Regions back off bonds amid budget concerns

Associated Press

JEFFERSON CITY, Mo.

Uncertainty about where their next dollar is coming from has chilled the municipal bond market, meaning cities and states will be breaking ground on fewer public-works projects, canceling or delaying projects worth tens of billions of dollars and providing yet another blow to economic-recovery efforts.

Through mid-August, the total value of municipal bonds issued nationwide was down about 40 percent over the same period a year ago, the largest decline in two decades. The means fewer bonds issued for water and sewer systems, education, transportation, health care, electric utilities and general government purposes.

That leaves Kansas City, for example, without the money to prevent water from bubbling to the surface of streets and lawns because of aging water pipes that are bursting under pressure. The city can only afford to fix a fraction of the plumbing on its repair list.

Market analysts attribute the municipal-bond drop-off to a variety of factors, including a natural slowdown after last year’s rush to issue bonds before a federal stimulus act program expired. But another reason, say local-government officials, is the fact that their budgets are stretched so thin, they’re not willing — or able — to siphon scarce tax dollars toward debt repayment.