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U.S. Cities May Consider Defaulting as Revenue Falls, CBO Says - (www.bloomberg.com) Cities and other local governments may see property-tax revenue decline, forcing some to consider defaulting on debt and seeking bankruptcy protection, the Congressional Budget Office said in a report. A 27 percent decline in housing values from June 2006 through June 2010 hasn’t yet driven down tax rolls of cities, counties and school districts as property collections rose 31 percent during the same period, the budget office said in the Dec. 9 report. That is expected to change, because property taxes, which generate a fourth of revenue, lag behind changes in home prices by three years, the report said. “Collections will probably fall in the coming years as local governments gradually update property-tax assessments to reflect lower market values,” said the report, prepared by Elizabeth Cove Delisle. Falling tax revenue could force issuers to examine default and protections offered by Chapter 9 of the U.S. Bankruptcy Code, the report said. Chapter 9 offers court protection from creditors, and allows municipalities to restructure debt, negotiate for lower labor costs and make changes without the approval of all creditors, the report said. Local governments include 3,000 counties, 36,000 cities and towns, 37,400 special districts and 14,600 public-school systems, the report said. They get nearly one-third of their revenue from state aid while less than 4 percent comes from the U.S. government, it said.
Build America Issuers Race Dec. 31 Countdown Clock: Muni Credit - (www.bloomberg.com) Issuers from across the U.S. are moving up planned Build America Bond sales to this month, making the quarter the biggest yet for the program, which is set to expire Dec. 31 if Congress doesn’t extend it. States and municipalities are slated to offer more than $3.8 billion of the securities this week, according to data compiled by Bloomberg. Sales of the taxable debt in the last three months of 2010 to date represent about 21 percent of the $179 billion sold since the program began in April 2009, Bloomberg data show. The securities, which include a 35 percent federal subsidy on interest costs, have allowed state and local governments to borrow at a lower cost than traditional tax-exempt debt. President Barack Obama and Republican congressional leaders left the program out of a tax deal they reached last week, hastening issuers to market.
Build America Bond Program Extension Sought by Democrat in Senate Tax Bill - (www.bloomberg.com) A Democratic U.S. senator is proposing what may be a last-ditch effort to extend the Build America Bonds program as part of legislation being considered by the Senate to continue the 2001 and 2003 income-tax cuts. Oregon’s Ron Wyden, an advocate of the securities who previously led Democrats in an unsuccessful bid to have an extension included in the tax bill, offered an amendment seeking to keep them available for a year beyond their scheduled end on Dec. 31, said Jennifer Hoelzer, his spokeswoman. The looming end of the federally subsidized debt program, which pays 35 percent of the interest expenses on municipal bonds sold for public works, is threatening to push up borrowing costs for cash-strapped state and local governments. The securities were left out of the agreement President Barack Obama struck with Republicans, some of whom have been critical of the program. While in the minority, the party has enough power to stall the passage of legislation.
Alarm over rise in US bond yields - (www.ft.com) The UK’s largest investment manager has warned of a potentially “catastrophic” rise in US Treasury yields in the wake of the “extremely irresponsible” fiscal policy being adopted by Washington. Barack Obama and congressional Republicans last week agreed a fresh economic stimulus package, involving the extension of Bush-era tax cuts and unemployment benefits, a payroll tax holiday and tax breaks for investment that, if passed, are forecast to maintain the bloated federal deficit at 9-10 per cent of gross domestic product. The package, significantly larger than expected, fuelled a surge in 10-year Treasury yields to 3.28 per cent on Friday, from 2.51 per cent at the start of week, with most commentators attributing the jump to expectations of faster economic growth in the US in 2011 thanks to the stimulus. However, Legal & General Investment Management, which manages £342bn ($541bn) of assets, warned the jump in bond yields could be the start of a bear market in US debt. “They are running an extremely irresponsible fiscal policy, completely abusing their reserve currency status. No other country would be able to run such a deficit without a long-term plan to bring it under control,” said Tim Drayson, economist at LGIM.
Bears Draw More Blood From Crashing Netflix - (www.businessinsider.com) One of the short's favorite targets -- which in recent weeks has finally discovered the law of gravity -- is tanking again. It's down 4.5%. The latest headline is Jeff Bewkes of Time Warner slamming the company's economics. Click here for more on the variety of factors keeping it down >
OTHER STORIES:
Commodities' Paths Diverge - (online.wsj.com)
High-frequency traders boost forex turnover - (www.ft.com)
Chinese IPOs raise three times as much as US listings- (www.ft.com)
China Risks ‘Rush’ to Tighten in 2011 After Inflation Tops 5% - (www.bloomberg.com)
As China Rolls Ahead, Fear Follows - (www.nytimes.com)
China Said to Aim for at Least 7 Trillion Yuan Loans - (www.bloomberg.com)
Push for shake-up of EU rescue facility - (www.ft.com)
Risky Borrowers Find Credit Available Again, at a Price - (www.nytimes.com)
Housing Shaky as Lenders Tighten . - (online.wsj.com)
Fed unlikely to shift from QE2 roll-out - (www.ft.com)
Wall Street Sees Record Revenue in ’09-10 Recovery From Bailout - (www.bloomberg.com)
A&P, U.S. Grocery-Store Chain Owner, Seeks Bankruptcy - (www.bloomberg.com)
Florida Governor Declares Emergency for Crops on Cold - (www.bloomberg.com)
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