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by That should be welcome news to investors who may already be at capacity with Georgia general obligation bonds, and it should also be attractive considering the ongoing lack of paper from the state., This deal will be sold through negotiation with Citigroup Global Markets Inc. as the book-runner. It is structured to appeal to both retail and institutional buyers, said one potential buyer. There is a retail order period today, with the rest of the deal being opened up to institutional investors tomorrow., Public Resources Advisory Group is the financial adviser and Sutherland, Asbill & Brennan is the bond counsel., officials were considering insuring all but the first two maturities of both the Garvees and reimbursement bonds., One observer said that supply in general is low because of July redemptions, This is a new kind of security [from Georgia] and a new name, so it will be interesting to see how it will come, however most agree this scenario is unlikely., That includes rating agency analysts. Moody's Investors Service rated the tollway authority's deal Aa3, while Fitch Ratings and Standard & Poor's rated it AA-minus., The road and tollway authority has been able to sell debt since *2001-, this is the first time Georgia has sold Garvees. That will change in the coming years, however, as roughly $3 billion of Garvees have been designated for transportation projects, and sales are planned for *2008-, *2009-, *2010-, and 2011., Proceeds will be used to fund projects throughout the state, especially in the metro-Atlanta area
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by Tedra DeSuehead of the tomorrow's sale of $225 million of revenue bonds by the, Kentucky Turnpike Authority, state officials received word from Standard &, Poor's that the agency was raising the authority's rating two notches to, AA from A-plus., The upgrade, coupled with the fact that there is not a lot of supply out, of the state or nationally, should make this deal attractive to investors., Standard & Poor's analyst Helen Samuelson said the upgrade reflects the, strong coverage of debt service obligations from road fund revenue, which, mainly includes motor fuel and highway usage taxes. The turnpike's debt is, secured by lease rental payments subject to appropriation by the Kentucky, General Assembly., Kentucky does not issue general obligation bonds, but instead issues, appropriation-backed debt through several agencies, including the turnpike, authority. The debt service for these agencies is dependent on lawmakers, allocating the appropriations. And while lawmakers have a history of, appropriating the funds, the appropriations have been an issue when, lawmakers failed to adopt a budget in a timely matter., For the turnpike's debt, however, Samuelson pointed out several factors, that greatly reduce the risk of non-appropriation. For example, road fund revenues can only be used for transportation-related purposes., Also, appropriated funds are channeled through a flow of funds that pays, Fitch Ratings and Moody's Investors Service have affirmed their ratings of, AA-minus and Aa3, respectively., The turnpike deal will be sold through negotiation with Morgan Stanley as, book-runner. Peck, Shaffer & Williams is bond counsel. Retail investors, will have the first shot at buying some of the bonds on tomorrow. The deal, will then be opened up to institutional investors on Wednesday., The deal is structured with about $35 million of Series 2006A economic, development revenue bonds and $190 million of Series 2006B economic, development revenue bonds., F. Tom Howard, the executive director of the state's Office of Financial, Management, noted that while the Series A bonds will be delivered March, the Series B bonds will be delivered in June. Both series have, maturities from 2007 through 2026. He said the earlier and 20-year, maturities are typically where the most interest has been seen in previous, deals from retail investors and the same is expected for this year., The first 10 years and then the 19th and 20th years are where we see the, Given the size of, this deal, Kentucky Gov. Ernie Fletcher used the upgrade as an opportunity to reach, out to lawmakers who are in session now working on the state's *2006-†2008, biennium budget., Sticking to our commitment to limit the state's debt, continuing to build, our reserve funds and timely passage of a state budget that makes progress, Fletcher said in a, press release regarding the upgrade., Proceeds from this week's deal will be used to fund the remaining $225, million of the $450 million road fund bond authorization from the *2005-, session. Fletcher's budget proposal to the General Assembly for the next, biennium includes $938 million of bond projects, of which $75 million are, road fund bonds.
