Discussing the upcoming Fourth of July holiday and specific reasons for investors to celebrate muni investing in the U.S. are Dennis Derby, portfolio manager and senior research analyst for the Municipal Fixed Income team, and Christine Collins, investment strategy consultant, with Allspring Global Investments.


Dennis Derby: The focus on public good in the municipal market is the driving force in improving life in the United States for all the citizens and constituents here.

Christine Collins: That’s Dennis Derby, portfolio manager and senior research analyst for the Municipal Fixed Income team with Allspring Global Investments. I’m Christine Collins, investment strategy consultant, and you’re listening to On the Trading Desk®. We’ll be talking about the upcoming Fourth of July holiday here in the United States and reasons to celebrate investing in municipalities across the country. Thanks for being here, Dennis.

Dennis: It’s great to be here, Christine.

Christine: Well, it’s almost the Fourth of July again. And for everyone in the United States, that likely means getting together with friends and family to celebrate the anniversary of the country’s independence. With all of this traveling taking place, could you give us insight as to what this means for municipalities?

Dennis: Absolutely. Part of what makes municipal bonds relevant to our daily lives here in the United States is that they have a meaningful impact on how we live our lives and they do really improve the quality of our lives.

Christine: Can you give us some examples of the improvements that you’re seeing around the country?

Dennis: Some of the most notable improvements in transit and public transportation have been implemented through the use of municipal bond financing. Now, while public transit might be the first thing that comes to mind when the topic of municipal bonds come up, I would note that many roadway improvements and airport improvements over the last 20 years have greatly benefited through their use of the muni markets. They have come in the form of expanded airport and car rental facilities. You see nicer amenities, better gate spaces, and improved dining and shopping, as well as improved baggage handling and parking. Now, by issuing municipal bonds, airports can access the capital markets at a significantly lower borrowing rate and methodically plan for their growth. Now, this applies to toll roads, as well. We have seen many private public partnerships over the last two decades that have expanded high traffic roadways quickly and efficiently. Now, one example of that can be found in the nation’s capital, Washington DC, where if you look at the Dulles Toll roads, you’ve seen an almost 40-year history of managing commutes in a very dense traffic environment. Now, while traffic patterns have changed, management has been able to respond to those changes and they’ve implemented rate changes, as well as implementing all electronic tolling. Now, that makes a huge difference from when I was younger, as holiday weekends meant really waiting in long holiday toll collection lines and looking under the seat for quarters. Well, fortunately, those days are behind us. And we’ve seen a great deal of progress and improvements over the last several decades. And I think we have more to come through issues in the municipal bond market. Now, I would note that we had recently seen the Infrastructure Investment and Jobs Act pass in 2021. And that should be a huge tailwind for funding highways, power grids, broadband, and all of these things also mean more supply for the municipal bond market over the next few years. So, we should see more opportunities to see the nation’s transit system improved through the municipal bond market over the next few years.

Christine: These are all great points, Dennis, and definitely a relevant topic. Now, speaking of transportation, one notable municipal issuer that you cover is the New York Metropolitan Transportation Authority, or the MTA. For the largest city in our nation, this is an important way for folks to get around on the holiday. Can you give us the latest on your outlook for MTA issuance?

Dennis: A great deal is happening around the MTA at this point. And there are a number of headlines discussing congestion pricing, lower ridership, and concerns about public safety. Now, these are all valid concerns and they are being addressed. In the post-pandemic environment, though, we would expect the management team to work with the city and state towards solutions that move away from ridership-generated revenues to other supplemental types of revenues, such as payroll taxes, rideshare fees, and other potential fees and taxes. This has received a great deal of press coverage and many transit authorities in the United States have actually already moved to this model to maintain service in volatile traffic scenarios. Now, remember that municipal entities have a foremost duty to serve their constituents and in the MTA’s case, that’s to ensure riders have a safe and reliable option to navigate the city.

Christine: Now, moving quickly to a different municipality, the Illinois and Chicago Complex have been in the headlines for the last several years with a long history of credit concerns with its municipal issuance. With that in mind, Dennis, what’s to celebrate here?

Dennis: That’s an excellent observation, Christine, and there certainly is. If you look at the state and the city complex, they’ve received numerous rating upgrades over the last few years, as longer-term costs, particularly the pension costs have been addressed, and in some cases, matched with new revenue streams. Now, this has led to the buyer base for these names being expanded as a result of these upgrades and improved financial responsibility across the complex. We’ve really seen better fiscal management. One important contributor to this has been the management teams themselves and they’ve been more willing to address a number of these longer-term issues to solve these imbalances over time. Now, there are certainly several issues, such as pension funding, public safety, and population trends that are concerning and do remain in the headlines, but I think that we can celebrate the meaningful management changes over the last few years and addressing these issues cautiously and thoughtfully.

Christine: This is really great, Dennis. Much appreciated. With the time we have left, can you give our listeners any final thoughts, particularly on the country as a whole as we celebrate the Fourth of July?

Dennis: Absolutely, Christine. I was having a visit with my father over Father’s Day weekend. And for many years, he actually commuted into New York City and Philadelphia from Connecticut and New Jersey. And we were talking about how much has changed and how much easier it is to get from one place to another these days. One example of that is flying through LaGuardia Airport in New York City, which was, quite politely, a very difficult experience several years ago. But nowadays, the terminals have been improved. Just a few years ago, the terminals were dilapidated. And if you weren’t in flying out of the C concourse, you had very limited choices of places to eat and very few places to actually sit down. Now, the terminals are some of the best in the world now, largely thanks to municipal bond issuance that went to pay for these renovations and the design behind them. So, if you think about the longer toll road lines that are now a thing of the past, thanks largely to electronic tolling financed by the municipal bond market, it’s shown some very, very strong improvements. While the space is certainly more complicated than it was in the past, the focus on public good in the municipal market is still there and it’s a driving force in improving life in the United States. I, for one, am very grateful when I travel across the country or across the city for these improvements. Mobility is a large part of the American identity and the projects funded by municipal bonds make this very accessible for all the citizens and constituents here.

Christine: Thank you, Dennis, for being with us today and sharing your insights.

Dennis: My pleasure. Thank you, Christine.

Christine: And for our listeners, I hope you have a happy Fourth of July. And thank you for joining us here On the Trading Desk®.

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