Posts Tagged ‘Muncipal Bonds’

Smith’s Stadium Bond Gradings

July 16, 2015

Stadium bonds have been the subject of several articles in Smith’s Research & Gradings over the years. What started as a curious endeavor quickly became a more serious work upon discovering even the most serious Stadium Bond analysts appear to have overlooked the history of stadiums in Western Civilization.

Smith’s Stadium Bond Gradings reflect decades of researched on the subject matter. We have developed several interesting conclusions about the nature and durability of the revenue streams.

To begin, the word “Stadium” is a Latinization of the Greek word for the distance of a race (which measured 660 feet and is a distance of one “stadia”). For track fans, this race is still run today — the 220 yard or 200 meter dash — which is still the measure of endurance, cunning, and speed amongst sprinters. In contrast, the Greeks built amphitheaters for public festivals and ritualized plays, constructed so views were unobstructed on a steep incline, so even the highest tier of seats was within earshot of the stage.

The Greek stadiums eventually grew larger, but retained a horse-shoe shape. This allowed participants at earlier sporting events to compete both on the track and in the field — quite literally. The most famous of Greek stadiums was the Hippodrome.

However, the stadiums eventually became the site of horse races — more specifically, chariot races. The largest and greatest expression of this type of stadium is arguably the Circus Maximus.The first Etruscan King, Lucius Tarquinius Priscus, drained the swamps beneath the Capitoline Hill for the construction of the first Circus Maximus around 600 B.C. Perhaps the Circus Maximus was conceived as an engine of social homogeneity at a time when Etruscans ruled the larger population of Latins — within two generations, the Latins had overthrown the Etruscan Kings (ostensibly for the rape of the virtuous Lucretia).

Circus Maximus

Circus Maximus

Eventually, the horse-shoe shaped Circus Maximus was expanded — larger than the Yale Bowl by one and one half times — with a seating capacity of 250,000 (plus the “sky boxes” on Palatine hill). Indeed, standing on the patio of the home thought to belong to Julius Caesar, which is situated high atop the Capitoline Hill, visitors can well imagine the throngs of working class Romans filling the Circus Maximus. The vantage point provides a glimpse into a vibrant Roman economy, where people cheered for the chariots drawn by four horses on a track 2,000 feet long and 600 feet wide. It was the Indianapolis Speedway and the demolition derbies of the old Charlotte Motor Speedway on a grand scale.

Surely, societies that are growing are fascinated by machines that are driven dangerously fast. Speed was everything, whether you were digging ditches or laying bricks, in ancient Rome.

The Roman Coliseum — the first of the modem day “stadiums” — was constructed to provide unobstructed seating for 50,000. The “sport” at the Coliseum was the death of gladiators and Christians; seating bespoke a person’s station in life — Patricians, Senators, Tribunes, Equites, and Publicans. Indeed, the Coliseum had little to do with “sport” and everything to do with the exaltation of ego. It was about “seeing people and being seen.”  Stadium-building did not stir the public’s imagination again until late in the 1800s.

Perhaps the construction of Cathedrals and Universities provided sufficient employment for stone workers?

Modern Era
In any event, the modem era of stadium building began with the construction of a stadium in Athens for the Olympics in the late 1890s. It was built on a foundation from an earlier Greek stadium.

At the turn of the century, America embarked on a stadium-building binge that is still unrivaled by today’s construction craze. A whole series of massive stadiums were constructed, with seating capacity in excess of 100,000 people: The Yale Bowl, Ohio State University’s Stadium, The Los Angeles Coliseum, Soldier’s Field, JFK Stadium, Notre Dame’s Stadium. These were built as great football and Olympic stadiums.

Yankee Stadium became known as “The House That Ruth Built” and decks were constructed to accommodate more fans. However, baseball stadiums remained intimate environments that allowed fans to nurture the national past-time. Only Camden Yards and Wrigley Field remained relatively unaffected by stadium construction during the later half of the century. Cleveland’s municipal stadium was built as the largest baseball stadium in the world with seating over 70,000.  Dubbed “The Mistake By the Lake”, the Cleveland Municipal Stadium funneled winds from Lake Erie toward homeplate, making it a pitcher’s park.