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by Yvette ShieldsChicago-based ABN AMRO Financial Services Inc. has named its head of, underwriting, Paul Muller, to temporarily replace veteran banker Courtney, Shea as head of the firm's public finance group, following her resignation, late last week., Muller will divide his time between Chicago and New York, where he manages, the underwriting desk. Muller and Mike Smale, the managing director of the, municipal bond department, did not return calls to comment yesterday., Shea, who was vacationing, also could not be reached to comment on her, departure, which comes after four years at the company., Market sources close to Shea said her contract at the firm had recently, expired and she wanted to take a brief break to consider her career, said one source at, the firm who asked not to be identified., Several public finance professionals close to Shea said she has talked to, several firms interested in hiring a senior banker with key relationships, with major regional issuers, including Jackson Securities LLC. Speculation, has also circulated that Shea might go to work for the campaign of her, friend Republican gubernatorial candidate and state Treasurer Judy Baar, Topinka., Shea has strong ties to both Republicans and Democrats. Her father, lobbyist Gerald Shea, was a Democratic House majority leader. He was also, close friends with former Republican Gov. George Ryan from their days, together in the General Assembly. That gave Shea an edge with the state, after Ryan's election in *1998-, adding to existing relationships with local, Democratic-controlled issuers such as Chicago and Cook County., Shea left Citigroup Global Markets Inc. after three years to join ABN, AMRO, the Dutch parent of Chicago-based LaSalle Bank, in late 2001 as a, managing director to head the group. She had spent six years at the former, woman-owned Artemis Capital Group Inc., which was then acquired by the, firm now known as RBC Capital Markets Inc. She left Kemper Securities Inc., to open the Chicago office for Artemis in 1992., However, since *2001-, most of the senior bankers who worked under Shea have, moved on., In *2003-, the former head of the group, Jon Savage left to join the former, Banc One Capital Markets Inc. Victor Chang left the firm last fall to take, over the small public finance group at Hutchinson, Shockey, Erley & Co., where he joined as an equity partner. Linda Rafanello left to join Harris, Trust & Savings Bank and has since left there also., Stephanie Neely and Tammie Beckwith were hired by Shea, but have since, left. Neely is at Blaylock & Partners LP and Beckwith is now with UBS, Securities LLC. Remaining bankers include industrial revenue bond, utilities, and auction-rate specialist Peter Glick, quantitative analyst, David Schott, and former Moody's Investors Service analyst Ivan Samstein, who was hired as a general government banker by Shea in 2004., Though the firm and Shea parted amicably according to sources, some, additionally said that ABN had expected stronger deal numbers from Shea, over the last two years, though the firm made advances in its *2005-, rankings over a year earlier., The firm ranked 17th last year among Midwestern senior managers, up from, 26th in *2004-, according to Thomson Financial. None could compare to its, height of a 10th place finish in 2003 when the firm won a coveted, co-senior manager spot on Illinois' $10 billion general obligation pension, sale., Shea was credited as the banker on the deal, but state officials have said, privately that the firm won the lucrative spot because of the combination, of its strong community ties as a Chicago-based firm and the clout of its, prominent president Norman Bobbins, who has close ties to Chicago Mayor, Richard Daley, and was a campaign contributor to state Gov. Rod, Blagojevich. State sources have praised Shea's work on the deal during a, European trip to meet with foreign investors., The firm also had used former Democratic lawmaker Alfred Ronan as a, consultant until June 2003. Ronan had also previously lobbied on behalf of, a financial advisory firm partially owned by state budget director John, Filan., With Shea's departure, the firm no longer has a senior banker with strong, general governmental relationships to Chicago, the state, or other large, issuers. A source at the firm said officials are actively recruiting, bankers and looking internally and externally for a permanent successor, for Shea. The firm also last month hired Kristyn Harrell, who previously, worked with higher education and nonprofit borrowers at J.P. Morgan, Securities Inc., In one noteworthy deal last year, the firm introduced its retail-driven, direct access notes program to municipals in a $150 million Chicago sale., Though the city's chief financial officer Dana Levenson has praised the, results publicly, privately he has expressed disappointment with the deal., Initially, Levenson had hoped for savings of 20 basis points over a two-, to three-month sale period. The sale lasted five months into February and, resulted in savings of just 12 to 13 basis points., Market participants have blamed the structure, explaining that the program, is most beneficial on the short end where the city could have benefited, from the flexibility of attaching a one-year call without the penalty, institutional investors inflict on such features. It's unlikely, however, given Bobbins political stature, that the firm would suffer a loss of, favor with the city.
