The Tax Cuts and Jobs Act has been Beneficial for Colorado


The Tax Cuts and Jobs Act (TCJA) has been positive for the supply and demand dynamic in the Colorado municipal bond market. TCJA eliminated tax-exempt advanced refunding, which has resulted in lower municipal bond issuance this year. The new law also limits state and local tax deductions to $10,000, which we expect will increase municipal bond demand from investors. Advanced refunding issues accounted for 18% to 29% of municipal bond supply from 2012-2017. The TCJA was the largest overhaul of the US tax code since 1986, and reduces individual and corporate income tax rates, which will affect most states by eliminating or reducing exemptions and deductions that were available prior to its passage. Individual and corporate income tax revenues in Colorado will increase by an estimated $196 to $340 million a year as a result.

The passage of TCJA is also expected to increase Colorado’s general fund by an estimated $309.3 million in fiscal year 2017-18, $207.3 million in fiscal year 2018-19 and $326.3 million in fiscal year 2019-20, according to the Colorado Office of State Planning and Budgeting’s December 2017 forecast. The substantial growth in fiscal year 2017-18 is a one-time increase, as investors postponed capital gain sales and corporations deferred tax liabilities in anticipation of federal tax law changes.

While TCJA is a positive for the state, Colorado’s Public Employees’ Retirement Association’s (PERA) unfunded liability is still a concern that we are monitoring. Senate Bill 18-200 was passed in the Colorado Legislature on May 9, 2018, to make modifications to PERA to reduce its unfunded liability. The TCJA is expected to provide consumers with more disposable income and will continue to expand Colorado’s economy at lower levels due to higher costs of living, tight labor markets and inflationary pressures as interest rates increase.


Oregon Local Bond Measure Election Analysis


Earlier this week, Oregon residents approved over $940 million of general obligation bonds across the State, which was historically strong. Although results have yet to be certified, and therefore still preliminary, bonds approved by this election far outweigh the $852 million approved at the previous Oregon November special election in 2017. There are four scheduled election dates in Oregon each year: the 2nd Tuesday in March; the 3rd Tuesday in May; the 3rd Tuesday in September; and the 1st Tuesday after the first Monday in November. In November 2008, Oregon voters approved Ballot Measure 56, which repealed a law requiring more than 50% of a county’s registered voters to vote in bond measure elections held in May and November. As a result, the May election has become an important election to follow for new bond measures.

By election measure, approximately 59% of the bond issues were approved; however, 80% of the total requested par amount was approved by voters. Oregon typically sees more ballot measures during general elections, which are held in November, of even-numbered years. Accordingly, the current election falls flat versus the 2016 November general election, which approved a staggering $1.76 billion of new supply.

Election results were dominated by Salem-Keizer School District’s $620 million issue, which is estimated to cost taxpayers $1.24/$1,000 of assessed value. Overall, 90% of the total par-amount approved at the election was for school districts making capital improvements to existing facilities and constructing new facilities to accommodate enrollment growth. Furthermore, a significant marketing point for several of the school bond issues was the Oregon School Capital Improvement Matching program, which is a grant program, offered by the Oregon Department of Education for the support of communities that pass general obligation bonds for school improvements.

Some elections were closer than others. Nestucca Valley School District’s general obligation bond was last reported as being favored by only 21 votes. If approved, the bond measure would fund the construction and renovation of school facilities. Also, tax-rate and the overall par amount requested did not seem to weigh into voter decisions as much as demographics and geography. For example, both measures in Douglas County failed. The election also approved a wide variety of projects ranging from park and recreation facilities and road improvements to addressing overcrowding and safety in schools.

Overall, this election will provide a significant source of additional supply to the Oregon bond market. The year has been off to a slow start, and while this election will help alleviate some of the supply concerns, we expect that issuance will be lower this year than last year.


S&P Downgrades Kentucky Debt


On May 18, 2018, Standard and Poor’s (S&P) Global Ratings lowered Kentucky’s issuer credit rating one notch from A+ to A, and lowered the Commonwealth’s appropriation-backed obligations to A- from A, which affects lease debt issued by the State Property and Building Commission. Additional downgrades include Kentucky’s state aid intercept programs for universities and public schools, revised to A- from A, and lease debt backed by the Administration Office of the Courts, revised from A- to BBB+. The ratings remain investment grade, and S&P’s outlook is now stable.

