Municipal Bond Forum

Financial stress on cities and counties from pandemic

Today there was a front-page piece in the newspaper about financial stress cities and counties are facing due to lack of revenue caused by the pandemic fallout.

Should I be worried about them defaulting on bonds or failing to make interest payments?
M.B., Florida

James A. Klotz responds:

I don’t disagree there will be unusual financial stresses brought about by these various shutdowns, but we don’t expect the consequences to be dire.

Obviously, this pain cannot be quantified until these restrictions are partially or permanently rescinded, businesses can reopen and daily life returns to normal.

Debt service is always the No. 1 priority for municipalities (GO bonds) and political subdivisions (revenue bonds).

Naturally, the sooner this crisis ends, the better.