Joseph Krist

Publisher

This is the final MCN of 2024. We make no prediction as to the impact of a return to the Presidency by Mr. Trump on the municipal bond market. The level of disruption anticipated to occur is impossible to understate given the involvement of idealogues and the wildcards posed by the involvement of Messers. Musk and Kennedy. We’re already seeing it in the inability of Congress to pass a continuing resolution to fund the government. It will be important for investors to look beyond the billowing clouds of smoke and dust which we are bound to see in the first 90 days of Trump2.0.

It comes at a time of weak leadership especially at the local level. The list of indictments in New York City grows almost daily. The mayor of Chicago may have gotten a budget passed but it came at a huge political cost leaving the Mayor significantly weaker. In Los Angeles, the deputy mayor for public safety is under investigation for making bomb threats against the building he works in. None of this inspires confidence.

The pending campaign for Mayor in New York will be disruptive enough but it will come as the Governor faces significant headwinds. Congestion pricing is turning into a lose-lose for the Governor as it may be stopped by the Trump administration. A plan to change school funding in NYS was dropped last year in the face of strong opposition. The gubernatorial election in New York is 2026 but it will complicate this year’s budget negotiation.

But that is next year. Now, it’s time to enjoy the holidays and take a bit of rest. So, Merry Christmas to you and best wishes for a Happy New Year. We’ll be back for the January 6, 2025 issue. Be well, be safe, and be good to yourselves.

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CHICAGO GETS A BUDGET

The Chicago City Council voted to pass Mayor Brandon Johnson’s final budget proposal calling for $17.3 billion of spending.  The plan represents quite a retreat from the Mayor’s original plans which relied on the revenue side of the budget to achieve balance. They called for a $300 million property tax increase. The budget proposal approved by the Council included no property tax increase. Instead of increases in property taxes, a variety of other taxes would be increased. They are designed to be paired with some small expense cuts.

One key takeaway: there were no layoffs. The city used a series of one-time fixes to help close the gap that are unlikely to be accessible next year. From the start, that included $139.6 million from using surplus revenues from prior years, a TIF surplus that will bring in $54 million more than in 2024, and improved debt collections. It is clearly a stop gap budget reflective of the City’s political divide and poor management by the Mayor of the politics of the budget.

The expense “reductions” include some $286.3 million have come from planned “operational efficiencies,” which the mayor’s budget team has not fully detailed. Personnel savings — in this case, getting rid of vacant positions — total about $42.7 million. Johnson’s initial proposal cut the city’s headcount by 743 positions. Instead, the Mayor proposed $1 million in staff reductions at the mayor’s office, $2.8 million in “middle management cuts” and $1.1 million in shifting costs from Business Affairs and Consumer Protection to a “cable TV origination fund.” 

On the revenue side, $165.4 million will come from raising various city taxes and fees including the city’s lease tax charged on things like car leases and software licenses, the tax on streaming services, parking and valet rates and plastic bags, the added speed cameras, and a mix of other smaller fee and service increases. Streaming taxes will rise from 9% to 10.25%, and lease taxes will go from 9% to 11%. Taxes on garage and valet parking will climb to 23.25%, up from 22% on weekdays and 20% weekends. The plastic bag tax would climb to 10 cents.

One assumption sticks out as likely unrealistic: $215.4 million in “structural” fixes came from changes in how the city assumes revenues will come in next year. The biggest was the hope that CPS would make good on its promise to pay the city for a $175 million pension bill for non-teacher employees. With its own longstanding fiscal problems and a shared tax base, that would seem to be a shaky assumption. Another is a provision to levy a fee to cover the cost of large events like Lollapalooza and NASCAR races.

At the end of the day, the budget barely made it through and it did nothing to truly address the concerns about structural balance and the City’s poor pension position. Our view is that the ratings should carry a negative outlook in that it is likely that a similarly difficult budget environment will prevail going forward with the Mayor’s bucket of good will steadily leaking.