The downgrades were anticipated, as S&P had previously had a negative outlook for the state. Reasons cited for the downgrades were fiscal stress due to years of uneven budgetary management, weakened reserves, income levels below the national average and ongoing pension funding issues.

Moody’s Investors Service downgraded Kentucky’s issuer rating in July of 2017 to Aa3 from Aa2. Moody’s also lowered other Kentucky government entities last July, including Kentucky’s general fund appropriation lease revenue bonds to A1 from Aa3, Kentucky’s agency fund appropriation lease-revenue bonds to A2 from A1, the Kentucky Public University Intercept Program to A1 from Aa3, the Kentucky School District Enhancement Program to A1 from Aa3, and the Kentucky Turnpike Authority to Aa3 from Aa2. Moody’s outlook is also stable.

Kentucky’s economy has been improving and employment continues to strengthen. If the expected manufacturing expansions by Amazon, Ford and Toyota come to fruition, we believe that some credit ratings may see a reversal over the next couple of years. Kentucky’s general fund revenue grew in the first quarter of 2018 by 5.3%, and the state should be in good shape to meet the balanced budget requirement for the current fiscal year ending in June. Recent economic highlights for the current fiscal year include sales and use tax revenue growth of 3.5%, an increase in the corporate income tax revenue of 5.1%, individual income taxes receipts increasing by 5.2%, and property tax revenue increasing by 3.7%.
Read more “S&P Downgrades Kentucky Debt”


Do the New Municipal Security Transaction Rules Affect You?


The Municipal Securities Rulemaking Board’s (MSRB) proposed revisions to rules G-15 and G-30 were approved by the Securities and Exchange Commission in November 2016 and became effective on May 14, 2018. The amendments add transparency to transactions involving municipal securities purchased by individual investors.

In brief, the new changes will add the following to confirmations of individual municipal security trades:

  • The total dollar amount of markup/markdown (compensation received) in price.
  • The total percentage amount of markup/markdown (i.e. a percentage of the securities prevailing market price).
  • The time of the trade along with the security identifying number (cusip number) and a reference or hyperlink to the MSRB’s official repository for information; Electronic Municipal Market Access (EMMA) which can provide trade price data.
  • This information pertains to same-day off-setting principal transactions for retail clients.

The benefit of the new rule is that investors are provided with a heightened level of fee transparency; an outcome that is in the investor’s best interest.  Prior to the revised MSRB rules, most individual municipal security transactions executed over-the-counter at a net price did not include a disclosure of fees or purchase costs. The new rules will give investors important information about the cost of purchasing individual municipal securities.

Either in addition to, or as an alternative to, purchasing individual bonds, investors seeking tax-exempt income can also take advantage of the benefits of investing in municipal bond mutual funds.  Particularly during periods when the supply of available municipal bonds is low, mutual funds, which routinely invest large dollar amounts on behalf of all fund shareholders, may have opportunities to invest in bonds that are available in the institutional market, but not available in the individual retail bond market. Due to the large dollar amounts invested by municipal bond mutual funds, they may purchase bonds at prices available to institutional investors, and thereby, enhance the trade execution on behalf of all fund shareholders.  Bond mutual funds report expenses and fees in the prospectus.

For over 30 years,  Aquila Group of Funds has sought to provide municipal bond fund investors with as high a level of double tax-exempt income as is consistent with preservation of capital. We offer single-state municipal bond funds in seven states, and our locally based portfolio managers and credit analysts have an up-close perspective on bond issuers and the economy in their states. We believe this gives them valuable insights about the economic and political climate of each state, which allows them to manage interest rate and credit risk by consistently maintaining broadly-diversified, high-quality bond portfolios of intermediate average maturity.

Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus. The prospectuses are available on this site, from your financial adviser and when you call 800-437-1020.


Recent natural disasters in Hawaii


Occurrences not seen as a credit risk

In recent weeks S&P Global Ratings and Fitch Ratings expressed opinions on the ability of Hawaii government entities to cope with flooding, mudslides, an earthquake and a volcanic eruption, all of which have occurred since mid-April.

