(Bloomberg) — U.S. voters are likely to pass at least $37 billion of the sale of state and local government debt that was on the agenda in Tuesday’s election, led by measures that cut work on schools and will finance other infrastructure projects.
Officials asked for approval of a total of $66 billion in bond measures, according to a Bloomberg analysis of data compiled by IHS Markit that rules out referendums by Texas’ utility and water districts. An early count shows that the ascendancy is moving towards acceptance.
The largest measures passed include a $4.2 billion statewide climate measure in New York and a $2.3 billion school bond in Austin, Texas, according to a preliminary Bloomberg tally of unofficial results. .
The approvals “send the message that voters are concerned and thinking about the multi-year impact infrastructure is having on their communities,” said Tom Kozlik, head of municipal research at Hilltop Securities Inc. “It is very clear that voters are not short on sight, even if there are some negative economic considerations.”
The margin of approval for some measures is remarkable. For example, New York’s environmental bond received nearly 60% of the vote, beating Democratic Governor Kathy Hochul’s victory by about 52%.
“These measures transcend what is happening politically,” Kozlik said. “Voters have a vision for the investment they would like to see happen in their states and regions.”
Governments that have passed referendums now face the prospect of borrowing at the highest interest rates in at least a decade, which could lead some to delay plans to tap into the bond market. With the Federal Reserve raising interest rates to curb inflation, 30-year municipal bonds are yielding 4.05%, more than double the level earlier this year.
“Governments will be careful about how much the issuance costs,” said Alice Cheng, municipal credit analyst at Janney Montgomery Scott.
She expects that some of the measures will hit the market in the second half of 2023 at the earliest.
“If the projects are not time-consuming, it may make sense to go into 2024, when volatility is more moderate and there are more opportunities in the market,” Cheng said.
Last year, voters approved at least 65% of the $28.7 billion in municipal bonds to consider, in what was a relatively weak year for bond referendum volume. More loans are often requested in by-elections: four years ago, local governments asked for approval of about $76 billion.
“You see that governments still have capital needs to fund,” said Frances Lewis, senior managing director at MacKay Municipal Managers. Some had postponed or reduced referendums during the pandemic, Lewis said.
Few measures failed as of Wednesday, with losses of at least $3.4 billion. A $650 million move in Berkeley, California, to fund local infrastructure repairs and affordable housing, didn’t seem to get enough votes, according to unofficial results.
Here are some of the largest approved referendums on bonds, according to unofficial results:
- New York voters approved a $4.2 billion environmental bond designed to improve water quality while investing more to reduce the risk of flooding and other disasters linked to climate change
- Austin: Voters approved a $2.3 billion bond to Austin Independent School District, part of a $2.44 billion package that will fund security improvements, equity centers and upgrades for campuses in the district
- Long Beach: Voters were on track to approve a $1.7 billion bond for Long Beach Unified School District to fund upgrades to school facilities, ensure building accessibility, fix leaking roofs, and remove lead paint and asbestos