Author: Austin Thompson

Municipal Finance in a Pandemic: How is the Market Responding?

Municipal Bonds & COVID-19: What is going on?

Prior to the outbreak of COVID-19 in the US, the municipal (“muni”) bond market was strong. Investors looking for a non-taxable rate of return were hungry for municipal bonds, driving interest rates down for borrowers (state and local governments) and pushing more debt into the marketplace. Most governments have a cap on the amount of non-taxable municipal bonds they can issue, so many had expanded to include taxable bonds (at a higher rate of return for investors and a higher interest rate for borrowing).

Historically, muni bonds have been very low risk. The rate of default on municipal bonds is very low, and investors see muni bonds as a safe haven for return. The rate of return is often quite low, as determined by the safety of investment, but from a portfolio standpoint, they are a safe addition. As of the end of 2019, the muni bond market was incredibly strong; perhaps the strongest it has ever been. Many state and local governments had strong “rainy day funds” or days of cash on hand, making the risk of default even lower and the bond rating even higher. 

Then, COVID-19 made its way to the US and changed the marketplace. Muni bonds have historically performed well during economic downturns, as issuers rarely default– specifically those with great bond ratings. COVID-19 changed this perspective within the market. Investors began selling off everything, including municipal bonds, leaving issued debt sitting in the market unclaimed and driving up interest rates for borrowers. The stock market followed suit, dropping rapidly over just a matter of days, pushing many to wonder if the US was headed for another recession. Why did this happen? And most importantly, what is next? Continue reading

What’s the Use? Assessing Trends in North Carolina’s Residential Water Use

After droughts and in light of future concerns over water resources, the topic of conservation has risen in importance. While regional differences in supply concerns exist across the United States and even on a smaller scale, within states, there have been consistent pushes on a federal-level to move towards more efficient use without customer behavior change. Most research suggests that behavior change is “hard,” but by addressing use at the fixture, consumers can continue flushing and showering just as much and use less water.

In addition to this push towards more efficient appliances, the rise in the water and wastewater rates across the US and more specifically, in North Carolina, have put additional incentive on users to conserve, as they are continually sent a strong pricing signal. Weather and household size can also have profound impacts on water use, but the regionality of weather and general trend towards population growth across the country make it harder to assess the impact on total use. Despite all of the factors that impact total demand, federal and state leaders remain interested in how demand is changing over time and what that means for communities strapped for supply and communities struggling to bring in sufficient revenues to cover rising expenses.  Continue reading

What’s Trending? A Look Into North Carolina Household Water Bills and the Income to Pay

The 2019 North Carolina Water and Wastewater Rates Dashboard was deployed just over a month ago, marking another year in a long partnership between the Environmental Finance Center at UNC-Chapel Hill, the North Carolina League of Municipalities, and the North Carolina Division of Water Infrastructure. One of the benefits of such a long and successful partnership is the wealth of historic rates data.

The Rates Dashboard provides an up-to-date look at rates and financial sustainability indicators for utilities around the state, but it is merely a snapshot. By looking at trends in rates and demographic factors, such as income, the numbers and changes start to tell a story. A trends analysis was produced for a recent course on Water and Wastewater Finance at the UNC School of Government, looking at rates from 2009-2018, EPA SDWIS Service Population data from 2009-2018, and income, from US Census American Community Surveys, from 2007-2017. The figures below are adapted from that analysis. The analysis is restricted to utilities that have participated across all years and availability of data. By looking at the overall trend rather than the specific values, the resulting patterns can provide considerations for utilities across the state. Continue reading

Where the ARC meets the EFC: Program Evaluation

A Program Evaluation of the Appalachian Regional Commission’s Water and Wastewater Infrastructure Projects, FY2009-FY2016

In 1964, President Lyndon B. Johnson stood in Martin County, Kentucky and declared “an unconditional war on poverty in America.” As part of this initiative, the Appalachian Regional Commission (ARC) was created: a congressionally appropriated commission that invests in economic development projects in Appalachia, an area of the country that was lagging behind in public health, infant mortality, education, and income level. Fast forward to today, and Appalachia still struggles with job loss and economic downturn. Many counties in central Appalachia built economies around coal mining, and as America’s energy profile shifts away from coal and towards other options, coal towns often need help investing in local infrastructure to improve quality of life and promote economic development. Continue reading

Growing Economies and Shrinking Coastlines: Financing Wider Beaches

As of 2014, NOAA estimated that about 40 percent of the US population lives in a county on the coast and these coastal counties are responsible for 56 million jobs. As a nation, we have developed heavily along the coastlines, building large and valuable assets on property that may erode. As communities along the southeastern coastline have experienced and can likely attest to, there are very few viable options for slowing coastal erosion that do not either cause more erosion downdrift or damage to coastal ecosystems. To date, most communities have found beach nourishment to be the most viable option. So what is beach nourishment and how do we pay for it? Read on for answers to these questions and more: Continue reading