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Draft OF Assessing MUNICIPAL Bond Default ProbabilitIes of California Cities 2013

Draft OF Assessing MUNICIPAL Bond Default ProbabilitIes of California Cities 2013

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Published by 83jjmack
lists default probability scores for over 260 California cities.
this is a draft document

also visit this website for more details on city budgets

http://www.publicsectorcredit.org/ca/en/cities


“We are not going to be having a tsunami of bankruptcies. Not every city is going to turn out like Stockton and San Bernardino,” said Marc Joffe, a consultant with Public Sector Credit Solutions, who created the study along with Dr. Matthew Holian, a professor of economics at San Jose State University. “There are certainly differences. Some cities did perform quite badly and had high default probabilities above 2%.”

The study still needs to be vetted by peer review, and Lockyer’s office will not comment on the project until that process is finished, according to his spokesman Tom Dresslar.

pay attention to Atwater, Ridgecrest, Vallejo and Monrovia
lists default probability scores for over 260 California cities.
this is a draft document

also visit this website for more details on city budgets

http://www.publicsectorcredit.org/ca/en/cities


“We are not going to be having a tsunami of bankruptcies. Not every city is going to turn out like Stockton and San Bernardino,” said Marc Joffe, a consultant with Public Sector Credit Solutions, who created the study along with Dr. Matthew Holian, a professor of economics at San Jose State University. “There are certainly differences. Some cities did perform quite badly and had high default probabilities above 2%.”

The study still needs to be vetted by peer review, and Lockyer’s office will not comment on the project until that process is finished, according to his spokesman Tom Dresslar.

pay attention to Atwater, Ridgecrest, Vallejo and Monrovia

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Categories:Types, Business/Law
Published by: 83jjmack on Jul 15, 2013
Copyright:Attribution Non-commercial

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08/04/2013

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Electronic copy available at: http://ssrn.com/abstract=2258801
 
 Assessing Municipal Bond Default Probabilities
Matthew J. Holian, Ph.D.Associate Professor of EconomicsSan Jose State University1 Washington Square HallSan Jose, CA 95192-0114Tel: (408) 457-4367E-mail:matthew.holian@sjsu.edu Marc D. JoffePrincipal Consultant Public Sector Credit Solutions1955 N. California Blvd.Walnut Creek, CA 94596Tel: (415) 578-0558Email:marc@publicsectorcredit.org 
DRAFT submitted to the California Debt and Investment AdvisoryCommission and the Center for California Studies and for peerreview. This document reflects the opinions of the authors and not necessarily those of CDIAC or the Center.
 
Electronic copy available at: http://ssrn.com/abstract=2258801
DRAFT
 
ii DRAFT
 Abstract 
In response to a request from the California Debt and Investment Advisory Commission, wepropose a model to estimate default probabilities for bonds issued by cities. The model can be usedwith financial data available in Comprehensive Annual Financial Reports that cities are required topublish. The study includes modeled default probability estimates for 261 California cities withpopulation over 25,000. Our model relies on case study evidence, logistic regression analysis of major city financial statistics from the Great Depression – the last time a large number of citiesdefaulted – as well as logistic regression analysis of more recent city financial statistics.Independent variables in our model include (1) the ratio of interest and pension expenses to totalrevenue, (2) the annual change in total revenue, (3) the ratio of general fund surplus (or deficit) togeneral fund revenues and (4) the ratio of general fund balance to general fund expenditures.
 
DRAFT
 
iii DRAFT
Table of Contents:
Executive Summary.............................................................................................................................................. vAcknowledgements ............................................................................................................................................ viiIntroduction ....................................................................................................................................................... - 1 -Literature Review ............................................................................................................................................ - 6 -Previous Depression-Era Municipal Default Research ................................................................. - 6 -Predicting Credit Ratings as a Proxy for Estimating Default Risk ............................................ - 9 -Objections to Rating Based Analysis ................................................................................................. - 13 -Estimating Default Probability from Market Prices .................................................................... - 16 -Default Probability Modeling Using Logit and Probit Techniques ........................................ - 18 -Great Depression Review and Analysis ................................................................................................ - 22 -The Depression Era Municipal Default Wave ................................................................................ - 23 -Bank Closings, Bank Holidays and Municipal Bond Defaults .................................................. - 24 -Property Tax Delinquencies ................................................................................................................. - 25 -Public Employee Pensions .................................................................................................................... - 27 -Data Selection ............................................................................................................................................ - 29 -Conceptual Model and Variable Selection ...................................................................................... - 31 -Statistical Methodology ......................................................................................................................... - 37 -Limitations .................................................................................................................................................. - 41 -Municipal Bond Defaults in California: History and Case Studies .............................................. - 42 -Pre-1930 ...................................................................................................................................................... - 42 -Depression Era .......................................................................................................................................... - 45 -Post 1940 ..................................................................................................................................................... - 47 -Desert Hot Springs ................................................................................................................................... - 49 -Vallejo ........................................................................................................................................................... - 53 -

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