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PA Turnpike Commission ‘on the Path to Bankruptcy,’ Auditor General Says

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The Pennsylvania Turnpike is headed down the “road to ruin,” state officials warn, TribLive reported. It’s not corruption or mismanagement, but rather Act 44 of 2007 that requires the commission to pay PennDOT $450 million a year for mass transit that has left the nation’s first superhighway deeply in debt despite annual toll increases. Those hikes have driven the toll for a car ride across the turnpike to $56.50 and resulted in a decline in turnpike traffic as drivers sought out less-costly alternatives. Last year, the Tribune-Review found that tolls from commercial traffic that made up 44.55 percent of turnpike toll revenue in 2009 had fallen to 42.71 percent in 2017. DePasquale warned that a pending federal court case filed by truckers who claim diverting tolls to PennDOT is a violation of interstate commerce laws exacerbates what is already a serious threat to the turnpike. Should the truckers prevail and the court rule Act 44 a violation of federal law, the results could be catastrophic for both the state and the Turnpike Commission, he warned. There’s little question, Auditor General Eugene DePasquale said, that Act 44 has been the impetus for 11 consecutive years of toll increases. “Before Act 44, there were only five toll hikes in the 64 years. Now it happens every year, with no end in sight,” he said.

High-Yield Muni Market Passes a Key Test from Puerto Rico’s Sell-Off

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Over the past month, hedge funds and other investors dumped more than $2.5 billion of debt they received in Puerto Rico’s record restructuring, a sell-off that made the sales-tax-backed securities the most actively traded in the municipal-debt market, Bloomberg reported. Yet the prices haven’t crashed — and the flood did little, if anything, to dampen the gains for other tax-exempt junk bonds. The performance shows that the $3.8 trillion municipal market weathered a major test from Puerto Rico’s bankruptcy. The debt restructuring had raised concern that the speculative corner of the market would struggle to absorb the billions of dollars of new debt, pushing up yields on Puerto Rico’s new securities and other high-risk debt competing for limited space in investors’ portfolios. The new batch of restructured debt hit the secondary market in February after Puerto Rico issued $12 billion of non-rated sales-tax bonds, called Cofinas, to investors who traded in their outstanding securities, cutting more than $5 billion of the island’s troubled debt. Since then, high-yield municipals have earned 1.2 percent, more than the 0.8 percent advance in the broader tax-exempt market, according to Bloomberg Barclays indexes.

Official: Puerto Rico Debt-Adjustment Plan Not ‘Realistic’ in April

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The executive director of Puerto Rico’s federally created financial oversight board said that a plan to restructure the U.S. commonwealth’s core government debt likely cannot be done by the end of April, Reuters reported. An attorney for the board told a U.S. judge who is hearing Puerto Rico’s bankruptcy cases that a draft plan was expected next month, according to local media reports. However, the oversight board’s executive director, Natalie Jaresko, said the attorney meant to say that the plan could be filed with the court “at best” in April. “I don’t think it’s highly realistic to do this by the end of April,” Jaresko said, adding that board’s goal is to seek court confirmation of a plan before year end. Negotiations are ongoing with creditors over an adjustment plan for roughly $13 billion of general obligation debt and almost $50 billion in unfunded pension obligations, although the board has asked the court to void more than $6 billion of GO bonds issued in 2012 and 2014. “We’re trying not to do a cramdown, but I don’t know where that’s going to end up in the end,” Jaresko said, referring to a process where an adjustment plan could be imposed on certain creditors.

Experts Warn New York City Edging Toward Financial Disaster

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Experts say New York City is careening closer to all-out financial bankruptcy for the first time since Mayor Abraham Beame ran the city more than 40 years ago, the New York Post reported. As tax-fleeced businesses and individuals flee en masse, and city public spending surges into the stratosphere, financial analysts say New York is perilously near total fiscal disaster. Long-term debt is now more than $81,100 per household, and Mayor de Blasio is ramping up to spend as much as $3 billion more in the new budget than the current $89.2 billion. “The city is running a deficit and could be in a real difficult spot if we had a recession, or a further flight of individuals because of tax reform,” said Milton Ezrati, chief economist of Vested. De Blasio has detailed $750 million in savings for the preliminary fiscal 2020 budget, but that won’t be enough to stave off a bloodbath if New York’s economy is hit by financial shocks — including a recession, which some see on the horizon — analysts warn. Gov. Cuomo’s preliminary budget has $600 million in city cuts in the coming year. But city spending, up some 32 percent since de Blasio took office — triple the rate of inflation — may need to be cut deeper, these analysts add. The city’s long-term pension obligations have escalated, as well, as its workforce has soared by more than 33,000 in the last five years.

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