IRA FUNDING

One of the immediate concerns stemming from the results of the November elections was how loan funding under the Inflation Reduction Act would be accomplished before a change in the Presidency in January, 2025. The fear is that agencies counting on approved but not closed loans for a variety of projects might never receive the money under a Trump administration. Some notable projects for manufacturing were seen as being at risk.

Recently, a couple of loan closings were affected to enable substantial manufacturing projects to continue to move forward. the U.S. Department of Energy’s (DOE) Loan Programs Office (LPO) announced the closing of a direct loan of up to $9.63 billion to BlueOval SK LLC (BOSK) for the construction of up to three manufacturing plants to produce batteries for Ford Motor Company’s future Ford and Lincoln electric vehicles (EVs).

Together, the plants, one located in Tennessee and two in Kentucky, would enable more than 120 gigawatt hours of U.S. battery production annually. The three facilities created more than 5,000 construction jobs as the plants were being built and will create up to 7,500 BOSK operations jobs. BOSK is a joint venture between Ford Motor Company (Ford) and SK On, a world leading Korean EV battery manufacturer. 

The U.S. Department of Commerce awarded Micron Technology up to $6.165 billion in direct funding under the CHIPS Incentives Program’s Funding Opportunity for Commercial Fabrication Facilities. The loan is part of a projected $100 billion investment to develop manufacturing facilities outside Syracuse, NY. Micron is the only U.S. manufacturer of memory chips. A four factory production complex is promised to create 9,000 manufacturing jobs in an area which has seen manufacturing jobs disappear.

INSURANCE

In early 2023, the Senate Budget Committee began a series of hearings examining the risks that climate change poses to insurance, mortgage, and property markets in coastal and wildfire-exposed communities. Florida has the highest average statewide non-renewal rate; Texas is not even in the top ten. Southern New England, the Carolinas, New Mexico and counties in the Northern Rockies, Oklahoma, and Hawaii. In 2023 alone, all 10 of the top 10 states ranked by insurance non-renewal rate were either coastal states or states with counties that experienced an average annual loss of $10 million or more from wildfire damage.

The states where nonrenewal rates are the highest are California, Oklahoma, Louisiana, Mississippi, Florida, North Carolina, and Massachusetts. In the case of North Carolina, non-renewals were already an issue before this year’s hurricane disaster. In 2023, it had the third highest non-renewal rate of any state, and in 2018 it was the highest by a significant margin. Those numbers are expected to spike in the aftermath of Hurricane Helene. Likewise in California where wildfires continue as we go to press.

The report highlights the fact that it is not just coastal areas susceptible to climate change risks. Land-locked Oklahoma ranked 7 of 10 by non-renewal rate in 2023 and 5th among states with the highest growth in non-renewal rate from 2018 through 2023. High rates of non-renewal in Oklahoma are likely explained by increasing winds and hail from severe convective storms. Fire risk is driving non-renewals in New Jersey and Montana.

The long-term implications – sky-high insurance premiums and unavailable coverage will make it nearly impossible for anyone who cannot buy a house in cash to get a mortgage and buy a home. Ultimately, house prices and values will drop with an accompanying impact on local revenues. Much has been written about the potential impact of a second Trump administration on regulations and the climate. That debate is unlikely to alter the current trends in residential insurance. In the end, insurance may be what drives responses to climate change rather than rhetoric or even legislation.

TAMPA STADIUM VOTE

The Pinellas County Commission voted 5-2 to approve its $312.5 million share of bond financing for the Tampa Bay Rays’ proposed $1.3 billion ballpark in St. Petersburg, Florida. The vote follows the approval received from the City of St. Petersburg for its share of the planned financing. The County was lobbied heavily prior to the vote. The most prominent lobbyist was the MLB Commissioner.

Pinellas County commissioners voted in July to approve $312.5 million in public financing for the stadium using tourist taxes to pay off the debt. The commission voted 6-1 in October to delay votes on issuing bonds due to uncertainty over where the Rays would play the 2025 season after Hurricane Milton tore off the roof at Tropicana Field. Since then, the makeup of the Commission has changed. It is impossible to understate the role of the MLB Commissioner.

