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

The Cover Story

Linda Baker
Thursday, August 27, 2015
01-cover-0915-thumbBY LINDA BAKER

How do you put a baby on the cover of a business magazine without it looking too cutesy?


Read more...

Best Foot Forward

July/August 2015
Monday, July 13, 2015
BY CHRIS NOBLE

Whether you're stepping out to work or onto the track, Pacific Northwest shoe companies have you covered.


Read more...

Child care challenge

News
Wednesday, August 26, 2015
0927OHSUhealthystarts-thumbBY KIM MOORE AND LINDA BAKER

Child care in Oregon is expensive and hard to find. We delved into the numbers and talked to a few executives and managers about day care costs, accessibility and work-life balance.


Read more...

Staffing Challenge

July/August 2015
Monday, July 13, 2015
BY KIM MOORE

A conversation with Greg Lambert, president of Mid Oregon Personnel Services.


Read more...

5 questions for ImpactFlow CEO Tyler Foreman

The Latest
Thursday, August 13, 2015
impactflowthumbBY JACOB PALMER | DIGITAL NEWS EDITOR

Portland-based startup ImpactFlow recently announced a $5.7 million funding round. CEO and co-founder Tyler Foreman talks about matching businesses with nonprofits, his time at Intel and the changing face of philanthropy.


Read more...

Business School

September 2015
Wednesday, August 19, 2015
BY AMY MILSHTEIN

Training, from the mundane to the sublime, bolsters companies and workers in an uncertain world.


Read more...

Storyteller in Chief: Power Player

September 2015
Wednesday, August 19, 2015
BY LINDA WESTON

In 1996, after a 17-year career in the destination marketing industry, where I gained national standing as the CEO of the Convention & Visitors Association of Lane County, I was recruited by the founders of a new professional basketball league for women. The American Basketball League (ABL) hoped to leverage the success of the 1996 USA women’s national team at the Atlanta Olympics — much like USA Soccer is now leveraging the U.S. Women’s National Team’s victory in the World Cup. The ABL wanted a team in Portland, and they wanted me to be its general manager.


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