These fields were largely financed by the fortunes of the various teams. And, it was the ancient allure of unobstructed views that sent the Brooklyn Dodgers to Los Angeles: “Dodger Stadium” was the first three-tiered stadium constructed without columns. Such sedentary concerns had turned Ebbets Field into an apartment complex and sparked a stadium building craze.

Enter the “Astrodome”, which was the first completely enclosed stadium, in the early 1960s. Baseball franchise movement stirred the imagination of stadium builders and municipal finance executives. However, television increasingly put pressure on the margins of stadium and franchise owners, while the lucrative contracts provided enormous compensation. But, the profit motif inspired owners to fill every seat, which is still used by owners to cover the fixed costs.

Gradually, the public’s capital was used to entice private sector franchises to play at stadiums in “new” cities, such as New Orleans and Miami. The people approved bond referendums and politicians promoted the concept by stating “a major league town” moniker was necessary to attract corporations to a city — which has nothing to do with the love of sports and everything to do with power.

Cleveland Browns Leave Town
The Browns football team’s announcement that it wanted to move to Baltimore from Cleveland (eventually leading to buses leaving in the middle of the night)  prompted a lot of guffaws among backbench analysts who have been skeptical about the creditworthiness of stadium bonds. But, to understand the creditworthiness of stadium bonds, investors need to know that in many cases, repayment has little to do with revenue streams like stadium gate receipts.

For example, MBIA insured bonds that constructed a stadium for the winter “cactus” baseball league in the Southwest. However, repayment is largely secured by a tax on car rentals in the Phoenix area.

Indeed, a better name for “stadium bonds” might be “enterprise bonds”, which would lump them in with convention centers and other erstwhile endeavors by municipalities to stimulate economic enterprise. Municipal investors and analysts know that municipalities have a somewhat dubious track record in managing enterprises.

As a result, in the mid 1990s, rating agencies forced investment bankers to cobble together various revenue streams to support the debt service repayment of stadium bonds. In the 1990’s, Ernest Perez, who was one of SRG’s Regulars, provided several insights into the stadium bond financing frenzy. In 1995, he noted the St. Louis Rams -related financing essentially included a G.O. pledge from the State, which gives an indication of the importance given professional sports.

Mr. Perez agreed with SRG’s suggestion that bondholders should ideally have a “put” if the professional team leaves the stadium. But, to date, no exit signs have appeared for bondholders if a team fires the stadium.Stadium Cost

Preliminary work at S&P yielded an interesting feature, which is a sort of travelling first lien on the team’s revenues. Basically, the team ownership would agree to pay enterprise-type fees for a stadium, even if it moves to another stadium.

The Doghouse
Fresno State (California State University, Fresno) issued municipal bonds to finance the construction of a new arena. Hence, the Bulldog’s last game on March 1, 2003, at the old Selland Arena proved to be a sweet farewell as Fresno State finished atop the regular season in the Western Athletic Conference (WAC).

The WAC winning press release from Fresno State said, “Next year, the ‘Dogs will play in their new Doghouse…the Save Mart Center on campus.”

On the following Wednesday, Fresno State took harsh action by self-imposing sanctions to ban participation in the NCAA or NIT postseason tournaments because of academic fraud.

The next day, Thursday, the WAC announced the WAC-champion Fresno State Bulldog’s season would end on Saturday against Rice.

The Fresno Bee, a local newspaper, reported allegations made by some players that assistance was provided in completing writing assignments by an individual who was paid to complete those assignments. Subsequent investigations by the NCAA and Fresno State found the allegations to be true.

Yes, the Bulldogs were in the real doghouse.