S&P stated that, at this point, they don’t expect the eruption of the Kilauea Volcano to significantly impact their AA-/Stable credit rating of Hawaii County.  The rating agency will continue to evaluate the situation, along with the duration and on-going impact of the eruption, which had damaged local roads, highways, power lines, and a number of residential structures as of this writing.

A Fitch Ratings analyst, Stephen Walsh, was quoted in Bond Buyer as saying “It doesn’t take away from the tragedy from an individual standpoint, but looking at the bottom line, we don’t expect it to have a financial impact on either Hawaii County or the state”.

Based on the Hawaii County fiscal 2017 audit, S&P expressed the opinion that the county maintains strong liquidity levels, along with a balance of over $5.7 million in its general fund for disaster and emergencies, and a general fund balance of approximately $25 million, which they consider strong.  In addition, there are expectations that the county will receive funding from the Federal Emergency Management Agency (FEMA) to assist with recovery efforts.

The state of Hawaii had previously received approval for millions of dollars in funding from FEMA following flash floods and mudslides on Kauai and Oahu, which occurred in mid-April.  That funding will assist Kauai County in making repairs to infrastructure and public facilities.  S&P highlighted the Kauai County general fund balance of nearly $50 million, which the agency considers to be very strong, along with liquidity of $71 million, also viewed as very strong.


Are You Free of Your Tax Bill for the Year?


Tax return form with pen and calculator

Tax Day is next week and as you send in your 2017 tax forms, you might be surprised to learn that the nation will still be working to pay this year’s taxes.

Every year the Tax Foundation calculates Tax Freedom Day®, which determines the day the country has earned enough money collectively to pay its total tax bill. The calculation considers all federal, state, and local taxes and divides them by the nation’s income. For 2018, Tax Freedom Day falls on April 19th. So, the average taxpayer will spend 109 days working to pay their taxes.

In another calculation, the Tax Foundation incorporates the federal deficit. When that is included, we will have to work another 17 days; until May 6th, to reach Tax Freedom Day.

The Foundation figures that Americans will spend more on taxes in 2018 than on food, clothing and housing combined.

Read more “Are You Free of Your Tax Bill for the Year?”


2018 Aquila Tax-Free Trust of Oregon Annual Shareholder Meeting in Portland


Shareholders of Aquila Tax-Free Trust of Oregon are cordially invited to attend their annual shareholder meeting Thursday, May 10, 2018 at 11:00 a.m. at the Oregon Convention Center, Meeting Rooms F150-151, 777 NE Martin Luther King Jr. Blvd., Portland, Oregon. Light refreshments will be served prior to the meeting and parking will be validated at the end of the meeting.

John Mitchell

Attendees will have the opportunity to visit with Fund Executives, Trustees, the Portfolio Manager and hear renowned Oregon economist and Trustee, John Mitchell, speak about the Oregon and national economy. Mr. Mitchell is principal of M & H Economic Consultants of Portland. He is a past chairman of the Oregon Council of Economic Advisors, and former chief economist of U.S. Bancorp.

Please plan to attend. We look forward to seeing you on May 10th.


Tony Tanner joins Aquila Investment Management LLC


Aquila announces future portfolio manager retirement, and new member of investment management team

Todd Curtis

Aquila Investment Management LLC (“AIM”), Advisor and Administrator to Aquila Group of Funds, announces the future retirement of Aquila Tax-Free Trust of Arizona (“ATFTA”) lead portfolio manager, Todd Curtis, and welcomes Anthony (Tony) Tanner as a new member of its portfolio management team.

Mr. Curtis became an employee of AIM and Senior Vice President/Portfolio Manager of ATFTA in 2004, and was previously an employee of the Fund’s former sub-adviser and its predecessors, where he served as portfolio manager of ATFTA since its inception in 1986.  Based in Phoenix, Arizona, Mr. Curtis serves as the ATFTA lead portfolio manager.  He also serves as a member of the portfolio management teams of Aquila Churchill Tax-Free Fund of Kentucky and Aquila Tax-Free Fund For Utah.