One prior vote in opposition was flipped as a result of that effort. “While I do not trust the owner of the Rays [Stu Sternberg], I trust Mr. Manfred,” that commission member said. “He is the reason I am voting yes. MLB is aware of the several instances where the Rays organization has intentionally tried to sabotage the very deal they agreed to. As a result of this vote, it is my hope that the Tampa Bay Rays will finally have an owner that our other wonderful local franchises have.

WATER WARS

Arizona Attorney General Kris Mayes filed a nuisance lawsuit against Saudi Arabia-based Fondomonte Arizona LLC, which has farming operations in La Paz county on the state’s border with California. Its operations consist on growing water-intensive alfalfa for use as feed for cattle in Saudi Arabia. These operations date back only 10 or 15 years but they are having a measurable effect on local water sources. There are currently no limits on the amount of water which the farm can consume.

According to a hydrology report commissioned by the Attorney General’s office, Fondomonte pumped 31,196 acre feet of water in 2023, enough for over 90,000 homes in the state, and uses more than 80 percent of the Ranegras Plain Basin’s water pumped each year. The State has already cancelled leases with Fondomonte covering state owned land. The goal of the lawsuit is for Fondomonte’s other operations to be declared a nuisance, its “excessive” groundwater pumping curtailed and an abatement fund established to address the damages it has caused, such as draining local wells. 

RISING FARES AND TOLLS

The Bay Area Toll Authority (BATA) will increase tolls at the region’s seven state-owned toll bridges by $1 on Jan. 1, 2025. This will be the third of the three $1 toll increases approved by the California Legislature in 2017 through state Senate Bill 595 and by voters through Regional Measure 3 in June 2018. The first of these toll hikes went into effect on Jan. 1, 2019 and the second on Jan. 1, 2022. The new toll will be $8.00. BATA also approved a plan which is projected to raise tolls to $10.00 in 2030.

Starting on January 1, toll rates on roads in Ohio, Oklahoma, Pennsylvania, New Jersey and New York are set to rise anywhere from 3% to 15% for passenger and commercial vehicles. The lowest increase is for drivers on the New Jersey Turnpike and Garden State Parkways at 3%. In Ohio, toll rates will rise an average of 7.7% for passenger vehicles as well as most commercial vehicles. Oklahoma will see the highest increases. Toll fares will rise 15% across the entire system of the Oklahoma Turnpike Authority, which operates 12 turnpikes. An automatic 6% increase every two years starting Jan. 1, 2027, to account for inflation has been authorized. 

New York’s MTA announced that it expects to raise bus and subway fares by $0.10 in 2025 to $3.00. Coming right after congestion pricing takes effect, the fare increase is alienating riders and drivers. It comes in the midst of negotiations between NYS and NJ to try and settle litigation against the congestion fees.

DEMOGRAPHICS

According to U.S. Census Bureau data released this week, the country’s population grew by almost 1 percent this year to surpass 340 million people, marking the fastest annual growth rate since 2001. Net international migration, which refers to any change of residence across U.S. borders (the 50 states and the District of Columbia), was the critical demographic component of change driving growth in the resident population.

With a net increase of 2.8 million people, it accounted for 84% of the nation’s 3.3 million increase in population between 2023 and 2024. This reflects a continued trend of rising international migration, with a net increase of 1.7 million in 2022 and 2.3 million in 2023. With a population gain of nearly 1.8 million — a change of 1.4% between 2023 and 2024 — the South added more people than all other regions combined, making it both the fastest-growing and largest-gaining region in the country. Within the South, Texas (562,941) and Florida (467,347) had the largest numeric gains, and the District of Columbia grew the fastest (2.2%) from 2023 to 2024.