Reaction among existing bondholders was one of absolute denial. “It means nothing. Well, not nothing. But, it’s not a professional franchise. If the team doesn’t have a winning season, Fresno State isn’t going to leave town.”

A trader said, “There isn’t any other form of entertainment in the region.”

NHL Strikes
Fitch Ratings determined that in the event of a complete cancellation of the National Hockey League’s 2004-2005 season, Fitch would place all currently rated sports arena debt associated with a NHL team on Rating Watch Negative.

The two publicly rated arena transactions — L.A. Arena Funding (Staples Center, Los Angeles) and the Denver Arena Trust (Pepsi Center, Denver) were both rated ‘A’.

Of course, the NHL did cancel the entire 88th season in 2004-2005. It was the first time a professional sport league cancelled an entire season due to labor disputes.

Once again, the NHL had a lockout (strike) in 2012-2013. Fitch placed one private arena rating with a NHL anchor franchise on Rating Watch Negative and continued to closely monitor the operations of other arenas with a NHL anchor franchise. Currently, Fitch rates L.A. Arena Funding’s (Staples Center, Los Angeles) $201 million revenue backed notes ‘BBB+’, Stable Outlook and the Denver Arena Trust’s (Pepsi Center, Denver) approximately $46.7 million revenue backed notes ‘BBB-‘, Stable Outlook.

Fitch did not rate the NHL league-wide borrowing facility secured by national television contracts and other league revenues.

Despite the canceled games Fitch said that the Pepsi Center, Staples Center and other Fitch-rated private arenas with an anchor NHL franchise retain some, albeit limited, financial flexibility. Fitch noted that the above-mentioned arena ratings also have an NBA franchise as an anchor tenant and host a significant amount of other events, providing some level of revenue certainty to support operations. Additionally, the arenas maintain a significant level of contractually obligated revenue in the form of multi-year suites and club seats, sponsorship and advertising and other long-term contracts. However, renewals of these revenue agreements may be impacted in the event of a canceled season. The pressure on renewal rates stemming from local economic conditions and, in some cases, recent on-ice performance could be exacerbated by labor uncertainty.

The lockout shortened the 2012–13 NHL season, originally scheduled to begin on October 11, 2012, from 82 to 48 games, a reduction of 41.5 percent.

Troubled Stadiums and Towns
Standard & Poor’s Ratings Services downgraded Bridgeview Illinois’ bond rating on general obligation (GO) bonds in 2014. The outlook is negative, S&P reported:

“The downgrade reflects the significant level of stress placed on the village’s finances by its underperforming soccer stadium. To minimize property tax increases, the village has used general fund revenues and issued additional debt to pay debt service on its GO bonds related to the stadium. The village’s very high debt level is mainly due to its series 2005 GO bonds, of which $128.4 million is outstanding, to build a soccer stadium.

The village also issued $50 million of variable-rate GO bonds in 2008, proceeds from which the village mostly used to refund economic development notes and bank lines that it incurred to buy land around the stadium and other parts of the village for future development. Because of the uncertainty about the extent to which the stadium fund will be able to support debt service from net revenues, the village is faced with either levying property taxes or using general fund resources to make up the difference.

The city of Glendale, Arizona, tried to sell its City Hall so they could pay off their hockey arena in 2013. They also considered mortgaging the police station. The city had already tapped out its land-fill fund and the water and sewer fund to pay sports debts. When Glendale residents collected signatures for a referendum, city council changed the rules. They placed the proposed City-Hall sale on the agenda as an “emergency measure” in order to bypass the referendum and prevent the voters from having a voice.

The city’s promise of economic development, stores and restaurants, vanished in the recession. Glendale’s reserve fund is gone, and the city has now approved another sales-tax hike.

Many other cities suffer from crushing debt as a result of bad stadium investments.

Hamilton County, Ohio, sold a municipal hospital to pay just one year’s worth of stadium debt. They also cut their operating budget, slashed social services, and raided the rainy-day fund.