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by Alison L. McconnellPanelists at a Friday session of the Council of Infrastructure Financing, Authorities' annual federal policy meeting here applauded the nomination, last, week of Eric Solomon as the Treasury Department's assistant secretary for, policy., Last Monday, the White House announced that President Bush plans to, nominate Solomon for the position, which he has held on an acting basis for, more than a year. The Senate must confirm his nomination., Solomon has been involved in several key policy discussions that have, important implications for the tax-exempt bond market, particularly the, Circular 230 regulations that set forth standards for tax practitioners, including attorneys issuing state and local bond opinions., I think the tax system will be under exceptionally good hands under, said John J. Cross 3d, a former private-practice attorney who, recently, started work in Treasury's Office of Tax Policy as an attorney in the tax, He is universally well-regarded as a smart tax, lawyer and a good guy ... and has sound, Susan Gaffney, federal liaison director of the Government Finance, is always open to discussion with municipal market groups., [His nomination] is a, Bruce Serchuk, a partner with Nixon Peabody LLP here and another panelist, at CIFA's policy meeting, echoed Cross and Gaffney, If there is, reason for optimism in the tax world, The three panelists talked to CIFA members Friday about other recent, federal developments, the most recent of which was Congress' approval of, reconciliation legislation that places several restrictions on pooled bonds, and requires broker-dealers to report tax-exempt bond interest payments to, the Internal Revenue Service., The legislation exempts state revolving funds, which are used for, wastewater and drinking water infrastructure projects, from the pooled bond, provision that requires issuers to have written loan commitments for 30% of, bond proceeds before issuance. SRFs are subject to the three other, provisions, however, including one that requires 30% of bond proceeds to be, lent to borrowers in the first year., The GFOA is working to ensure that the dealer and trustee community is in, synch on the new interest reporting requirement, Gaffney added. The bill, is to, be signed by Bush this week., If fundamental tax reform reappears as an issue after the November, pay attention to what, according to Gaffney., If it stays status quo ... we will have to play a lot of defense, If the House or Senate changes, we might have an opportunity to play, some offense. It's been so long, we'll have to dust off the uniforms and, to preserve the, importance of the tax-exempt bond sector., In addition to discussions over comprehensive tax reform, Cross said, Treasury would welcome a consensus viewpoint from muni market groups such, CIFA and GFOA as it pursues simplification of the tax-exempt bond system, legislation and regulations., And Serchuk discussed the state of the IRS' tax-exempt bond audit, stance, against abusive transactions in recent months., settlements of audits of large bond issues are the rule rather, than the exception, since the disgorgement to the IRS of any ill-gotten, gains, is almost always less than potential taxpayer exposure, the former IRS, official said.
