland utilities face as customers facing increasing rate demands gravitate to solar as a more reliable and often more economical choice. LUMA, the private entity which manages PREPA, estimates that some 117,000 homes and businesses in Puerto Rico were enrolled in net metering as of March 31, 2024, with systems totaling over 810 megawatts in capacity. 15,000 net-metered systems totaling over 150 MW in capacity were installed as of 2019 — the year Puerto Rico adopted its 100 percent renewables goal under Act 17.

Net metering was going to be evaluated under the terms of the January legislation but not until 2030. In April, the Financial Oversight and Management Board urged the governor and legislature to undo Act 10 to allow regulators to study net metering sooner. When that didn’t happen, the board made another appeal in a letter dated May 2, threatening litigation to have the law nullified. They want repeal to occur in the current legislative session ending June 30.

A two-year study overseen by the U.S. Department of Energy, known as PR100, which analyzed how the island could meet its clean energy targets. The study suggests that net metering isn’t likely to start driving up electricity rates for utility customers until after 2030, the year the Energy Bureau is slated to revisit the current rules. 

CARBON CAPTURE

The Department of Energy (DOE) obligated almost $1.4 billion across 654 research and development projects to support carbon capture, utilization, and storage (CCUS) and direct air capture (DAC) technologies from fiscal years 2018 through 2023. Nevertheless, according to the Congressional Budget Office, as of September 2023, only 15 facilities were capturing and transporting CO2 for permanent storage as part of an ongoing commercial operation.

The significant majority of DOE’s carbon capture funding. Specifically, FECM obligated almost $950 million, or 69 percent of DOE funding, to support 410 projects from fiscal years 2018 through 2023. 392 projects (about 96 percent) focused on technologies related to reducing emissions from coal and 18 (about 4 percent) from oil and gas.

Now the federal government is increasing its support for carbon capture. The Infrastructure Investment and Jobs Act provides approximately $12 billion for CCUS and DAC projects. This week, the third-largest “direct air capture” plant operating in the United States came on line. This one adjacent to a Google facility in Oregon is smaller than the other two projects – Global Thermostat’s plant in Commerce City, Colorado, and Heirloom’s plant in Tracy, California.

PORTLAND

I-5 Bridge – When construction starts on a new Interstate 5 bridge across the Columbia River in early 2026, drivers will begin paying tolls on the existing span between Washington and Oregon. Funding for the replacement has been a very contentious issue. Tolls are counted on to raise $1.2 billion for construction plus provide an ongoing stream of revenue for bridge maintenance and operations. Several possible rate scenarios are under review. These have one-way rates ranging from $1.50 to $3.55 with higher prices during peak travel times.

The Oregon Legislature will consider a possible appropriation of some $40 million to help the Port of Portland keep its container loading components open. (See 4.22.24 MCN) The Governor has included $35 million in her budget and proposes to request the remaining $5 million from the legislative Emergency Board at a meeting in September. Each would require approval from lawmakers. Earlier this year, Port leaders asked the Oregon Legislature for $8 million to support operations and were turned down.

Portland voters approved the extension of a local gas tax. The 10-cent-per-gallon tax funds street and sidewalk maintenance and safety projects across Portland. The city estimated the tax will cost the average Portland driver who uses gas-powered vehicles about $2.50 per month. The city’s gas tax was introduced in 2016, and renewed by voters in 2020. It has generated nearly $150 million for the transportation bureau over eight years.

MILEAGE FEES

The Mineta Transportation Institute (MTI) has released the results from its 15th annual survey in a series that explores public support for raising transportation revenue through higher federal gas taxes or a new mileage fee. The headline may be that for the first time a majority of respondents supported some form of mileage fee. In reality, the poll results indicated that support was soft in many ways.

A majority of respondents (51%) supported replacing the federal gas tax with a mileage fee where the rate would vary according to the vehicle’s pollution emissions.  “More than half of respondents supported not only the pollution-rate mileage fee but also a new ‘Business Road-Use Fee’ that would be charged to delivery and freight trucks (58%) or to taxis and ride-hailing vehicles (53%).

The problem comes from the fact that the least popular mileage fee option was a flat-rate fee on all travel. Support for this option was only 39%.” The trend line is positive. “Support for the flat-rate mileage fee grew from just 22% in 2010 to 39% in 2024. Similarly, support for the pollution-rate version grew from 33% in 2010 to 51% in 2024.” 

Other data indicated how uninformed people are about the realities of taxes and road funding. The survey also assessed public knowledge about federal gas taxes and support for the idea of raising the federal gas tax rate by 10 cents per gallon. Only 2% of respondents knew that the federal gas tax rate has not been raised in more than 20 years. Support for raising the federal gas tax has risen since 2010. 