In the West, California (232,570) and Arizona (109,357) had the largest numeric gains between 2023 and 2024, while Utah (1.8%) and Nevada (1.7%) grew the fastest. Just over 57.8 million people lived in the Northeast between 2023 and 2024. During that time, the number of residents increased by 0.76% — a gain of almost 435,000. Growth in the Northeast largely stemmed from net international migration (567,420).

The number of people moving from the Northeast to other parts of the country continued to slow as the region lost fewer residents via net domestic outmigration (192,109) in 2024 than in 2023 (278,245). Within the Northeast, New York (129,881) had the largest numeric gains, and New Jersey (1.3%) had the fastest-growing population.

The population in the Midwest increased by over 410,000 (0.6%) to a total population of 69,596,584 in 2024. The region had a net domestic migration loss of 49,214, far fewer than the net domestic outmigration of 89,787 in the previous year. The Midwest gained 406,737 people through net international migration and experienced a net gain of 52,741 from natural increase. Within the region, Illinois (67,899) and Ohio (59,270) had the largest population gains, while North Dakota (1.0%) and Iowa (0.7%) were the fastest-growing states. 

Three states saw their populations decrease slightly between 2023 and 2024: Vermont (-215), Mississippi (-127) and West Virginia (-516), up from two states that lost population between 2022 and 2023. Puerto Rico had a population of 3,203,295 in 2024 — a 0.02% decline over the prior year. Though Puerto Rico’s population declined, it did so at a much slower pace than in recent years, having experienced drops of 1.3% and 0.5% in 2022 and 2023, respectively. The U.S. territory did experience positive net migration (15,204), although this gain was offset by natural decrease, as there were far fewer births (18,219) than deaths (33,920). 

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

CYBER CRIME AND A RATING

Moody’s has affirmed Children’s Hospital Los Angeles’ (CA) (CHLA) Baa2 revenue bond ratings. The outlook has been revised to negative from stable. 

The negative outlook reflects challenges CHLA faces to stabilizing (and eventually growing) its unrestricted days cash on hand and total cash balances (inclusive of restricted funds) over the next several quarters owing to weak financial performance and high receivables balances related to the Change Healthcare cyber-attack. That attack occurred on February 21, 2024 but it was not until July 19, 2024, that Change Healthcare filed a breach report with OCR concerning a ransomware attack that resulted in a breach of protected health information. 

The most visible impact to the public was the interruption in processing charges and reimbursements to patients and providers. In this case, the difficulties at Change had a stronger impact. Like most of the children’s hospitals, CHLA’s reliance on state funding and reimbursement policies due to its high Medicaid exposure made it vulnerable to delays experienced by the State in receiving Medicaid revenues.

On top of the impact upon its non-Medicaid patient base, the result has been to pressure its unrestricted days cash on hand and total cash balances (inclusive of restricted funds) over the next several quarters owing to weak financial performance and high receivables balances related to the Change Healthcare cyber-attack.  

OAKLAND DOWNGRADE

Moody’s has downgraded the City of Oakland’s (CA) issuer, general obligation bond, and pension obligation bond ratings to Aa2 from Aa1. It also downgraded the city’s lease revenue bonds to Aa3 from Aa2. The outlook has been revised to negative from stable. It reflects Moody’s view that management has not made sufficient and timely budget adjustments to fully absorb the one-time pandemic relief monies that were used to fund operations, and declining revenue, in particular real estate transfer taxes. As such, the city has reduced its flexibility to address ongoing spending pressures.

Based on fiscal 2024 unaudited actuals, the city will record a $30.3 million deficit, and available general fund balance will remain solid at $211 million or 22% of revenue. While management has implemented a plan to reduce operating expenditures, they are still projecting to end fiscal 2025 with a $93.1 million deficit in their general purpose fund. The City is still feeling the effects of crime which accompanied the end of the pandemic. It had a major impact on economic activity and the City’s real estate market.

Underlying all of this is the political environment. The Mayor was recalled in November. While the City has a weak Mayor-strong Council structure, the recall in the midst of federal investigations still matters.