The town of Harrison, just across the Passaic River from Newark, had its bond rating cut a rare eight notches in a single year, when it was unable to pay the debt on a soccer stadium.


Stadiums are the coronation of public construction on a grand scale in the history of Western Civilization.  The public’s capital provides a glorious return to great and growing cities by promoting civic pride in the community. For medium scale cities, smaller scaled stadiums (“right sized”) support local sports and attracted world class entertainment.

However, Smith’s Research & Gradings has found stadiums provide little in the way of economic development.  Moreover, the use of tax-incentives to lure sports teams to play in stadiums in tiny townships can lead to financial ruin.  Particular attention needs to given to claw-back mechanisms and make-whole provisions that will allow the municipality (and bondholders) to recoup their capital investments in the event a sports team wants to leave.

When it comes to stadium finance, the broader the base, the better the bonds.

Smith’s Critical Infrastructure Review: Water

June 16, 2015

j0321110Smith’s  Critical Infrastructure Review of Water (an essential resource)

We have found the United States continues to face dramatic event risks.  Tops on the list of Smith’s Event Risks for Water is Global Climate Change.

Smith’s has found more than half of the dams in the United States are beyond their expected useful life. Smith’s Gradings of reservoirs go hand-in-hand with dams.  The water level behind a dam is very important to measure slow moving events, like droughts, or fast moving events like floods. The loss of human lives and property damage factors into Smith’s Sentinel System that powers Smith Information System.

Smith’s Database of Critical Infrastructure Assets includes Safe Drinking Water and Clean Waste Water. Smith’s Drinking Water Research includes water mains, which are driven, in part, by water main breaks. These water main breaks occur 850 times a day (on average), and when coupled with slow leaks, are the reasons why one-sixth (1/6) — 2.1 trillion gallons of  treated drinking water — never reach the faucet.

The age of the water mains is a key performance indication (KPI) for Smith’s Water Main Gradings. Other H2O KPIs include the pipe material, soil, climate/weather, seismic faults/activity, location, and any recent pipe inspections.

America’s older urban areas, such as major cities along the East Coast and Mid-Atlantic, have water systems that are well beyond their expected lives.  Baltimore’s water system suffers more than a 1,000 breaks a year, for example.

The American Water Works Association, a lobbying group for non-profit and corporate water works, estimated the cost of repairing the U.S. underground water system at more than US$1 trillion.

Principal Aquifers of the U.S. Source: U.S. Geological Survey

Principal Aquifers of the U.S.
Source: U.S. Geological Survey

Smith’s Aquifer Gradings

Understanding water, as an essential resource, requires digging deep into the subject matter to learn about the aquifers, which are underground water-bearing layers of rock that serve as subterranean rivers and lakes. Smith’s Aquifer Gradings maps to 62 different aquifers in the United States.

The Great Plains Ogallala Aquifer is one of the world’s great aquifers, but in places it is being rapidly depleted by growing municipal and agricultural use. Even this huge aquifer, which underlies portions of eight states, is being depleted. It contains primarily fossil water from the time of the last glaciation. The annual recharge, in the more arid parts of the aquifer, is estimated to total only about 10% of annual withdrawals.

Moreover, Smith’s review has shown an increased presence of chemicals used in pesticides/fertilizers, proven to be harmful to human beings.

Understanding the three major Aquifers that form the Florida Aquifer is essential to investing over the next 10 to 30 years. It is one of the world’s most productive aquifers. It is under all of Florida as well as large parts of coastal Georgia and areas of coastal Alabama and South Carolina.  The Florida Aquifer provides fresh water to major cities, such as Savannah and Brunswick in Georgia, as well as Jacksonville, Tallahassee and St. Petersburg, Florida.

Smith’s Florida Bond Gradings reflect our growing concerns about the saltwater intrusion, particularly in South Florida, where the unconfined Biscayne Aquifer merges with the Atlantic Ocean. Smith’s Aquifer Gradings are linked to the bond credits of Miami and Dade County.