Almost three-quarters of respondents supported raising the gas tax rate if the revenue would be dedicated to maintaining streets and highways (74% support). In contrast, far fewer respondents supported the same gas tax increase if the revenue were spent for undefined “transportation” purposes. 70% supported raising the rate if the revenue were dedicated for safety improvements. In contrast, only 35% supported the rate increase if the money were spent more generically “for transportation.” The majority also supported the concept of using some gas tax revenue to support public transit (71%).

NEW YORK ECONOMY AND BUDGET

Earlier this year City employment reached 100% of its pre-pandemic level. Following a gain of more than 77,000 jobs last year from the final quarter of 2022 to the final quarter of 2023 (Q4 to Q4), the Independent Budget Office (IBO) projects that the City will gain over 91,000 jobs in 2024. The mix of new jobs however, is not following trends seen pre-pandemic. This has implications for the lower end of the City’s economy. Certain lower-wage industries that provide key entry level positions, such as leisure and hospitality and retail trade, remain well below their pre-pandemic employment totals.

IBO does not expect the retail sector to reach its pre-pandemic employment in the foreseeable future, in part resulting from shifts in consumer spending away from brick-and-mortar retail to greater proportions of online purchases. At the same time, The stability of high-wage jobs during the pandemic, in conjunction with a stable outlook for Wall Street, indicates stability for the City’s tax collections and finances in the short run. The largest shares of IBO’s total tax forecast estimate are Real Property (44%), Personal Income (21%), General Sales (14%), and Corporate Taxes (9%), while the remaining taxes and audit revenue together reflect the remaining 12%.

So how does all of this impact the outlook for the pending FY 2025 budget? IBO anticipates budget surpluses exceeding the Administration’s Projections in 2024 and 2025 The higher 2024 surplus results from IBO’s forecast of approximately $129 million more in anticipated tax revenues and about $1.0 billion less in City spending than presented in the Executive Budget financial plan. With similar net tax and spending estimates as the Administration for 2025, using the 2024 surplus to pre-pay 2025 expenditures, IBO anticipates 2025 to also end with a surplus of around $1.1 billion.

IBO estimates larger gaps than the Administration. Starting in 2026 IBO’s projected gaps for 2026 ($6.2 billion) and 2028 ($6.0 billion) are well within the range that the City has closed in the past. IBO estimates a slightly larger gap of $7.9 billion in 2027 in part due to the Administration’s budgeted $1.0 billion in State funding for asylum seekers that the State has yet to commit to, which IBO estimates will be covered by City funds.

IBO anticipates substantially more funding will be needed, more than $605 million (all City funds) in 2025 for personnel costs across the uniformed agencies of Police, Sanitation, and Correction, largely to cover overtime costs. IBO estimates an additional $651 million will be needed from 2025 through 2027 to fully fund the current spending levels for the City Fighting Homeless and Eviction Prevention Supplement (City FHEPS) housing rental voucher program. To fund DOE programs previously funded by Federal Covid-19 aid, IBO estimates an additional $187 million will be needed in 2025 and $505 million in each of the following years.

NATURAL GAS AND CLIMATE

The Government Accounting Office (GAO) was asked to examine pollution from peakers across the nation. Those are plants designed to supply power during spikes in demand. There were 999 peakers in the U.S. in 2021, according to GAO’s analysis of the most recent Environmental Protection Agency (EPA) data. In 2021, peakers accounted for 3.1 percent of annual net electricity generation and 19 percent of total designed full-load sustained output for all power plants. The expansion of this generating source is being challenged across the country.

One reason is that GAO found that when operating, peakers emit pollutants like those from other power plants that use fossil fuels, such as nitrogen oxides and sulfur dioxide. According to EPA data, peakers operate less frequently overall than non-peakers, but when they do operate, they emit more pollution. A second reason is that GAO found that historically disadvantaged communities (i.e., census tracts with higher percentages of historically disadvantaged racial or ethnic populations) are associated with being closer to peakers. 

TRANSIT’S DILEMMA

A new report from a conservative research organization highlights a phenomenon plaguing many transit systems serving multiple jurisdictions. Coming out of the pandemic, these systems were confronted with a landscape that they did not design. The declines in ridership due to limits on economic activity were one thing. The move to remote work and the impact on ridership is making it’s true impact harder to emerge. There are signs.

