Weak Municipal Bond Sales May Affect City PlansPosted: Updated:
PASCO, Wash-- As the economic bind continues it's grip on American tax-payers, local and state governments are beginning to feel the effects.
Pasco is hoping to put in a water treatment facility into the 2009 budget. That won't happen unless $9 million worth of municipal bonds are sold. And that's not an easy task because of a fluxuating interest market.
"As you can imagine the stock market, the instability of that, does the same thing to the interest market," says Jim Chase, the Financial Services Manager for the City of Pasco.
Federal, state, and local governments need money to repair city halls, improve schools, and more. That capital typically stems from local investors in the form of a municipal bond. They're one of the safest investments because most defer state interest tax, and it's almost guaranteed money back over time, typically with a profit. But fewer people are buying.
"There's a lot of fear, there's a lot of just putting money back and pulling it onto the sidelines."
The market is so bad, Federal Reserve Chairman Ben Bernanke has endorsed a second econominc stiumulus package to help jump-start a stale economy. But financial advisers say now may be the best time to invest because the likelihood of a large yield is high.
"The values have been depressed, but the yields are looking very attractive, so now in a lot of ways is a time to be considering municipal bonds," says Pielstick.
Without investments, cities like Pasco will be forced to hold off on city plans, but Chase remains hopeful.
"I'm fairly certain we'll be able to sell that in the spring."