The Edwards Aquifer in Central Texas provides clean water to more than 2 million people.  It is located in the Permian Basin, which is famous for natural gas and the movie “Friday Night Lights”.  What’s more, the Central Texas Aquifer remains fully charged due to the tremendous recharging from local lakes, streams and rivers.

The Mahomet Aquifer is located in central Illinois. It supplies water to some 800,000 people and contains approximately four trillion gallons of water.

The Kirkwood-Cohansey Aquifer is located under the Pine Barrens (New Jersey) of southern New Jersey. It not only contains 17 trillion gallons of water, it provides some of the purest water in the world.

The Buried Valley Aquifer System is in the central basin of the Passaic River watershed as defined by the U.S. Army Corps of Engineers and U.S. Environmental Protection Agency. This aquifer impacts drinking water sources and, thus Smith’s Gradings for twenty-six municipalities in four northern New Jersey counties: Morris, Union, Essex, and Somerset.

In California, Smith’s Aquifer Gradings include the Bishop Sub-basin, which supplies San Ramon, California in Contra Costa County. The Bishop Sub-basin, together with the Mocho Sub-basin, are candidates for recharging from “reclaimed reverse osmosis waters.” to support communities in the Livermore Valley.

The Santa Clara Valley Aquifer provides drinking water for the south San Francisco Bay area.  It has been under enormous pressure, which resulted in the water pressure dropping below 200 feet — which in turn, resulted in the ground dropping (subsiding) 15 feet in some areas.

The largest groundwater basin in California is the Turlock Basin, which is a sub-basin of the San Joaquin Valley groundwater basin, and it occupies approximately 13,700 total square miles. The Turlock Basin aquifer is located within California’s Central Valley and is to the east of the city of Turlock. Unlike most of California, the groundwater in the Turlock Basin occurs in older alluvial deposits and it is the sole source of water for the City of Turlock. Smith’s Aquifer Gradings reflect that portions of the San Joaquin Basin have “overdrafted” water, allowing infiltration of agricultural water pollutants and creating overall poor water quality.

Smiths Aqueduct Gradings
Smith’s Database of Critical Infrastructure Assets includes tunnels, which can be used to transport vehicles (cars, trucks, bus) or water, which are called aqueducts. The largest existing aqueduct in the world is the Thirlmere Aqueduct in North West England. It was built between 1890 and 1925 and runs 96 miles through the English countryside.

New York Aqueduct System

New York Aqueduct System

The second largest aqueduct in the world is New York Water, which has a storage capacity of 550 billion gallons and provides 1.2 billion gallons of fresh water per day to 8 million New Yorkers. In an engineering feat that rivals the great pyramids of Egypt, more than 95% of New York aqueduct’s water is moved by gravity. The New York water system has three aqueducts and three tunnels. The aqueducts serve as reservoirs and the tunnels serve as the distribution system.

The New Croton Aqueduct is the oldest in New York and it was completed in 1890 to transport water from New Croton reservoir in Westchester and Putnam counties. Today it supplies about 10% of New York City’s water needs.

The Catskill Aqueduct is the newest asset in the New York system. It was completed in 1960 to bring water from two reservoirs in the Eastern Catskill Mountains.  It supplies about 40% of New York City’s water needs.

The Delaware Aqueduct is the largest by volume.  It was completed in 1945 to bring water from tributaries of the Delaware River in the Western Catskills and it provides about 50% of the New York City’s water supply.

In terms of length, the top title would go to the California Aqueduct. It is 444 miles long and runs from the Sacramento Delta to Lake Perris.

No. 2 in length is the Colorado River Aqueduct, which supplies the Los Angeles area with water from the Colorado River nearly 250 miles to the east.

Smith’s Canal Gradings
America’s first financial boom and the birth of Wall Street came with the construction of the Erie Canal.  Prior to the canal, Philadelphia was the heart of banking, brokering and commerce. It was the Philadelphia Exchange which promulgated rules for traders, such as no spitting on the floor of the exchange and no feet on desks.