There is a disconnect between ridership and funding sources in many metropolitan area transit grids. The ratio of operating fares to operating expenses has always varied and New York (at some 50%) was always an outlier in terms of how much of its revenue was supported by fares. The more typical setup was a funding source – often a sales tax – collected across multi-jurisdiction service areas. It worked well until the pandemic.

Now that sort of funding structure is being questioned in many areas in terms of both maintenance of existing systems as well as expansion of new systems. Suburban residents who have become less reliant on mass transit for basic commuting seem to be taking a different view. It is seen as harder to justify support for a system which holds down fares through other revenues.

Colorado just enacted a new tax on the fossil fuel industry that is projected to produce $285 million to fund mass transit expansion. That led to the release of the report. The report stated ridership decreased 46% and the operating budget increased 3% between 2019 and 2022. The system’s operating budget increased from $477 million in 2014 to $856 million in 2023 and its proposed budget for 2024 is $1 billion. Only 4.4% of the district’s operating costs were covered by fares as of Jan. 31, 2024.

From 2020 through 2022, 66% of the system’s revenue came from sales and use taxes in participating counties. Federal grants provide approximately 25% of its operating costs.

ASCENSION HEALTH

The issue of cybersecurity is back in the spotlight as the result of ransomware attacks on healthcare facilities, providers and insurers. The biggest current situation involves Ascension Health and its 140 national hospital system. An ongoing ransomware attack against Ascension has moved basic patient care to pre-computer conditions. The attack has slowed It’s an ongoing debate operations, limited utilization and revenues.

This is the second major ransomware attack against a healthcare entity. Earlier this year there was a successful attack on United Health Care’s Change Healthcare. Change handles one-third of the nation’s patient records. The threat of the release and/or misuse of that data has been an often effective cudgel to be wielded by attackers.

One has to ask if United Health Care’s decision to pay a $22 million ransom encouraged future efforts. It is an ongoing debate with arguments on both sides. Ascension was hit as it was in the midst of an improving financial trend. Ascension reported income from recurring operations of $15 million for the nine months ended March 31, 2024 as compared to a $1.1 billion loss from recurring operations for the comparable prior year period.

Additionally, Ascension’s recurring operating performance for the three months ended March 31, 2024 improved $622 million over the comparable quarter in the prior year. For Q3 FY24 YTD, Ascension experienced an increase in overall same facility volume over the comparable period in the prior year, most notably driven by total inpatient admissions, emergency visits and total surgery visits.

Ascension’s net income for the three months ended March 31, 2024, including both operating and nonoperating items, was $581 million which represents a $1.3 billion turnaround from the same period in the prior year. For the nine months ended March 31, 2024, Ascension’s net income improved $2.2 billion over the prior year. It remains to be seen when systems will be restored and how much of an ultimate cost the system winds up bearing.

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

NYC TAX GIMMICK

The average single family New York City homeowner pays $1,088 a year for water. Landlords pay for water, but pass along the costs to tenants. The increase, if it goes through, would amount to another $93 a year on water bills, according to a proposal acquired by The New York Times. We do not see this increase by the city as being a real credit issue. Rather, it is an indicator of the policy gap between the Mayor and the City Council. Neither want to raise taxes reflecting the sway of outer borough homeowners and the large commercial real estate interests which are heavy sources of campaign money.

It is a sign of the Mayor’s weakening political outlook and the fact that he is up for reelection in 18 months. He did get control of the schools from the legislature in an unexpected win for the Mayor. The period between now and the 2025 mayoral election will be a difficult one as COVID money will be effectively gone and the impact of migrants, homelessness and crime will continue to drive spending.

While the Mayor is proposing new taxes (no matter what he calls it), the NYC Independent Budget Office (IBO) has released data indicating that the City may have more money than it thinks. IBO estimates the City will spend $800 million less on Citywide staffing costs over the rest of FY 2024. This is the largest contributor to IBO’s $1.1 billion surplus projection. IBO’s estimates costs associated with asylum seeker services to be $3.3 billion less than what the Administration is projecting.

We are not arguing about whether the sky is falling. We just don’t see a stable current outlook for the city’s credit.

ILLINOIS BUDGET

The Civic Federation of Chicago has taken a look at the Governor of Illinois’ proposed budget. It notes that the proposed FY2025 budget represents the first year the State has had an initial budget deficit to close since the start of the pandemic. Based on current projections, the State’s revenues are expected to come in lower than projected expenditures in FY2025, resulting in a deficit of $970 million. The Governor’s proposal introduces a number of tax changes and enhancements that would close the budget deficit if approved by the General Assembly, thereby bringing the budget into technical balance. 