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by The rule, which took effect in April 1994 to prevent dealers from engaging in pay-to-play practices, however, permits a municipal finance professional to contribute up to $250 to any issuer official for whom he or she can vote., Rule G-37 survived a two-year constitutional challenge by Alabama bond dealer William Blount, who contended the rule violated dealers' First Amendment rights to free speech. Blount lost the case in April *1996-, when the Supreme Court refused to consider, and effectively upheld, Christopher Taylor, the MSRB's executive director and several lawyers, said yesterday that the Supreme Court's ruling in the Vermont case, Randall v. Sorrell, does not appear to have any bearing on G-37., My quick read of the newspapers is that it has no implications for G-37, Taylor said., which Taylor pointed out has nothing to do with G-37., But perhaps more important is that the ruling faulted the state's contribution limits for not being narrowly tailored, Taylor said, adding, My view, without having really studied it, is that it really ought not to create any deficiency in G-37, agreed Harvey Pitt, chief executive officer of Kalorama Partners LLC, former Securities and Exchange Commission chairman, and the lawyer who initially defended G-37 in the Blount case., I think people feel like G-37 was aimed at a relatively small group of individuals who are exercising a privilege by way of their broker-dealer licenses, said Monty Humble, a partner at Vinson & Elkins LLP in Dallas. In contrast, Vermont's campaign contribution and spending restrictions applied to all voters in the state, But Kenneth Gross, a partner and campaign finance expert at Skadden, Arps, Slate, Meagher & Flom LP here, The Supreme Court not only ruled that the contribution limits were unconstitutional because they were too low [$200-$400], but one of the factors that added to their invalidity was that they were not indexed for inflation, The limited exception that we've been living with under G-37 is now 12 years old. What was $250 in 1994 is not $250 now. It's a very low limit and it's not indexed for inflation., While there were additional factors in Blount that don't exist in [the Vermont] case, such as that G-37 addressed a perceived problem in an industry, I still don't think it allows you to be unconstitutionally low in setting a limit for people who can vote for certain people, he added., still stands, that the ability to make political contributions is a protected First Amendment right of free speech, The case involving Vermont stems from the state's enactment in *1997-, under then-Gov. Howard Dean, of the nation's toughest campaign finance law to limit the influence of money in politics. Under the law, candidates for state office could spend only $2, 000 to $300, 000 during a two-year general election cycle, depending upon the office being sought. In addition, individuals could contribute only $200 to $400 during the two-year election cycle for a candidate for state office, depending upon the office. The law also imposed a limit of $2, 000 upon the amount an individual could give to a political party during the two-year timeframe., Candidates and voters sued the state, In the 29-page ruling written by Justice Stephen Breyer, failed to include five factors, such as indexing, disproportionate to the public purposes they were enacted to advance
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by increase in home loans, prompting what could be a record $1.25 billion of single-family mortgage bond issuance for the program this year., As the agency's volume of loans has jumped 10-fold over the past two-and-a-half years, it is finding creative ways to balance borrowing needs and volume-cap limits to keep that momentum. After three sales this year, the OHFA plans to issue up to $400 million more in October., The number of loan reservations in the agency's program jumped from 1, 000 in 2003 to 10, 000 this year, executive director Doug Garver said. The OHFA issued about $105 million in bonds in 2003 and $400 million in 2005. If the state issues $300 million in October, as planned, this year's volume will reach $1.25 billion, In addition to reaching out to lenders in *2004-, the agency introduced a conventional loan program in 2005. Garver said the OHFA set an internal goal for that program to make up 10% of total loan volume, but the program, My Ohio Mortgage, has reached nearly 70% this year. The agency also enhanced its down-payment process, making it easier for lenders and buyers to use its documents., As production increased, the agency has had to become more innovative in structuring bond deals, to make sure we put a competitive rate on the street that would enable us to serve both the business side and mission side of our program, As the program has grown, Ohio has confronted new challenges and shifted its method of issuing bonds to take advantage of the higher interest rate environment. To hedge interest rates as it projects the need for loan volume, Sachs & Co. acted as the lead manager for the sale with Mitsui Marine Derivative Products LP as the counterparty on the swap., In two sales since then, the OHFA has instituted six more swaps. It issued $250 million of bonds that closed in May, including three swaps. That sale consisted of $65.5 million of variable-rate bonds and, for the first time, $25 million of taxable debt. George K. Baum & Co. acted as the lead manager and SMBC Derivative Products was the swap counterparty., In the most recent sale, the OHFA has no unhedged variable-rate debt, said Bob Connell, director of debt management., It was a matter of concern about rising interest rates, In addition, the agency first issued taxable bonds in the May transaction, which has helped to ensure it will not exceed its tax-exempt volume cap limit for future issues, threatening the lower interest rate cost of borrowing, Connell said., The program has involved a reversal of the traditional bond issuance schedule. Normally, the agency issues bonds first, sets a mortgage rate, and originates the loans. If rates fall, the loan rates aren't as competitive with conventional lenders, but the agency has locked in its borrowing costs, said Scot Perlman, the OHFA's financial adviser with Seasongood & Mayer. Or, if the agency takes reservations first and then borrows, interest rates can rise and mortgages may not generate enough to repay the debt., Swaps can reduce risk by locking in interest rates shortly after taking reservations for loans. The risk then lies with the potential that loan reservations are not filled, Perlman said. Most state housing agencies, however, have a good track record of predicting how many move from reservation to closed loan, This is a very effective program because it allows the agency to hedge its pipeline as it's making reservations, Perlman said., proceeds from refunding and the taxable injection, the OHFA is comfortable that the program can sustain about $800 million of bond issuance each year, Garver said. Agency officials have projected out for five years., What we're finding now is that we've built the beast, and we've got to feed the thing, Garver said., In October, Goldman Sachs will act as the senior manager on the sale, and the agency expects to institute at least one, but possibly up to three, swaps, Garver said. The sale will also include taxable debt., The bond counsel is Peck, Shaffer & Williams. Underwriter's counsel is Calfee, Halter & Griswold. Thompson Hine has acted as the agency's counsel. The agency's bankers were selected in 2004 to work with it for three years on a rotating basis.