Smith’s Canal Gradings includes 18,241 canals. These are man made canals. Each state has given a name to the canal, which may be only a narrow irrigation or drainage ditch or a large ship, municipal water and/or irrigation canal. States with extensive agricultural acreage may have several hundred to thousands of canals. Smith’s Gradings consider the canals as economic arteries and cultural veins.

The longest canal is the Intercoastal Waterway, which is 3,000 miles long and extends from the Gulf of Mexico up the entire Eastern Seaboard.

The most important canals in America today, perform the same duties they did when created.

For example, the Augusta Canal still provides transportation and is the primary source of fresh water for Augusta, Georgia.

The Chain of Rocks Canal, “Lock No. 27”, allows traffic on the Mississippi to bypass the dangerous Chain of Rocks that can make the river unnavigable during low water. During droughts, Smith’ Gradings monitors the area as a major bottle neck for logistics and barges.  Situated just south of where the Missouri River flows into the  Mississippi, Lock No. 27  handles more  cargo than any other structure on the Mighty Mississippi.

Still, not every canal has been a success. The Mississippi River – Gulf Outlet Canal (abbreviated as MRGO or MR-GO) is a 76 mi. channel constructed by the United States Army Corps of Engineers in the 1950s that provided a shorter route between the Gulf of Mexico and New Orleans’ inner harbor Industrial Canal via the Intracoastal Waterway.

In 2005, although disputed by the Corps of Engineers, the MRGO channeled Hurricane Katrina’s storm surge into the heart of Greater New Orleans, contributing significantly to the subsequent multiple engineering failures experienced by the region’s hurricane protection network. In the aftermath the channel was closed. A permanent storm surge barrier was constructed in the MRGO in 2009, and the channel has been closed to maritime shipping.

Smith’s Ferry Gradings
Ferry systems provide transportation at a much lower capital cost than, say, bridges or tunnels, for communities located along waterways.

The Washington State Ferries operates the largest Ferry System in the United States. With ten routes on Puget Sound and the Strait of Juan de Fuca, the Washington Ferries transit between terminals in Washington and Vancouver Island. In 2012, Washington State Ferries carried 22 million passengers and 10 million vehicles.

The Staten Island Ferry is the nation’s single busiest ferry route by passenger volume. New York City also has a network of smaller ferries, aka “water taxis”, that shuttle commuters along the Hudson River from locations in New Jersey and Northern Manhattan down to the midtown and financial district in lower Manhattan.  Over the past decade ferry companies started to offer service linking midtown and lower Manhattan with locations, such as LaGuardia airport in the boroughs of Queens, as well as Brooklyn, by crossing the city’s East River.

Cape Cod is connected to the islands of Martha’s Vineyard and Nantucket by The Woods Hole, Martha’s Vineyard and Nantucket Steamship Authority. The ferry leaves Woods Hole to stop at Vineyard Haven (Martha’s Vineyard) as well as Hyannis and Nantucket.

New Orleans operates the Algiers Ferry, which has been in continuous operation since 1827. It is one of the oldest operating ferries in North America.

San Francisco operates the Blue and Gold fleet of Ferries that travel the San Francisco Bay area. The majority of ferry passengers are daily commuters (which is a pleasant way to get to work) and tourists.

SRG’s database of Ferries includes the Bridgeport-Port Jefferson Ferry.  The Bridgeport & Port Jefferson Steamboat Company was founded in 1883 by Phineas Taylor Barnum. It operates year round with two ferry boats that travel on a synchronized schedule (each leaving at the ports at the same time so as to maximize the dockspace/facilities)  Over 1 million people use the Bridgeport-Port Jefferson ferry and 500,000 vehicles are transported.

Smith’s Ferry Gradings consider weather, the age of the ferries, the inspection process, as well as the management  when making its assessments.  The ferries are often overlooked and many could potentially benefit from municipal bond financings.