It is far from certain that the Legislature will support some new taxes. The Governor has asked agency leadership teams to prepare for a budget scenario with $800 million less in revenue. The $52.7 billion proposed General Funds operating budget is a 4.5% increase from estimated year-end FY2024 spending of approximately $50.4 billion—excluding FY2024 supplemental appropriations of $1.2 billion. Agency spending (excluding pension contributions and transfers out of the General Funds for debt service and other purposes) will increase by $1.9 billion, or 4.9%, from the FY2024 year-end estimate to $40.4 billion.

General Fund revenues are proposed at approximately $53.0 billion for FY2025, an increase of $779 million, or 1.5%, from the FY2024 year-end estimate of $52.2 billion. The State is projected to end FY2025 with a $128 million surplus after a proposed $170 million contribution to the rainy day fund. The Governor’s proposed budget fully meets the State’s 50-year pension funding plan by making the statutorily required General Funds pension contribution of $10.1 billion in FY2025. It also proposes increasing the 50-year funded ratio goal from 90% to 100%, which will add three additional years to the funding payment plan and extend its end date from FY2045 to FY2048. 

MISSISSIPPI MEDICAID

In February, the Mississippi House passed a bill that would offer coverage to people with incomes up to 138 percent of the federal poverty level, or just over $20,000 a year for a single person. The bill included a work requirement, but it also contained a provision ensuring that the expansion could move forward if the federal government rejected the work requirement. When the bill moved to the Senate, only a scaled back measure was approved.  The Senate version limit eligibility to people below the federal poverty line. The Senate version would have taken effect only if the Biden administration allowed the work requirement.

Early last week, an agreement between the chambers was released: Coverage would be extended to people with incomes up to 138 percent of the federal poverty level, as called for under the Affordable Care Act, but new recipients would be required to work at least 25 hours a week to get benefits. The work rule would likely have been a non-starter as has been the case in courts throughout the country. Nevertheless, it was clear that nothing would get through the Senate without work rules. This moved the House Speaker to announce that he wanted to put the question directly to voters. “It became apparent that opinions still differed on the best way to address our health care crisis,” he said in a statement.

He proposed a two-part ballot initiative that would ask residents if they supported Medicaid expansion, and if so, whether it should include a work requirement. But the suggestion was dismissed by state senators.

COLLEGES

As is often the case in the wild, it’s the smaller members of the herd who become prey. This is becoming increasingly true in the small private college sector.

On April 25, the University of Saint Katherine, an Orthodox Christian college in San Marcos, California will close at the end of the spring 2024 semester. Founded in 2010, its narrow focus limited demand. Those limits were amplified by the pandemic. Now, the institution was no longer able to meet its financial obligations due to “a steep shortfall in operating cash.”

And on April 29, Wells College in Aurora, New York revealed it would be closing at the end of the current semester, after 156 years of operation. Wells was for much of its history a women’s college. Enrollment had fallen from about 500 students several years ago to 357 in fall 2022, it lost money in five of the last 10 available fiscal years.

The cost pressures continue at institutions of all sizes. Pennsylvania State University is offering buyouts to employees at its Commonwealth Campuses. Staff that are eligible for the program include tenured or tenure-line faculty, academic administrators and staff who are full-time employees and not on fixed-term contracts. The primary reason for the offer is that “enrollment has declined significantly at the Commonwealth Campuses, in aggregate, over the past 10 or so years while the number of faculty and staff at the campuses has remained relatively flat.”  

CALIFORNIA WATER

The 2023 Water Year (WY) — which spanned from Oct. 1, 2022, through Sept. 30, 2023 — brought 4.1 million acre-feet of managed groundwater recharge and a total rise in groundwater storage of 8.7 million acre-feet, according to the California Department of Water Resources. The 4.1 million acre-feet recharge volume was equivalent to the entire storage capacity of Shasta Lake, the largest above-ground reservoir in California. Of the total recharge amount, 93 percent — or 3.8 million acre-feet — occurred in the agricultural center of the state – San Joaquin Valley.

Although WY 2023 ranked as the 8th wettest year in the last 50 years, with nearly 100 percent recovery of surface water reservoir levels, long-term groundwater storage in aquifers remains in a deficit due to decades of pumping that often exceeded the replenishment. In WY 2023, increased surface water supply led to a significant reduction in statewide groundwater extraction, amounting to a total annual extraction of 9.5 million acre-feet, a stark contrast to the 17 million acre-feet extracted in WY 2022.