HOSPITAL RATINGS

Moody’s has affirmed Legacy Health’s (Legacy) (OR) A1 revenue bond rating. Legacy has approximately $700 million of debt outstanding. The outlook remains negative. We noted the potential merger of Legacy and Oregon Health & Science University earlier this year (6.17.24). Moody’s notes the strong possibility that a merger with Oregon Health & Science University (OHSU, Aa3 stable) will be completed by the middle of next year. 

Even with a merger, the resulting entity would still face lower than average profitability and cash position. This is blamed on high labor rates, the continued dependance on temporary labor, inflated length of stay, and unfavorable state regulations. All merger integration processes are complicated and rarely have they gone to plan. The merger agreement also includes provisions which would require a certain amount of Legacy’s unrestricted cash and investments to be transferred to an independent foundation. 

Over recent years, the trend towards consolidation by hospitals has reaffirmed the importance of larger balance sheets and liquidity. In some rural areas consolidation and scale allows providers to survive even in those tough markets and maintain credit quality. One example this week comes from North Dakota. Moody’s has affirmed Altru Health System ND’s (Altru) Baa3 revenue bond ratings.

Altru Health System is its region’s largest provider and is the primary referral hospital for a 17-county, 20,000+ square mile territory in northeastern North Dakota and northwestern Minnesota. While its patient base is spread over a huge area this does not totally offset very high leverage; a rural market with low population growth; somewhat challenging demographics; and a history of difficult physician, nursing, and staff recruitment given its remote location. Its sole community provider status does support better Medicare reimbursement. 

EV

General Motors will fold its Cruise subsidiary into its main operations and work to develop fully autonomous personal vehicles. It will bring to an end the company’s effort to develop an autonomous taxi model. It was one of these vehicles that hit and dragged a pedestrian during live street testing in San Francisco. Waymo, a unit of Google’s parent company, offers autonomous taxis in San Francisco, Los Angeles and Phoenix with plans to expand to Atlanta, Miami and Austin, Texas. 

CARBON CAPTURE

Project Tundra is a plan to install equipment that would capture emissions from Milton R. Young Station, a power plant near Beulah, North Dakota. The electric cooperative behind the project has estimated that it would cost $2 billion to complete. The U.S. Department of Energy has singled out Project Tundra as having national importance. The department’s Office of Clean Energy Demonstrations last year awarded the project up to $350 million to help cover costs if construction moves forward. 

TC Energy, the Calgary-based company whose portfolio also includes TransCanada pipelines, was the project’s lead contractor. It recently announced that it had decided to step away from the project. No reason was cited but the company referenced

Where are public power entities considering a carbon capture retrofit for operating coal plants? The Nebraska Public Power District continues to explore the possibility of placing a carbon capture system at Gerald Gentleman Station, the largest coal-fired power plant in the state with a summer capacity of 1,365 megawatts. There is no timetable for making a decision about whether to move forward with the project.

Two Illinois utilities are considering carbon capture. The city-owned utility in Springfield, Illinois, held a ribbon cutting ceremony in July to mark the beginning of testing and operation for the carbon capture system at the 205-megawatt Dallman coal plant. The Prairie State Energy Campus is also evaluating carbon capture at its plant. It must comply with a 2031 deadline for reducing emissions. Prairie State’s study includes an estimated capital cost of $2 billion to install a system that would capture and store 95 percent of the plant’s carbon emissions. In addition, the system would cost about $175 million per year for operation and maintenance.

SCOTUS COAL ASH RULING

The Supreme Court rejected a request from East Kentucky Power Cooperative to block an Environmental Protection Agency effort to address the health risks presented by coal ash. EKPC argued that the E.P.A. had exceeded its statutory authority by requiring monitoring and remediation at facilities that were no longer producing coal ash. That argument was rejected by an appeals court. The case before the SCOTUS was rejected for review.

EKPC says that monitoring required by the E.P.A. would cost some $16 million annually to operate. The E.P.A. estimated the cost at under $300,000. Either way, EKPC has time to develop a plan to abide by the ruling. “The earliest compliance deadline the cooperative faces is far down the line — well into 2028,” one of the briefs said. “And that deadline requires it to comply only with modest groundwater monitoring requirements.”

