Anthony Tanner, CFA®, Senior Vice President and Portfolio Manager, Aquila Tax-Free Trust of Arizona
Seldom in the financial landscape do investors have greater ability to support and participate in their local and state economy than through investing in municipal bonds. Municipal bonds can offer individual investors a source of income that is generally exempt from Federal and state income taxes.
The municipal bond market provides more than just an avenue for investors to earn tax-free income. At the local level, it is a vital and core component of economic development. Municipal bonds are the primary tool by which state and local governments implement public policy through spending on infrastructure projects, such as hospitals, schools, water and sewer systems, airports and other vital transportation projects. Many of our region’s most visible and successful public works projects have been funded primarily through municipal bonds, including the Light Rail System, the Sky Harbor Airport expansion, and Arizona State University campus development.
In Arizona, our residents benefit from a dynamic and resilient local municipal bond market, as illustrated by the manner in which state and local governments weathered the great recession in 2007-2009. By the low point in that economic downturn, the Arizona economy had shed nearly 300,000 jobs as employment declined 11%, compared to 6% nationally. Nevada was the only state with a deeper decline. Throughout that time, Arizona’s credit rating declined minimally from an average of AA- to A+.
Arizona set a recent record for employment after surpassing its pre-recession peak in 2016, and its current credit ratings of AA by S&P and Aa2 by Moody’s1 are actually higher than prior to the outset of the recession. Read more “The Essential Municipal Bond Market”