CALIFORNIA TAX INITIATIVE

A ballot initiative, championed by the California Business Roundtable and funded largely by real estate interests, would require voters to approve taxes passed by the Legislature and would raise the voter-approval threshold for some local taxes to two-thirds. It would also dictate that the Legislature must approve fees that the administration can currently impose and could invalidate some already-passed taxes unless they are re-approved under new rules. The deadline to remove qualified measures is about seven weeks away.

CALIFORNIA BUDGET

Governor Gavin Newsom released his May Revision proposal. The Governor’s revised budget proposal closes both this year’s remaining $27.6 billion budget shortfall and next year’s projected $28.4 billion deficit. The revised balanced state budget cuts one-time spending by $19.1 billion and ongoing spending by $13.7 billion through 2025-26. This includes a nearly 8% cut to state operations and a targeted elimination of 10,000 unfilled state positions.

The Governor points to two primary factors pressuring the budget. First, the state’s revenue, heavily reliant on personal income taxes including capital gains, surged in 2021 due to a robust stock market but plummeted in 2022 following a market downturn. While the market bounced back by late 2023, the state continued to collect less tax revenue than projected in part due to something called “capital loss carryover,” which allows losses from previous years to reduce how much an individual is taxed.

Second, the IRS extended the tax filing deadline for most California taxpayers in 2023 following severe winter storms, delaying the revelation of reduced tax receipts. When these receipts were able to eventually be processed, they were 22% below expectations. Without the filing delay, the revenue drop would have been incorporated into last year’s budget and the shortfall this year would be significantly smaller.

The structure of the state’s tax scheme which depends on a few large earners and their capital gains has played a role in the deficit calculations. Capital gains tax revenues that exceed eight percent of total general fund revenues are deposited into its Budget Stabilization Account (BSA). In 2021 capital gains realizations hit an all-time high of $349 billion. Conversely, the May Revision forecast projects that capital gains realizations fell to approximately $156 billion in 2022 and $137 billion in 2023.

The May Revision maintains the Governor’s Budget withdrawal of approximately $12.2 billion from the BSA, as well as $900 million from the Safety Net Reserve. However, the May Revision spreads the use of the BSA withdrawal over two fiscal years, utilizing $3.3 billion in the 2024-25 fiscal year and $8.9 billion in the 2025-26 fiscal year. This will leave a balance of $22 billion in the BSA. Nonetheless, the Revision includes some $8.2 billion of spending cuts. They will generate negative responses especially for their impact on education

The Revision includes a reduction of $510 million in ongoing General Fund support for the Middle Class Scholarship program; reduction of one-time $72.3 million General Fund in 2023-24, $348.6 million General Fund in 2024-25, and $5 million General Fund in 2025-26 for school-linked health partnerships; an ongoing reduction of $80.6 million General Fund to reflect the deactivation of 46 housing units across 13 prisons, totaling approximately 4,600 beds. The May Revision includes additional and adjusted support from revenue sources and borrows internally from special funds.

ESG IN COURT

An Oklahoma County District Court Judge Sheila Stinson issued a temporary injunction blocking an Oklahoma state law which would prohibit state agencies from investing with financial firms that boycott energy companies for no “ordinary business purpose,” because the companies engage in “fossil-fuel-based energy” and do not intend to meet environmental standards.

NEW YORK STATE CANNABIS

It has been evident merely from empirical evidence that the rollout of the legalization of cannabis in New York State has been a “disaster”. A new report from the State Office of General Services documents exactly how much of a disaster it is. Some 90 percent of applicants for cannabis businesses had failed to secure licenses. There is a waiting list includes 1,200 business that submitted applications last fall.

Here’s where the process made things worse. In order to have an application reviewed, an applicant had to spend thousands of dollars to secure properties where they intended to set up shop. That 1,200 applicant waiting list was a huge hurdle as the cannabis agency had the capacity to vet only 75 applications at a time. The execution of the approval process was inept as the regulators also denied an additional 309 applications without telling the applicants, some of whom have waited almost two years for a decision.

The agency itself is a bureaucratic nightmare. The responsibility for vetting license applicants is spread across four units of the agency, each with its own spreadsheet for tracking applications. Most other agencies that deal with licensing have a single person assigned to each license. At least nine staff members touch each cannabis application. But no one is responsible for seeing them through to completion. There are eight senior officials who report directly to the executive director but enforcement and licensing, fall to just two of them.

It was announced that the current head of the agency would not have his appointment renewed.

CALIFORNIA AND FIXED ELECTRIC CHARGES

The California Public Utilities Commission approved a plan which will apply to the rates charged by investor-owned utilities. Starting next year, most customers of those companies will be required to pay a $24.15 monthly charge. Low-income customers will pay $6 to $12 a month. The revenue from the fixed charge would be paired with a roughly 20 percent reduction in rates.

