Cities can raid retirees to boost project spending: report

Projecting U.S. spending on local water projects, Ryan Connors, veteran utility analyst, covers a lot of ground in a short report today to clients of Boenning and Scattergood, West Conshohocken:

PENSION BUSTING BENEFITS: "Municipal bond issuance more than doubled in February to $32.4 billion, water utility employment is hitting multi-year highs, and water pricing is re-accelerating" after years of budget tightening by cash-srapped municipal governments, Connors writes.

The U.S. Supreme Court's M&G v. Tackett decision, which held that "municipal workers' healthcare benefits cannot be construed as lifetime" unless guaranteed by union contracts, will make it easier for towns to stiff retires and cut costs. That, plus Detroit's "recent precedent on reducing pensions in bankruptcy," will make it easier to cut retirement payments to ex-city workers, enabling towns "to increase funding for other budget priorities, such as infrastructure."

HOUSING RECOVERY SOLID: "Helped by the improving jobs picture and low interest rates, housing permits (+19% from last year) and starts (+8%) are running well above year ago levels, and homebuilders are reporting strong order growth" and boom-era backlogs. More homes = more utility hookups.

FACTORIES STILL SLOW: Cheap oil doesn't seem to have hurt energy companies' water demand, but manufacturing capacity is still below 80%, so higher spending from that sector "is unikely in the near-term."

FARMERS BROKE: U.S. Department of Agriculture says the price to farmers of corn, at just $4.03 a bushel last month, is "hovering below cash break-even for U.S. growers," who need at least $4.18 a bushel to pay for tractors, oil and other costs. So they aren't spending extra on irrigation. A visit to this year's National Farm Machinery Show confirms "demance could bounce along the bottom for an extended period" and ag stocks will be weak.