Market freeze may slow Oklahoma road, infrastructure repairs

BY BRYAN DEAN

Published: October 20, 2008

Government officials and financial experts are warning that a freeze in the market for municipal bonds could cause major delays nationwide in government projects as basic as road repair and replacing water pipes.

Chris Cochran, executive vice president for Capital West Securities, represents many local governments when they have bonds to sell.

"Normally in the municipal bond market, on a weekly basis $5 to $7 billion dollars of bonds will be issued in the United States,” Cochran said.

"Beginning about three weeks ago, that essentially turned to something just slightly greater than zero. The market is essentially closed.”

Cochran said municipal bonds are considered safe investments and usually sell with no problem.

But with many large investment banks that normally buy bonds either going under or in panic mode, they aren’t making any purchases.

"The institutional buyers either are hoarding the cash or don’t have the type of cash they need to invest in these deals,” Cochran said.

There are about $25 billion in bonds that are essentially on hold, Cochran said. Among the deals that have been put off is a $164 million bond sale by the city of Arlington, Texas, intended to help pay for the Dallas Cowboys’ new stadium, and a $500 million bond sale by New York City.

Oklahoma County Treasurer Butch Freeman said the county got lucky with its recent bond sale to pay for the purchase of the General Motors plant. Those bonds sold in July.

"I honestly don’t know what we would do if we had $61.5 million in bonds to sell today,” Freeman said. "There’s no way we could have done it.”

Cochran said he doesn’t expect anything to change in the market before the Nov. 4 presidential election, but he hopes things will stabilize by the new year, at the latest.

Diane Pedicord, general counsel for the Oklahoma Municipal League, said city and county governments across the state use bonds to pay for everything from utility improvements and roadwork to police cars and new buildings.

"Obviously, if we can’t sell bonds in the marketplace, there will be a stop to those projects, or certainly a delay,” Pedicord said.

"We are seeing from some of our national counterparts that it’s already hitting in some other states very hard. If you have a major improvement that needs to be done, a delay could be serious.”

We are seeing from some of our national counterparts that it’s already hitting in some other states very hard. If you have a major improvement that needs to be done, a delay could be serious.”

Diane Pedicord,
general counsel for the Oklahoma Municipal League

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