The change comes in the wake of seriously reduced net metering payments which have negatively impacted growth of residential solar. The lowering of net billing and the imposition of fixed rates reflect the reality that the investor-owned utilities are transferring more financial risk to ratepayers and away from stockholders. It also coincides with an increasing number of findings of fault by the IUOs in association with wildfires.

DALLAS TRANSIT AND THE CITY’S BUDGET

Dallas Area Rapid Transit (DART) collects a 1% sales tax in all 13 of its member cities. The transit agency collected over $400 million in Dallas annually for the last two years, sales tax data shows. Now some Dallas City Council members are looking at that revenue stream and asking why it should not be used to fund general pension funding requirements.

The city faces a $3 billion shortfall in its police and fire fund, which administers the pension program for over 10,000 current and retired officers. The pension fund for civilian employees also suffers a $1 billion shortfall, according to city officials. In the past, city officials have considered liquidating more of its real estate portfolio to put more cash into the funds. They have also recommended seeking voter approval to change contribution rates for the employees’ retirement fund.

Pressure to address the pension problem stems from the fact that the City must present a plan to the State to fund the pension shortfalls over a thirty year period. The state legislation requiring the plan was passed in direct response to funding pressures which potentially would impact pension payments. Holding taxes down won’t fund the pension problem.

POPULATION

Large cities in the Northeast and Midwest grew in 2023, reversing earlier population declines, according to data released by the U.S. Census Bureau. Cities with populations of 50,000 or more grew by an average of 0.2% in the Northeast and 0.1% in the Midwest after declining an average of 0.3% and 0.2%, respectively, in 2022. Those in the West went up by an average of 0.2% from 2022 to 2023. Cities in the South grew the fastest – by an average 1.0%.

San Antonio, Texas, added more people (roughly 22,000) than any other city in 2023, reclaiming its No. 1 spot on the list of gainers and pushing it close to the 1.5 million population milestone. Detroit gained some 2,000 residents and while the absolute number is nit large, the breaking of a multi-decade trend is. In Chicago, losses continue but at a slowing rate. It remains the nation’s third largest city. New York, New York, remained the nation’s largest city as of July 1, 2023, with almost 8.3 million people, followed by Los Angeles, California, which reached nearly 4 million people.

The nation’s housing stock grew by about 1.6 million units between July 1, 2022, and July 1, 2023, reaching a total of 145.3 million. The 1.1% increase was nearly the same as the 1.2% increase between 2021 and 2022. California had the largest number of housing units (14.8 million), followed by Texas (12.4 million) and Florida (10.5 million). Falls Church, Virginia, was the fastest-growing county; its housing stock increased by 13.5% between July 1, 2022, and July 1, 2023, followed by Rich County, Utah (8.5%), and Jasper County, South Carolina (7.1%). Wasatch County, Utah, and Billings County, North Dakota, were tied for fourth place with 6.1%.

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

TRI STATE LOSES LARGEST PARTICIPANT

This week, the electric cooperative United Power will officially end its 7 decade relationship with Tri-State Generation and Transmission. United Power must make a net payment of $627 million to end its contract early. That number was the result of a court-mandated recalculation of the exit fee required by Tri State. The Federal Energy Regulatory Commission that came up with a formula for calculating the exit fees of Tri-State members who want to break their contracts. Initially, Tri State asked United for $1.2 billion. A major sore spot for United Power and the La Plata Electric Association in Durango is a cap of 5% on the amount of energy that cooperatives can generate on their own. 

The changes are being driven by the cooperative’s larger customer as much as anything. “We have industrial and commercial members who want a different fuel mix in a quicker time frame,” according to Tri State management. Tri-State has been working with its member cooperatives on a contract change that would allow them to get more of their electricity from other sources. Plans filed with state regulators call for Tri-State to get 50% of its power from clean-energy sources in 2025 and 70% by 2030. In addition, the company expects to cut its greenhouse gas emissions in Colorado by 2030 by 89% from 2005 levels.

United Power will still be paying to use Tri-State transmission lines and will buy roughly 30% of its power from the utility. Gabriel said United Power has signed four contracts with Tri-State, one of which will run for 20 years. United Power provides electricity to about 300,000 people with demand growing from 8% to 9% a year.

KENTUCKY COAL VS. JOBS?