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by Elizabeth AlbaneseSan Antonio-based Cullen, Frost Bankers Inc.'s proposed acquisition of Fort Worth-based Summit Bancshares Inc. could pave the way for additional investment banking business by Frost's new negotiated underwriting division., The boards of Frost and Summit have approved the merger, though the agreement is predicated on the approval later this year by shareholders for both banks. It is expected that the merger, valued at about $363 million, would not be completed until late 2006., Cullen, Frost is the parent company of Frost Bank, which operates 93 locations throughout Texas, with business centered around its home base of San Antonio as well as Houston, Austin, the Dallas-Fort Worth Metroplex, and south Texas., Frost Bank had $11.6 billion in assets as of March 31, while Summit -- which offers full-service commercial and consumer banking in Tarrant County and has 12 offices -- currently has assets of $1.1 billion., In April, Frost Bank added negotiated underwriting to its slate of commercial and consumer banking products, investment and brokerage services, insurance products, and investment banking services., We certainly hope that the merger with Summit will increase our underwriting business, said Bill Sirakos, This is a fairly new business area for us, Sirakos said the bank in April hired longtime JPMorgan banker Rogelio Rodriguez to head up its negotiated underwriting efforts., Rogelio is very well known and very well respected, especially here in south Texas, So far, We have several additional underwritings in the pipeline now, said Sirakos, One of those could be our first lead manager position, Sirakos said that while the bank had been involved in competitive municipal debt transactions, it opted to instead pursue negotiated financings., We had been doing competitive underwritings for a number of years, The competitive underwritings in which Frost Bank had participated were largely bank-qualified deals., Banks were our main clients, so we really focused on that, Most of that debt was for school districts, so it was really clean paper. Now, however, The acquisition of Summit, as well as Frost Bank's own public finance department, is expected to yield more referrals for the underwriting division., Our public finance division does not do underwriting or financial advisory services, Because the broker-dealer arm of the bank must be separate from the commercial banking enterprise, underwriting services are under the bank's capital markets umbrella., Under the rules of the [Municipal Securities Rulemaking Board], the underwriting division has to be in a separately identified department, Sirakos said., That division could be expanded in the near future, he added., I have approval to hire another banker, either in Houston or in the Dallas-Fort Worth area, Part of that depends on where we can best use the person, while the rest of it depends on where the best person is. We obviously want someone very knowledgeable, but it's not going to be just about how many deals that person can bring to market -- it's also going to be the right person for Frost. We need someone with integrity, While financial advisory work is not in the bank's current plan, that line of business may be pursued in the future., Rogelio is networking with financial advisers at other firms to help us get into deals, But if it is advantageous for us to move forward in that line of business, Sirakos pointed out that while he does not believe that an FA should underwrite deals for clients, serving clients in that capacity could allow the bank to cement relationships with other banks that would, in turn, offer Frost Bank underwriting jobs., In the merger negotiations, Lehman Brothers served as Frost's financial adviser, while its legal adviser was Sullivan & Cromwell LLP. Summit's FA was Keefe, Bruyette & Woods Inc., and its legal adviser was Bracewell & Giuliani LLP., Cullen, Frost earlier this year acquired Alamo-based Alamo Bank of Texas and Dallas-based Texas Community Bancshares Inc. In *2005-, it acquired Houston-based Horizon Capital Bank., Frost National Bank was originally chartered in 1868 in San Antonio. In *1977-
