Muni bond defaults moved past $4 billion from January thru September 2009 driven partly by the bursting of the real estate bubble which in turn triggered defaults in “Special Assessment” bonds, according to the Distressed Debt Securities Newsletter and Bloomberg.
The problem is caused by builders who issued tax-exempt bonds backed by these Special Assessment bonds to finance infrastructure, such as new schools. Builders are not paying the tax debt as houses go unsold and land values decline. For example in Adelanto, California, about $17 million in bonds defaulted as school construction proceeded faster than home building. The real estate crash caused fewer people to move into the area which means less tax revenue to support new schools. Special Assessment bonds are a real specialty area.
BondView.com can help you learn more about Special Assessment bonds…. 1) Take a look at all California Special Assessment bonds traded within the last 24 hours, see up to date yield curves for these bonds, or get an objective view of own muni bond portfolio. Or 2) For more info about Special Assessment Bonds contact an industry leader: David Taussig & Associates
(In the interests of full disclosure, BondView is not paid for this recommendation. We are just sharing our industry contacts with you.)