For decades, northern Kentucky has had a significant aluminum smelting industry. It benefitted from an availability of locations for plants as well as access to coal for low-cost power and the Ohio River for transportation. It comes as no surprise then that Century Aluminium would like to build its plant in Northeast Kentucky. Century is the largest producer of primary aluminum in the United States. Like other entities in energy intensive industries, Century is under pressure to reduce the carbon footprint associated with its smelter operations.

Century already operates a smelter in Sebree, KY and has an idle smelter in Hawesville, KY. The new plant was selected for a cost share of up to $500 million, pending award negotiations, from the U.S. Department of Energy to support the proposed project as part of the Biden administration’s efforts to decarbonize key U.S. industries. There are only four operating primary aluminum smelters left in the U.S., and Century’s proposed plant would be the first built in 45 years.

According to the Department of Energy, Century’s new smelter would lower emissions by 75% relative to a traditional smelter due to “energy-efficient design and use of carbon-free energy.” It is the term carbon-free energy that is causing concern that the company might not be able to obtain sufficient clean power to allow the proposed plant to meet those emissions benchmarks. It will create 1,000 permanent jobs represented by the United Steelworkers union, and 5,500 additional construction jobs. Salary and benefits packages for workers at the smelter are expected to be over $100,000 annually, according to the company.

The issue comes up after coal advocates in the Kentucky legislature passed several bills aimed at federal environmental regulatory actions and slowing down the process of closing coal fired generation.  Bills creating a new review board to analyze fossil-fuel power plant retirement decisions became law after the legislature overrode a gubernatorial veto. A second bill giving $3 million to the State Attorney General office from the state’s Budget Reserve Trust Fund or “rainy day” fund to create an “electric reliability defense program” also made it past the veto process. The money is intended to fund litigation challenging the recently published rules on coal fired power generation from the EPA.

While this is all unfolding, Louisville Gas and Electric Co. and Kentucky Utilities Co. (LG&E and KU) announced that they will replace two aging coal generation units at Mill Creek Generating Station in Kentucky—a combined 600 MW—with a 645-MW GE Vernova hydrogen-ready 7HA.03 gas turbine. The utilities have made it clear that they are making market based rather than ideology based decisions as to how to develop their generation base.

NUCLEAR

Georgia Power announced that Votgle 4 is in full commercial operation, seven years later than initially forecast. Their total price tag also blew past the original cost estimate of $14 billion to around $35 billion. Georgia Power owns the largest share in the Vogtle expansion with 45.7%, followed by Oglethorpe Power (30%), the Municipal Electric Authority of Georgia (22.7%) and Dalton Utilities (1.6%). The milestone allows the Votgle assets to be fully absorbed into customer rates. Estimates put the additional residential cost at about $14 per month for 1,000 kwh of power.

A federal appellate court has rejected environmentalists’ challenges under the National Environmental Policy Act (NEPA) and other laws to a decision by the Nuclear Regulatory Commission (NRC) to provide an exemption to a license renewal application deadline for the continued operation of California’s Diablo Canyon nuclear power plant, finding the agency did not act arbitrarily or capriciously. 

CHICAGO TRANSIT

Legislation has been introduced by two Illinois legislators which would merge the Regional Transit Authority (RTA), the Chicago Transit Authority (CTA), Metra and Pace. The idea is to reduce administration, competition for funding and an unwieldy governance structure. It comes in the wake of recent estimates of a $750 million deficit to result from the end of COVID related federal aid.

Governance of the new body would be in the form of nearly 20 voting members, down from the nearly /50 split between the current agencies. Three members would be appointed by the governor. The mayor of Chicago and president of the Cook County Board would appoint five each. One member would be appointed by each of the county executives of DuPage, Kane, Lake, McHenry and Will counties. 

Six non-voting members would also join the board: the secretary of the Illinois Department of Transportation, the chair of the Illinois Tollway, an organized labor representative chosen by the governor, the chair of the agency’s citizen advisory board and a representative each for the business and disabled communities, chosen by the board. This is considered streamlining by Chicago standards.

It is not clear what the impact of these proposed changes would be on the credit supporting debt issued by the agencies.

TRANSIT FUNDING CHALLENGES

In 2020, voters in Austin, TX approved the Austin Transit Partnership (ATP) — a local government corporation created to finance and oversee the development of a light rail system in the city. The vote also included approval of local taxes to support the plan. With that support, the ATP thought it would be prudent to go to the Texas courts to preemptively obtain validation for bonds it proposed to issue.

That process is now being challenged by Texas’ ideological firebrand, Ken Paxton. The Attorney General’s Office has to sign off on all bonds issued by local jurisdictions like cities, counties and local government corporations like ATP. He has assembled a group of plaintiffs to object to the validation of the bonds. The issues seem to come down to the meaning of words with the parties taking opposite views of what the law would require.

