The WSJ reports municipalities face a cash crunch amid declining tourism and stadium revenues. The result: uncertainty in the ability to repay muni’s at a time when higher taxes are a political third rail. From the article: “Public officials have borrowed billions of dollars to build stadiums for major teams. Since 2000, more than 40% of almost $17 billion in tax-exempt municipal bonds sold to finance major-league stadiums were backed by levies on hotels and rental cars—making tourism taxes the predominant means of public stadium finance, according to the Brookings Institution.
Much of outstanding muni debt is backed by property taxes and sewer fees, leading many to consider the securities nearly as safe as Treasuries.
Maryland Heights, Mo., bonds backing the Centene Community Ice Center, used by the NHL’s St. Louis Blues, have fallen from 109 cents on the dollar at the beginning of March to 68 cents on May 21, the last time the bond was traded. The city uses revenue from the facility to cover most of the debt payment of $3.6 million a year.”
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