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by The deal, which carries the triple-A guarantee of the Texas Permanent School Fund, is also expected to be the first of a slew of deals headed down the pike in the state., In the past, districts have taken advantage of Texas laws that allowed them to easily apply for special elections. That, say bankers, spread the flow of Texas school bond deals throughout the year., New Texas uniform election date laws, however, make it difficult for school districts to hold bond referendums on dates other than four mandated by the state., With all the help we've gotten from [lawmakers in] Austin, there's going to be a glut of Texas school bonds in the market, said Leon Johnson, a senior vice president and managing director of special projects for Southwest Securities Inc., the longtime financial adviser for Leander ISD., Johnson said that in accordance with the laws of supply and demand, an overabundance of Texas school general obligation bonds in the market could translate into higher interest rates for school districts., We did the lab work on this in 1998 when the Legislature first approved money through the Instructional Facilities Allotment, referring to a state program that provides debt service assistance for poor districts., Districts can only qualify for IFA assistance if they have voter-approved debt authorizations. That rule spurred dozens of districts to go to the polls at the same time, and then issue debt at roughly the same time., But this kind of rule has additional consequences. The districts sell bonds at the same time, and they go out for construction bids at the same time. That pushes the cost of materials and construction up, Bankers throughout the state say that because of the market issues associated with uniform election dates, they expect the topic to be readdressed during the Texas legislative session that begins in January., Since there is no other way for Texas school districts to pay for buildings, it's imperative that when they do issue debt, they are able to schedule and structure their GO bond deals so that they get the best value possible, Johnson said., Although some new improvements can be made using other debt mechanisms, new buildings can only be financed with GOs backed by a district's interest and sinking fund property tax levy, according to Johnson. That tax is dedicated solely to debt service for capital needs, while the maintenance and operations tax can only be used for school programs and maintenance of existing facilities, not new construction., Maintenance and operations tax revenues can only be used for maintenance and operations, Prior to issuing debt, a district must be able to demonstrate that it can meet debt service obligations by levying an I&S tax of no more than 50 cents per $100 of assessed valuation. However, Texas law provides for an unlimited-tax pledge for Texas school bonds, so if at some point during the lifetime of the debt a district's taxable values dropped, it could increase the tax rate as much as necessary to meet interest and principal payments., The restriction is tough for fast-growing districts, Johnson said. While those districts have strong expectation of increased taxable values, and must have facilities ready to serve growing enrollment, into their debt service obligations., said Johnson, Well, Nonetheless, the Leander ISD levies an I&S property tax of 30 cents per $100 of assessed valuation, an amount expected top increase to just 33 cents per $100 of value during the lifetime of the Series 2006 debt., As such, The deal includes $124.9 million of CABs that reach maturity from 2013 through *2045-, and $26.8 million of current interest bonds with maturities ranging from August 2006 through 2018., All but about $8 million of the offering is new money, the first issuance from a $286 million GO authorization approved May 13., I anticipate we'll be in the market this time each year for the next two or three years, Johnson said., The refunding component of the issue will take out the 2006 through 2018 maturities of the district's Series 1994 bonds., We'll save a little money on the refunding, but the major purpose of the refunding is to create some little holes to fill so that we can continue to meet the 50-cent test, Johnson said., In addition to the gilt-edged backing of the PSF, the deal carries an underlying rating of A from Standard & Poor's and A-plus from Fitch Ratings. Moody's Investors Service does not rate the bonds., First Southwest Co. is lead manager, and Citigroup Global Markets Inc. is senior manager. Morgan Keegan & Co., RBC Capital Markets Inc., and UBS Securities LLC are co-managers for the deal., USBank is the trustee for the deal, and McCall, Parkhurst & Horton is the district's bond counsel. Kelly
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by Yvette ShieldsThe $55.3 billion fiscal 2007 budget Illinois Gov. Rod Blagojevich, unveiled yesterday calls for several hundred million dollars of added, spending on new programs, but lacks detail on how the state will pay for, them over the long term, giving Republican lawmakers ammunition to attack, the plan., Blagojevich, who faces a challenge in the Democratic primary next month, and a general election this fall, did not propose an increase in the, state's income or sales tax to finance increased spending. Instead the, plan relies on $1.38 billion of new revenue including $878 million in tax, growth - a 5.6% increase., New revenues would also come from a tax increase on cigars, the asset sale, of the state's student loan agency, the closing of corporate tax, loopholes, the sale of