Though Mr. Curtis will not officially retire from his position as portfolio manager until April 30, 2018, AIM has added a new portfolio manager to its portfolio management team in order to facilitate continuity of management and a smooth transition, in conjunction with other members of the portfolio management team. After his April 30, 2018 retirement, Mr. Curtis will continue in a consultant role with AIM.

Tony Tanner

Tony Tanner, based in Phoenix, Arizona, joined the Aquila Investment Management LLC portfolio management team on March 7, 2018.  In addition to being a member of the portfolio management team for ATFTA, Mr. Tanner has joined Mr. Curtis, JT Thompson and Royden Durham as a member of the portfolio management teams of Aquila Tax-Free Fund For Utah and Aquila Churchill Tax-Free Fund of Kentucky.   Upon Mr. Curtis’s retirement, Mr. Tanner will serve as lead portfolio manager of ATFTA. The investment objective and principal investment strategy of the Fund will remain unchanged.

Mr. Tanner is a 30-year veteran of financial services with over 20 years of buy-side industry experience managing fixed income and multi-asset class portfolios for mutual funds, institutions, and ultra-high net worth clients.  He comes to AIM from BNY Mellon Wealth Management, where he was a Senior Portfolio Manager, serving high net worth families and institutions across Arizona.

Over the last 15 years, Mr. Tanner has worked in the Arizona wealth community.  This experience included establishing an investment advisory firm that provided dedicated fixed income portfolio management for clients in Arizona, New York, and California.  He also served as Director of Fixed Income for a Scottsdale investment advisory firm.  He then joined Wells Fargo Private Bank in 2010 as part of its National Fixed Income Strategies Team, where he managed fixed income and multi-asset class portfolios for their larger clients in Arizona, Southern California, and Nevada, and he served on the Global Fixed Income Council where he helped lead their tax-exempt strategy efforts until 2014.

Before relocating to Arizona, Mr. Tanner helped lead the Rochester Division of OppenheimerFunds from 1991-2003, as co-manager of their flagship municipal bond product line, during which time assets grew from $300 million to over $12 billion.   He also directed the research efforts of the closely-held mutual fund complex through its acquisition by OppenheimerFunds.

Mr. Tanner received an MBA in finance from the University of Rochester, Simon Business School, and a Bachelor’s degree in business from St. Louis University.  He is a is a CFA® charterholder and a member of the CFA® Institute and the Phoenix CFA® Society.  He also serves on the Finance and Investment Committee of the Catholic Community Foundation, Phoenix Diocese.


Liz Claman interviews JT Thompson


On January 30, 2018, JT Thompson, Portfolio Manager of Aquila Tax-Free Fund For Utah, was interviewed by Liz Claman, Financial Journalist and TV Host, for Asset TV.  Topics discussed during the interview include the impact of tax reform legislation on the municipal bond market, the importance of the revenue stream that secures a municipal bond, the appeal to investors of investing locally through municipal bonds, and opportunities in the municipal bond market.  You will find more information on the Fund, including the Prospectus, on this site.


Before investing in a Fund, carefully read about and consider the investment objectives, risks, charges, expenses, and other information found in the Fund prospectus.  The prospectus is available from your financial advisor, and when you call 800-437-1020 or visit www.aquilafunds.com.


Aquila Churchill Tax-Free Fund of Kentucky Annual Shareholder Meeting


Shareholders of Aquila Churchill Tax-Free Fund of Kentucky are cordially invited to attend their annual shareholder meeting Thursday, April 19, 2018 at 8:30 a.m. at The Olmsted, 3701 Frankfort Avenue, Louisville, Kentucky. A buffet breakfast will be served prior to the meeting.

Ryan Barrow

Attendees will have the opportunity to visit with Fund Executives, Trustees, the Portfolio Manager, and hear Ryan Barrow, Executive Director of the Kentucky Finance and Administration Cabinet, which is part of the Office of Financial Management. The Office is responsible for the investment and debt management functions of the Commonwealth, including conducting the state’s bond sales, which provide financing for major projects such as those in which your fund invests. Mr. Barrow was named one of 40 rising stars by Bond Buyer in 2016.

Please plan to attend.  We look forward to seeing you on April 19.