Sans Mots

February 6, 2015
photo by Rob Rich/ © 2014 516-676-3939

Terry Smith (l) presented Eric Vandercar (r) with Smith’s All-Star First Team Award for his work in the Municipal Derivatives Category

Eric Vandercar, 53, died on February 3rd aboard a commuter train crash on the Hudson River Line in Valhalla, New York. The north bound Metro North Train ran into a Mercedes SUV that was on the tracks at a rail/road crossing. A witness told the local television news the crossing gates came down and hit the SUV. The driver got out of the vehicle to examine the damage and, upon returning to the steering wheel, was too late to get out of the way of the train.

“I was on the train ahead of the one in the accident,” said James Colby, senior portfolio manager at Van Eck Global ETFs. “And, I know the crossing well. It’s dangerous because of the light on the other side of the crossing. It is a gruesome accident.”

In addition to the six people who died at the accident scene, fifteen people were injured, New York State Governor Andrew Cuomo said. One passenger remained in critical condition and another passenger in “serious” condition on Wednesday afternoon at the local trauma hospital along with six other patients with less serious injuries, Westchester Medical Center officials said.

Mr. Vandercar is survived by his adored wife, Jill, and two beloved children, Jake and Sadie. “Sans Mots” (French for “no words”) best expresses the feeling that everyone on Wall Street and the investment community felt upon hearing the news.

Mr. Vandercar was a member of Smith’s All-Star Team in 2012, 2013 and 2014. Mr. Vandercar was a Senior Managing Director and Head of Municipal Funding at Mesirow Financial where he developed and executed best-in-class funding solutions with municipal investors. His primary focus was on Tender Option Bonds and Muni Preferreds that were structured so as to meet investor objectives and a high level of client service while complying with the current regulatory environment.

Mr. Vandercar joined Mesirow in March of 2014 after a nearly 27-year career at Morgan Stanley where he was a member of the Operating Committee of the Municipal Securities Group having managed and developed Morgan Stanley’s Municipal Funding, Liquidity, Credit and Lending businesses which encompassed a multi-billion dollar Tender Option Bond Program and Taxable Note Trust Program. He has led the majority of the product innovation in the industry over the past 15 years through coordination with the participants, advisors and regulators.

From 1989 through 1997, Mr. Vandercar was Morgan Stanley’s Municipal Strategist where he was consistently elected to Institutional Investor’s All-America Research Team while fostering credibility and lasting client relationships. Previously, Mr. Vandercar traded the proprietary arbitrage account on Morgan Stanley’s municipal bond desk. Before joining Morgan Stanley, he was employed for two years in Donaldson, Lufkin & Jenrette’s Municipal Bond Department and two years in Kidder, Peabody’s Corporate Finance Department with a primary focus of designing financial systems. Mr. Vandercar received an MBA with Distinction in Finance from New York University in 1987. Mr. Vandercar completed a dual degree program at the University of Pennsylvania in 1983 where he was awarded a Bachelor’s Degree in Economics with a major in Finance and a major in Decision Sciences from the Wharton School, as well as a Bachelor’s Degree in Applied Science with concentrations in Computer Science Engineering and System Science Engineering from Penn’s School of Engineering and Applied Science.

Last summer, Mr. Vandercar was the featured speaker in Smith’s All-Star Analysts Webinar Series. During the presentation, he discussed the challenges facing municipal funding in the wake of the Dodd-Frank Law and The Volcker Rule.

Terence Smith, founder of Smith’s All-Star Team, said, “Eric Vandercar had many gifts, but one we appreciated was his ability to harness the disruptive technology to bring the cutting edge of innovation to the often stale product mix in the municipal bond market. His death is all the more tragic since he labored to improve the very infrastructure that failed him and his family. The fruits of the municipal funding programs that his unique talents made manifest can be found in municipalities. His innovative and caring spirit lives on in the school districts, local governments, hospitals and, ultimately, homes across America.”