a gaming license, the diversion of some existing, revenues in special interest funds and a tobacco settlement funds. The, budget represents a $950 million increase over the size of the fiscal *2006-, plan., We can make state government more efficient and we can strengthen our, pensions. But, we can't do it alone. This is a budget that reflects our, priorities and I hope to work with all of you to pass it, the governor, said in his budget address., Unfortunately the 2007 budget appears to continue the fiscal, countered Patty, Schuh, It's built on more, borrowing and spending and relies on one time revenues to pay for ongoing, Release of the budget followed the governor's announcement last month of a, $3.2 billion bond-financed capital program. The proposal includes $500, million for kindergarten through 12th grade construction, $2.3 billion for, the road projects and $425 million for mass transit., The governor has so far said only that growth in state tax revenue and, some transportation-related revenue streams, such as motor fuel taxes and, license plate fees, would repay the new general obligation borrowing for, transportation projects. No revenue streams have been named for the, education debt., Blagojevich's party enjoys a majority in both chambers of the General, Assembly. However, while the budget requires just a majority vote, borrowing needs a two-thirds vote so some Republican votes will be needed, for the capital plan. Lawmakers hope to adjourn their session before May., The proposed budget plan contains a handful of costly new programs, including a proposal that would cost $45 million annually over the next, three years to provide pre-school to all three- and four-year-olds. It, also expands health care coverage for veterans, provides $3 million for, 100 new state police officers, improves existing state tax credits for, films shot here and establishes new tax credits to promote development, along major rivers. In addition, the state would use $100 million from its, share of tobacco settlement funds over the next five years to finance stem, cell research projects., On the education front, public school districts would receive $400 million, in additional operating aid and the state's public universities would, receive $40 million. The state would pay for the increased spending, through a combination of revenue growth, transferring $144 million from, various special interest fund accounts, and closing corporate loopholes., The state has tapped $1.1 billion from special funds - a controversial, action that has been challenged by the state treasurer. Business groups, are expected to fight the series of business tax changes, which would, raise about $138 million. One would no longer exempt bulk purchases of, computer software by businesses from state sales taxes another would tax, gasoline purchased elsewhere but stored in the state., A $1, 000 tax credit would be available for freshman and sophomore students, attending a public or private college here who earn at least a B average, at a cost of $90 million annually. The state would sell the assets of the, Illinois Student Assistance Commission, which administers student loans to, cover the costs. The governor did not disclose how much such a sale could, raise or how the state would cover the cost once the asset sale funds are, exhausted., Blagojevich said he would earmark any proceeds from the sale of an 11th, gaming license to help further reduce the state's unfunded pension, liability that is considered by rating agency analysts to be one of the, state's top fiscal burdens. The pension plans are at only a 60% funded, level. Republicans still believe, however, the governor's plan shorts the, pension system by $1.1 billion. A budget deal reduced funding in fiscal, 2006 by $1.2 billion and another $1.1 billion in fiscal 2007. The state, said the adjustment was warranted based on a revised funding formula, enacted along with legislation that reduced some benefits for future, employees., The governor also wants to consolidate so-called back-office, administrative functions of some state departments and services to, eliminate duplication for a savings of $115 million once it's fully, implemented., Blagojevich used the occasion of his budget address to tout what he, believes are his administration's fiscal strides. He provided more money, for schools, health care, and public safety without a major tax increase, consolidated state agencies, reduced positions, and authorized less new, debt than his predecessor, although the administration does not count the, state's $10 billion 2003 general obligation pension deal in its figures., The state's $20 billion of outstanding GOs are currently rated Aa3 by, Moody's Investors Service, while Fitch Ratings and Standard & Poor's rate, the state AA. The overall budget includes a $45.4 billion operating, budget, a $3.2 billion capital program, and reauthorized spending.