Property taxes in Austin are comprised of two components – maintenance and operations (M&O) rate and a levy for debt service. Raising the debt related rate requires an election and can only be done for a fixed dollar amount. The city argues by transferring M&O property tax revenue to a local government corporation like ATP effectively allows ATP to decide what the money can legally be used for. Once ATP receives the cash, it is “contract revenue,” not tax revenue, and can be used to pay down debts.

The City also argues that language in a resolution passed by the Austin City Council before the 2020 election called a “Contract with the Voters“, which says any changes to Project Connect require approval of the council, CapMetro and ATP board. All three bodies voted to approve the significant changes to the plan in 2023.

In 2021, the Colorado legislature enacted bills to[JK1]  implement Proposition 117 to fund transportation projects throughout the state. Just like in Austin, conservative opponents are relying on interpretations of the law to halt funding. In this case, the restrictions in question are seen as violating the state’s TABOR restrictions which limit taxes.

The law created separate fees for a number of transportation-related activities like Uber and Lyft rides, food delivery and fuel. The revenue from each fee was then directed to separate government-owned businesses known as enterprises, each of which was individually projected to take in less than the $100 million limit over five years set out in Proposition 117. At issue is whether the law requires the fees to be evaluated for compliance as a whole or whether each fee is valuated individually.

In ruling against those challenging the fees, a district court judge found that each enterprise and fee had “differing purposes” and thus did not need to be combined. The bill’s sponsors are clear that they created separate fees and enterprises specifically to conform to Proposition 117. 

COLORADO BALLOT INITIATIVE

Protect Colorado, is an advocacy group funded with millions from Chevron Energy, Occidental Petroleum Company and other smaller oil and gas companies operating in Colorado. It has submitted a ballot initiative to be voted on in November designed to make it harder for voter initiatives to make it to the ballot. To that end, it developed Initiative 77.

If approved, Proposed Initiative 77 would require all future ballot measures to appear below an extensive economic impact statement, which must include the estimated effect on jobs, state and local tax revenue and the overall state gross domestic product. The Colorado Secretary of State’s Office announced the backers had collected enough signatures to qualify for the ballot.

The measure would require the legislature’s chief economists to review potential economic impact statements submitted by “any interested party.” Within five days, the economist must write a summary with a range of all the qualifying statements. Protect Colorado is currently collecting signatures for another initiative to ban state and local governments from restricting “energy choice,” which could block policies to cut climate-warming emissions by limiting natural gas access in new buildings. 

CALIFORNIA POPULATION

A rebound in legal immigration and drop in Covid-19 deaths drove an increase of 67,000, or 0.2 percent, in 2023 in California’s population. The data provides a contrast to the popular notion that folks are pouring out of California as fast as they can. California still lost more residents to other states than it gained from them — as has been the case for two decades — but the number of people leaving for other parts of the country fell to pre-pandemic levels. The net loss of California residents to other states fell from a peak of 356,000 in 2021 to 91,000 in 2023.

One of the things lost in much of the commentary on California’s population is that the phenomenon of residents leaving for other states is common to immigration centers like California and New York. Those places are the first stop for immigrants who often move through to other destinations. The housing situation would likely accelerate that movement of new immigrants inland. California added 116,000 units, or 0.8 percent of the state’s inventory. Around half of those were single-family homes, while most of the rest were multi-family homes.

CLIMATE AND THE MILITARY

It’s not the first thing that comes to mind when one thinks about things military but it turns out that the US DOD has been out front in many ways on the issue of climate change. The location of many facilities often puts them at risk of things like rising sea levels and flooding. To that end, DOD has been assessing the resilience of many of its installation for a decade.

The Air Force Research Laboratory is the primary scientific research and development center for the Department of the Air Force. AFRL officially launched in 1997 to consolidate the four former Air Force laboratories and the Air Force Office of Scientific Research. Its primary focus is on weapons development but its total scope includes some 40 areas of technology.

Now the DOD is looking at potential climate mitigation efforts from the adoption of new technologies. AFRL has signed a two-year subcontract to develop a hydrogen fuel cell microgrid (H2MG) that could be replicated by the US Department of Defense. The H2MG project will see gaseous and liquid hydrogen production, storage and utilization technologies integrated into an existing 1.5MW solar microgrid system at the Joint Base Pearl Harbor Hickman (JBPHH) in Hawaii.

That solar microgrid which would support the project has been in operation for eight years at the base.

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.

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