Weekly Market Update
HOUSE PASSES TAX BILL
Thursday, November 16, 2017
The House passed its tax reform bill in support of the Republican Party's goal of a tax code overhaul. Although 13 Republicans and all Democrats voted against it, the bill passed by a vote of 227-205. Republicans are still facing an uphill battle, as the Senate will need to approve its own tax bill, announced last week. The bills contain significant differences and, should the Senate version pass, Congress will need to align the two. Analysts noted that the House bill could end the subsidy applied to Build America Bonds (BABs). The BABs program was instituted to allow municipal issuers to issue taxable debt and receive a subsidy for 35% of the interest costs. In past years, the subsidy has been cut back due to sequestration, and it is anticipated that, under the House version, the subsidy would be eliminated altogether.
In Other News
- Under the Senate's proposed tax bill, universities would be required to pay taxes on royalties generated from universities' names or logos. Additionally, universities will have to break out business activities unrelated to their core mission, so that, for tax purposes, losses in one cannot offset gains in another.
- Senate Republicans added a repeal of the Obamacare law's individual mandate to their proposed tax bill. Although the repeal would provide a needed spending cut, it threatens to alienate Senate Republicans who have voted against Obamacare's repeal.
- According to Moody's Investors Service, tuition revenue growth at private universities will outpace growth at public universities in fiscal year 2018 for the first time in more than a decade. Analysts attribute state affordability initiatives as a key factor in slowing tuition increases at public universities.
- The California Public Employees Retirement System (CalPERS) is evaluating a new investment strategy to more than double its allocation to municipal bonds. The strategy would allow CalPERS, the largest U.S. pension fund, to cut back on volatility at the cost of a lower expected rate of return.
- The American Council on Education announced a three-year program focused on evaluating equality in higher education for students, faculty and staff of color.
Rating Agency Update
- Moody's assigned Aaa to Pomona College's Series 2017 Revenue Bonds. The outlook is stable.
- Moody's downgraded Kenyon College's rating to A2 from A1 and assigned A2 to its Series 2017 Revenue Bonds. The outlook is stable.
- S&P downgraded Kenyon College's rating to A from A+ and assigned A to its Series 2017 Revenue Bonds. The outlook is stable.
- Moody's upgraded Boston University's rating to Aa3 from A1. The outlook is stable.
- Moody's downgraded Claremont Graduate University's rating to Baa3 from Baa1. The outlook is negative.
- Moody's assigned Aaa to Rice University's Series 2017 Bonds. The outlook is stable.
- Moody's assigned Baa2 to Nazareth College of Rochester's Series 2017 Revenue Bonds. The outlook is stable.
- S&P assigned BBB+ to Nazareth College of Rochester's Series 2017 Revenue Bonds. The outlook is stable.
- Moody's assigned A1 to Arkansas Tech University's Series 2017A & 2017B Housing System Bonds, 2017A Student Fee Bonds, and 2017A Athletic Enterprises Bonds. The outlook is stable.
- Moody's upgraded Arizona State University's rating to Aa2 from Aa3 and assigned Aa2 to its Series 2017A, 2017B, & 2017C System Revenue Bonds. The outlook is stable.
- S&P affirmed its A+ rating on Missouri State University. The outlook is positive.
- S&P upgraded Vanderbilt University's rating to AA+ from AA. The outlook is stable.
- S&P affirmed its BBB rating to the Foundation for Indiana University of Pennsylvania. The outlook is stable.