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by Elizabeth AlbaneseFort Worth lawyer who has been involved in litigation surrounding the, Wright Amendment for more than 20 years said yesterday that he is, surprised the bondholders who hold debt issued by Dallas, Fort Worth, International Airport have not yet filed a lawsuit to thwart efforts to, repeal the law., Southwest Airlines has for 16 months waged a public battle to have, lawmakers lift the prohibitive amendment, which restricts flights from, Dallas' Love Field to just a handful of states., Efforts to change the amendment or eliminate it altogether are expected to, ramp up in coming weeks. Under pressure from two north Texas congressmen, the Dallas City Council on Wednesday evening unanimously approved a, resolution asking Congress to delay taking any action on the Wright, Amendment until June 14, moving up an original deadline of Oct. 1, 2006., A similar resolution - with an Aug. 1 deadline - was approved by the Fort, Worth City Council on Tuesday. U.S. Reps. Sam Johnson and Jeb Hensarling, both Republicans, are sponsoring legislation that would repeal the Wright, Amendment, and said the Fort Worth deadline for a local solution was too, late to get any passage of their bill before the end of this year's, legislative session., Officials from DFW Airport have said they are confident that their airport, would be able to meet debt service obligations should the Wright Amendment, be repealed. They do have concerns, however, that repeal of the amended, law could increase competition for DFW, which might reduce airport revenue, and make it difficult to take on further projects to facilitate growth., Nonetheless, Dee Kelly, a partner with the Fort Worth law firm of Kelly, Hart & Hallman LLP, said that bondholders who purchased debt issued by the, airport bought that paper with the expectation that the Wright Amendment, would continue to be in place., If [American, Airlines] moves a lot of flights over to Love Field to compete there, it's, going to hurt DFW. I am surprised, frankly, that they have not filed a, Some investors and local leaders have pointed out that the law allowing, any commercial flights at all from Love contradicts DFW Airport's bond, ordinance, approved by the mayors of both Dallas and Fort Worth for all of, DFW's debt issues. The ordinance requires the phase-out of all other, commercial airports owned by each city. Fort Worth shut down Meacham Field, just prior to DFW Airport's grand opening., Although disclosure for bonds issued by DFW Airport indicates that the, bond covenants are subject to state and federal law - including the Wright, Amendment, which allows commercial operations from Love Field - Kelly said, that any change in the amendment would in fact constitute a change in the, security of that debt., There also remains in place and unchanged a bond covenant that both, cities signed that says that neither will do anything to impair operations, Yet it's very clear that Dallas is promoting Love, The so-called Wright Amendment - named for Jim Wright, a former, congressman from Texas, and passed by Congress in 1979 - is part of a, compromise that allows airlines that operate from Love Field near downtown, Dallas to fly to a limited number of destinations outside the state. The, rule largely applies to Southwest Airlines, which has a near monopoly of, 97% market share at Love Field., The measure was crafted to protect operations at DFW Airport, which was, just five years old at the time, located about half an hour from the, center of Dallas, and slightly farther from Fort Worth. Bondholders and, local officials were concerned that if Love Field remained attractive to, large commercial carriers, some carriers who were required to move their, operations to the new airport might seek to transfer their business back, to their old Dallas home., Southwest was able to continue its operations at Love Field unimpeded, because at the time the Wright Amendment was passed, it was an intrastate, carrier not subject to federal guidelines that required certificated, interstate carriers to move to DFW Airport.
Published in Bond Buyer (2006)
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