INTERNATIONAL ENROLLMENTS AND A TRUMP ADMINISTRATION

In the 2023-2024 academic year, there were 1.1 million international students. Students from India and China account for 54% of those students. Enrollment levels for these students are at an all time high. These students are attractive because in many instances they are “full fare” payers versus the significant number of domestic students needing financial aid.

A combination of much more restrictive immigration policies and the pandemic slowed and then reduced the number of international students. For the 2020 and 2021 academic years, these enrollments showed actual declines. Since the end of the pandemic and a new administration, international enrollments returned to more normalized growth.

Now many universities are advising their international students to return to campus from the holidays before Inauguration Day. One said, “A travel ban is likely to go into effect soon after inauguration. The ban is likely to include citizens of the countries targeted in the first Trump administration: Kyrgyzstan, Nigeria, Myanmar, Sudan, Tanzania, Iran, Libya, North Korea, Syria, Venezuela, Yemen, and Somalia. New countries could be added to this list, particularly China and India.”

CLIMATE LITIGATION

The efforts to make the fossil fuel industries pay what would effectively be reparations by governments continue. So far, the litigation initiated by states and cities has been launched against the oil companies. Those cases will continue in state courts as efforts to have the cases be handled in the federal courts have been unsuccessful. While these cases are litigated, a new class of defendant has been named in a suit filed by a small North Carolina town over many of the issues in the pending cases.

The Town Council of Carrboro accuses Duke Energy Duke Energy of intentionally spreading false information about the negative effects of fossil fuels for decades, despite knowing since the late 1960s about planet-warming properties of carbon dioxide emissions. It claims the power company funded trade organizations and climate skeptic scientists who created doubts about the greenhouse effect and obstructed policy and public action on climate change.

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

UNPREDICTABLE TRUMP

In the month since Election Day, the pundits of the world have been busily trying to predict what the impact of a Trump administration would be on various economic sectors. We see that as a bit of a fool’s errand based on the first Trump administration. That’s especially true for the municipal bond market. In spite of all of his emphasis on the nation’s “third world infrastructure”, significant investment in it never occurred under Trump. The emphasis instead was on things like opportunity zones which tended to have much bigger private sector benefits.

One example of where unpredictability can be a liability is the issue of loans made under the Biden administration for a variety of energy and manufacturing production facilities under the IRA. On the one hand, the loan program is a prime target for Project 2025 proponents to eliminate. On the other, the program will jump start significant manufacturing projects in states like Georgia, Kentucky, Indiana and Tennessee. Those projects alone would reflect some $20 billion of investment.

Federal action generated movement on several large scale transportation projects. The Bret Spence Bridge, new road and bridge facilities in Mobile, AL. In other instances, public private partnerships expanded their footprint with states like Louisiana utilizing them for major projects. The use of P3s continues to expand in the New York metro area as the local airports are brought up to date. These were the types of projects and funding mechanisms that were supposed to be championed under the first Trump administration.

The results of the election which produced the smallest majority in the history of the House of Representatives will make the enactment of significant legislation in areas like energy, taxes, and transportation that much harder. Given the President-elect’s transactional nature, things like private activity bond expansion and the SALT deduction will be in the middle of the negotiating storm over a budget. Given the dynamics of the House, there is no way to predict the fate of those provisions.

NYC – RIKERS ISLAND

Laura Taylor Swain may be one of the busiest federal judges given her stewardship of both the Puerto Rico bankruptcy and the operations of New York City’s main jail, Rikers Island. Litigation over the operations at Rikers have occupied two Mayoralties, stretching over more than ten years. This week the judge issued a 65-page opinion that said the city and its Department of Correction had violated the constitutional rights of prisoners and staff members alike by exposing them to danger, and had intentionally ignored her orders. She ordered the city and lawyers representing prisoners to devise a plan for a receivership by Jan. 14.

