Sponsored by Oregon Business

Battered bond market hurts public projects

| Print |  Email
Thursday, January 01, 2009

Battered bond market hurts public projects

SALEM Hidden within the larger economic fluctuations of last year was serious news for Oregon municipalities. The bond market — that typically sleepy backwater of American finance — was also going ballistic.

An oversimplified description of bonds is that they’re the fuel behind nearly every public project. They fund roads, new buildings and hospital expansions. They also give cities the ability to borrow money on a short-term basis. But in October the world’s largest bond buyers —Lehman Brothers, Goldman Sachs, Morgan Stanley — stopped buying, and municipal bond sales in the nation fell by almost 60%. The market has begun to recover, but Oregon municipalities are still faced with high interest rates, a voting public that’s skittish to sign off on new bonds, and the tricky decision of which projects to pursue at a higher cost, which to delay and which to kill.

“That was the most amazing mid-September to mid-October. I’ve never seen anything like that before,” says Laura Lockwood-McCall, the director of debt management at the state treasury. Since that September-to-October stretch, the state has seen a slow increase in the number of municipal bonds sold.

But not all sales are equal. A very good credit rating can suddenly mean a percentage-point difference in an interest rate — a difference that can add up to millions over the life of the loan. That doesn’t just affect agencies that have sold bonds, says Shirley Baron Kelly, assistant finance director at the city of Beaverton and a board member of the Oregon Municipal Finance Officers Association. It also affects those who may want to sell bonds but didn’t account for those new interest costs in their budgets.

“We budgeted 18 months ago,” she says. “Had we only known.”

Oregon agencies will evaluate their bond needs on a case-by-case basis, says Lockwood-McCall. When county finance directors like Dean Stephens at Benton County, and Mike Robison at Clatsop County say they’re not in the bond market right now, the relief in the their voices is almost palpable. Other agencies won’t be so lucky. In November, Oregon voters approved $1.4 million in new bond-funded projects (42% of the total amount was in Clackamas, Multnomah and Washington counties). To fund those projects, cuts will have to be made elsewhere. “This is probably going to be really ugly,” Lockwood-McCall says.

How ugly, no one knows just yet. “There are so many factors that none of us controls,” Baron Kelly says. “I wish I had a crystal ball.”

ABRAHAM HYATT


Have an opinion? E-mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

Comments   

 
randy
0 #1 Oregon Bond Ratesrandy 2009-08-01 19:36:45
I think you should look at the rates of Oregon bonds the the current level of risk the market put in. http://investment-income.net/rates/municipal-bonds-rate-page
Quote | Report to administrator
 

More Articles

Where do Portland demographics rank among the largest 50 cities in the US?

The Latest
Tuesday, February 10, 2015
thumbpdxinperspectiveBY JACOB PALMER | OB DIGITAL NEWS EDITOR

The Portland in Perspective study, done by the City Budget Office, was released Tuesday.


Read more...

Photos from the 100 Best Companies to Work For in Oregon awards celebration

The Latest
Friday, February 27, 2015
IMG 9975cneditPHOTOS BY JASON E. KAPLAN

Images from the 2015 celebration of Oregon's great workplaces.


Read more...

10 quotes explaining crisis at Port of Portland

The Latest
Friday, February 20, 2015
022015 port portland OBM-thumbBY JACOB PALMER | OB DIGITAL NEWS EDITOR

The ongoing labor disputes at the Port of Portland came to a head two weeks ago when Hanjin, the container port's largest client, notified its customers it would be ending its direct route to Oregon.


Read more...

Party Like It’s 1999

Contributed Blogs
Wednesday, February 25, 2015
pets-com-sock-puppetBY JASON NORRIS, CFA | OB GUEST BLOGGER

Pets.com, GeoCities, eToys, and WorldCom … blasts-from-the-past that all signify the late 1990s Internet bubble. Yet we believe the dynamics of the market, specifically in technology stocks, are much different today than it was during the late 1990s.


Read more...

VIDEO: The 2015 100 Best Companies to Work For in Oregon

The Latest
Friday, February 27, 2015

videothumbVIDEO: 2015 100 Best Companies to work for in Oregon


Read more...

Umbrella Revolution

March 2015
Monday, February 23, 2015

Yeah, we know: Oregonians are way too cool for umbrellas. But today’s stylish, high-tech models will soften the resistance of the most rain hardened.


Read more...

Meeting Facilities Perspective

March 2015
Tuesday, February 24, 2015
BY KIM MOORE | OB RESEARCH EDITOR

A conversation with Donna Earley, director of sales and marketing for the Salem Convention Center.


Read more...
Oregon Business magazinetitle-sponsored-links-02
SPONSORED LINKS