Mary Jo Ochson, senior portfolio manager for Federated Investors and member of Smith’s All-Star Ballot Committee, said, “He was the nicest person, ever. Eric was an advocate for the entire industry. Not only was he admired by the sellside, where he worked during his outstanding career, but Eric was trusted by the buyside because he was always fair. He will be missed – a lot.”

Indeed. Mr. Vandercar was also a music lover. The Jam Band Moe posted the following tribute to Mr. Vandercar on their facebook page:


Words can’t express how devastated we are today. We’ve lost so much more than a major moe. fan, we’ve lost a very good friend. Eric Vandercar will always be remembered – whether he was enjoying the music from the front row, or hanging out backstage with us, chatting with that easy smile of his. He was there during our early days at the Wetlands, and we just recently got to spend time with him in Jamaica.

An avid music supporter, a husband, a father – Eric, along with his wife Jill, have been a constant and familiar presence in all of our lives over the last couple of decades. And once they had kids, they made their love of music a family affair. Our hearts go out to Jill, Jake, Sadie and to the extended Vandercar and Shiner families, as well as all those who knew Eric.

The funeral will be held Friday, February 6th at 12:00pm at Temple Shaaray Tefila. Interment  immediately following at King David Cemetery in Putnam Valley.

Shiva will be observed Saturday evening, February 7th from 5:30pm -9:00pm with a Shiva service at 6:00pm. Shiva will also be observed Sunday, February 8th and Monday, February 9th from 1:00pm-7:00pm with a Shiva service at 6:00pm each night at the Vandercar home.

Jill Vandercar  105 Stone Bridge Lane. Bedford Hills, NY 10507  244-9449

Detroit Trials and Tribulations

September 15, 2014

The Detroit Bankruptcy makes a complete mockery of the rule of law and threatens to set a precedent that will send a shiver through the municipal bond market in search of a spine to tingle.

What is so very sad, to date, is the lack of any real moral outrage on the part of investors.

Blatant violations of contracts and the complete repudiation of bond opinions have been greeted by silence or exceptionalism that sounds like the bleating of sheep before the shears.

It doesn’t matter if Detroit is the only City in America that would dare to steal money from investors on such a gigantic scale. What matters is the City of Detroit’s attempts to repudiate $18 bln. in debt service payments go without chastisement, rebuke, or revile.

The decisions, so far, by the Federal judge, the State of Michigan, and the government of Detroit are nothing less than outrageous. How dare the bankruptcy judge demand to know how much Syncora Guarantee would accept to go along with the Detroit bankruptcy plan? Judge Rhodes sounds like an auctioneer at a Mecum Auto show: Would you settle for 75 cents on the dollar…yes? I have 75 cents on the dollar. Do I hear 50? How about 50 cents, do I hear 50 cents on the dollar, now?

Clearly, Judge Rhodes must know any plan that does not provide the full payment on the Pension Obligation Bonds is destined to be overturned by a high court. And, when the higher court rules the pension fund must return the $1.5 bln. then the City of Detroit will go into bankruptcy, again.

The likelihood that Detroit will go into bankruptcy again is almost a certainty among many in the municipal analytical community.

During a conference call, a rating agency analyst quipped, “Detroit may be going into Chapter 18 — Chapter 9, twice.”

It is even more ludicrous when the City of Detroit and the Bankruptcy Judge argue that artwork is like schools, hospitals and essential public services.

New York City’s Art Capital Group offered a $3 bln. loan secured by Detroit Art Institute’s collection. But, the City of Detroit would rather have a $814 mln. loan from local area institutions. The corruption and self-dealing stinks to high heaven.

If Michigan is allowed to restructure Detroit’s debt without providing any measure of recovery, and the Federal bankruptcy court can subordinate the rights of bondholders to the needs of organized labor, then municipal bond market faces a long walk on a very short pier.