The facility has been operating under a consent decree which was reached in 2015 under Mayor Bill de Blasio. It is easy to forget that the City Council has voted to close Rikers Island by August 2027 and replace it with four smaller borough jails. The intent was to reduce abuses and aid visitation. The politics of siting the proposed facilities has effectively blunted that effort.

The judge will appoint a receiver who will report to her. The receiver would have significant powers. One example – judge could grant a receiver the power to dissolve or alter labor contracts like the one that provides officers with protections like unlimited sick leave.

HOSPITAL MERGERS

A proposed merger between Union Health and Terre Haute Regional Hospital, the only acute care hospitals in Vigo County, Indiana has been delayed in the wake of a pending disapproval of the plan by state regulators. The two providers are the only acute care providers in Terre Haute and its surrounding Vigo County. A merger would have given the resulting entity a full monopoly over acute care hospital services in the County.

The hospitals sought the merger under a state provision known as a “Certificate of Public Advantage” law, or COPA. Indiana and 18 other states have such laws that shield hospital mergers from federal enforcement by the Federal Trade Commission. Under COPA laws, states typically agree to monitor hospital performance and quality while limiting price hikes. It is a real concern especially in the light of HCA’s participation in the proposed merger as the owner and operator of Union Health. Recent deals with HCA hospitals under COPA laws are seen as having fallen short in terms of their impact on access and costs.

That legacy has contributed to five states – North Carolina, Maine, Minnesota, Montana, and North Dakota —repealing COPA laws. Maine ended its law last year amid warnings from the FTC regarding such mergers. The situation in Terre Haute is a textbook example of how HCA conducts its business. In 2021, Union Health leaders were instrumental in the passage of Indiana’s COPA law. They supplied draft language for the bill to one of the bill’s authors, according to legislative testimony, and Union Health’s CEO Holman testified before lawmakers that the merger would improve the county’s poor public health rankings.

The effort is not dead. Union faces a July 1, 2026, deadline to refile an application, according to Indiana’s COPA law.

STADIUM UPDATES

The ownership of the Tampa Bay Rays has reaffirmed their existing agreement with the City of St. Petersburg and Pinellas County to finance a new baseball stadium. The reaffirmation was in response to a county demand for one prior to a vote by the County legislature on December 17 to move forward with the project. This followed last month’s statements from the team that the project could not happen without approval by the County in November. The County then gave the team a choice – you’re in or you’re out. They say they’re in.

The other travelling franchise, the Oakland A’s got some bad news on their stadium in Las Vegas. The cost of the Athletics’ planned new ballpark off the Las Vegas Strip has increased by a quarter of a billion dollars. Those costs will be the responsibimove this week.ity of the team. The new estimated cost is $1.75 billion, up from a previous $1.5 billion mark. The Las Vegas Stadium Authority Board gave its final approvals for the Athletics t

GRAIN BELT EXPRESS

The Grain Belt Express, a $7 billion transmission line project that’s been more than a decade in development, has won conditional approval for a $4.9 billion federal loan guarantee. The project plans to use its conditional loan guarantee to finance the first phase of its 5-gigawatt high-voltage direct current (HVDC) transmission line — a 578-mile stretch from southwestern Kansas to Missouri. It looks like the loan for this project may be one of the early casualties of Trump administration plans to significantly cut government spending.

The project has also secured some prospective buyers for its power, including a consortium of 39 municipal utilities represented by the Missouri Public Utility Alliance. It has received regulatory approval from both Kansas and Missouri. The Missouri approval is significant in that it followed changes in the availability of power to Missouri utilities. Unless all of the loan documentation can be completed before January 20, this funding is likely at risk.

You would think that the funding mechanism for these loans was a Biden administration creation. In fact, the Department of Energy’s Loan Programs Office (LPO) was established under the George W. Bush administration in 2005. For what it’s worth, one of the entities to receive funding from the LPO was Tesla.

