Preview: U.S. voters to decide on $34.2 billion of municipal bonds
(Reuters) - U.S. voters will decide the fate of scores of bond referendums totaling $34.2 billion on Tuesday along with a slew of ballot measures, including several dealing with raising or restricting taxes.
The amount of bond authorizations requested by states, cities, schools and other issuers in the $3.7 trillion municipal bond market is up from the $16.5 billion of bonds on ballots in November 2011 and November 2010's approximately $15.8 billion, But it is well under the $67 billion of debt voters were asked to approve during the last presidential election in November 2008, according to data company Ipreo.
Chris Mier, a managing director at Loop Capital Markets, said the sharp drop from four years ago reflects a growing sensitivity about borrowing amid concerns over the excess of public debt that is fueling the crisis in euro zone countries and the U.S. government's own huge debt load.
"Politicians and public servants are much more reluctant to bring bond issues before the public," he said.
Worries about the economy may also lead to more 'no' votes on bond issues. Richard Ciccarone, managing director and chief research officer at McDonnell Investment Management, said the 80 percent passage rate enjoyed by bond measures on presidential election ballots over the last 10 years may slip this year because voters may decide that "the economic times are not conducive to adding taxes" needed to pay off the debt.
California ballots are bursting with $14.8 billion in bond measures, the most of any state. San Diego's school district has the largest request - $2.8 billion of bonds for new construction and to upgrade facilities and technology.
Voters in the most populous U.S. state will also take up two state tax measures that emphasize raising revenue for schools, which have suffered from state budget cuts in recent years.
Governor Jerry Brown is pushing Proposition 30, which would increase the state's sales tax and income tax rates on the wealthy. Revenue raised by the measure would prevent $6 billion in spending cuts, which would strike mostly at education programs, over the near term and bolster the state's notoriously wobbly general fund in future years.
Rival measure Proposition 38 would increase personal income tax rates on all but the poorest Californians to raise money for schools, early childhood programs and to repay state debt.
Polls show weak support for Proposition 38 while the proportion of voters backing Brown's tax measure is just under 50 percent.
Tax framework changes are on ballots in 11 states, with seven measures aimed at prohibiting or restricting increases, according to Standard & Poor's Ratings Services. It added that other measures seek to raise taxes or make previous hikes permanent.
"... Florida, Michigan, New Hampshire and Washington (state) voters will consider measures that would limit their state legislatures' flexibility to increase taxes," the credit rating agency said in a report.
S&P also said other ballot measures in Arizona, Florida and Oklahoma would reduce the flexibility of local governments by placing restrictions on their future tax revenue growth.
S&P said, however, it did not anticipate any ballot measure would have an immediate effect on its credit views of issuers. Fitch Ratings, meanwhile, said the credit impact of the measures would be "significantly influenced" by how any change is managed by issuers.
In Michigan, voters will decide whether to keep or repeal a controversial 2011 law that gave the state more power to intervene in troubled local governments, including Detroit, its biggest city. Recent polls showed support for the law among likely Michigan voters below 50 percent. Voters will also decide whether to insert the right to collective bargaining into the state constitution.
Texas voters will weigh just over $6 billion of bonds, including $1.89 billion for Houston public schools and three issues totaling $642 million to finance various improvements in Dallas.
Alaska is asking its residents to approve $453.5 million of bonds for transportation projects, while New Jersey is requesting $750 million of bonds for colleges. Arkansas is seeking a temporary sales tax to fund $1.3 billion of bonds for roads and bridges.
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