ELECTION LITIGATION

Last month, Maricopa County voters overwhelmingly approved Prop 479  to keep the half-cent transportation tax residents in Maricopa County have been paying since 1985.  It’s projected to raise nearly $15 billion over the next 20 years for various transportation services and improvements. The Maricopa County Republican Committee recently filed a lawsuit asking the court to overturn what voters approved. The plaintiffs claim that Prop 479 is not a continuation of an old tax but a new tax that funds new projects. It also argues that the ballot measure didn’t pass the 60% voter threshold needed to approve a new tax in Arizona.

LADWP AND EQUITY

The L.A. Department of Water and Power has achieved a settlement with residents around one of its generating facilities over their exposure to unhealthy levels of methane leaking from the plant. Some 1,200 people who lived, worked or went to schools nearby will share in a $59.9-million settlement reached with the city. The litigation was started in December 2020. It alleged that the DWP failed to adequately inspect or repair equipment, or to notify residents of leakages during the 1,085-day period when community members were potentially exposed to methane and other toxic chemicals.

The Valley Generating Station is located in the San Fernando Valley between the communities of Sun Valley and Pacoima and generates electricity using natural gas. According to the complaint, NASA’s Jet Propulsion Laboratory first detected gas being emitted by the station in September 2017 and notified the utility. LADWP did not notify the community for some three years. In January 2021, the South Coast Air Quality Management District gave the utility a notice of violation over equipment identified as the source of the multiyear methane leak. 

CARBON CAPTURE

Wolf Carbon Solutions is withdrawing its petition to build a 95-mile carbon capture pipeline through eastern Iowa. Wolf sought a permit last year to build the hazardous liquid pipeline across Linn, Cedar, Clinton and Scott counties. It noted significant opposition in spite of the fact that Wolf had said it would build its pipeline without the use of eminent domain. This follows the decision this fall by Wolf to withdraw its application for a pipeline approval in Illinois.

The Wolf pipeline in Iowa was projected to connect with pipeline in Illinois to deliver carbon dioxide to a sequestration facility operated near Decatur, Illinois. In September, the U.S. Environmental Protection Agency alleged that ADM had failed to adequately monitor the sequestration site after some carbon fluid moved to an unauthorized zone.

This comes as the Iowa Supreme Court affirmed a lower court’s decision that Summit Carbon Solutions is allowed temporary access to properties for surveying, because it is a pipeline company that would be transporting a hazardous liquid. Summit is the only entity continuing its effort to build its pipelines at present.

FLORIDA HEALTH INSURANCE DELAY

KidCare is a Florida program which provides low-cost health insurance to children whose families make too much money to qualify for Medicaid. In Florida, that has meant families have paid $15 or $20 a month for coverage. In 2023, the Legislature voted unanimously to make more children eligible for KidCare by increasing the income threshold for eligibility to 300% from 210% of the federal poverty level. The change raised the income limit to $90,000 from $64,500 for a family of four.

The State needed federal approval to implement the pln. That approval included a requirement to comply with a federal rule put in place during the COVID-19 pandemic that requires the state to provide eligible children with a full year of continuous coverage. Florida balked at that requirement and challenged the rule in court. The lawsuit resulted in a delay just as Florida began reviewing Medicaid eligibility after the end of the COVID public health emergency. More than a half-million children were disenrolled, and they couldn’t get on KidCare due to the waiver dispute.

The Centers for Medicare & Medicaid Services accepted Florida’s application for a waiver after a yearlong delay, but with the stipulation that the state provides 12 months of continuous coverage. In response, the state’s Agency for Health Care Administration said it planned to request a 30-day delay on the waiver. The State wants to be able to disenroll children in the event that their family misses a premium payment.

We anticipate that efforts will continue to chip away at providing expanded Medicaid eligibility in states with conservative legislatures. Those efforts occurred with some regularity during the first Trump administration. The result was a near constant stream of litigation and failures to obtain court approval for things like work rules and other issues that states opposed to Medicaid expansion under the ACA.

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