Weekly Market Update

PROPOSED DRAFT OF TAX REFORM AND IMPACT ON MUNICIPAL BONDS

Thursday, November 2, 2017

The House Committee on Ways and Means released a new proposed tax bill on Thursday, the "Tax Cut and Jobs Act." Apart from permanently lowering the corporate tax rate to 20%, the proposed bill seeks to levy taxes on college endowments. Under the new bill, private universities with more than $100,000 per student will be subject to a 1.4% excise tax on investment income. Currently, universities are not taxed on their investment income. Proponents of the plan argue that college endowments have unfairly acquired and hoarded large amounts of wealth. On the other hand, universities have noted that their endowments are restricted through donor agreements and cannot be used as a savings account. Market participants were also stunned to see that the proposed bill included provisions to eliminate tax-exempt private activity bonds, including all 501(c)(3) bonds and tax-exempt advance refunding bonds. These items are perceived by some as "revenue raisers" to partially offset the cut to corporate tax rates.

In Other News

• Hedge fund manager Ken Griffin committed $125 million to University of Chicago's economics department, the latest in a round of mega donations to top universities. Experts attribute the increased fundraising to large university capital campaigns and the improving economy.
• After backlash from faculty and staff members, The University of Tennessee decided not to outsource its facilities staff. The move, which was projected to provide millions of dollars in savings, was criticized for creating a disconnect between academic programs and facilities employees.
• Labor Secretary Alexander Acosta remarked that teenagers should consider alternatives to higher education. The message is consistent with the Trump administration's goal of increasing apprenticeship programs.
• During its November meeting, the Federal Reserve maintained the benchmark interest rate target between 1 and 1.25 percent. The market is currently predicting a quarter point increase at the next meeting, which will take place in December.
• President Donald Trump has nominated Jerome Powell as the next Federal Reserve chairman. Powell will be tasked with leading monetary policy in a time of equity market expansion but moderate wage growth.

Rating Agency Update

• Moody's assigned Aaa to Institute for Advanced Study, NJ's Series 2017 Taxable Bonds. The outlook is stable.
• Moody's assigned A2 to Creighton University's Series 2017 Revenue and Refunding Bonds. The outlook is positive.
• Moody's assigned Baa2 to Rider University's Series 2017 Revenue Bonds. The outlook is revised to negative from stable.
• Moody's assigned Aa3 to Appalachian State University's Series 2017A General Revenue Refunding Bonds. The outlook is stable.
• Moody's assigned A2 to Tulane University's Series 2017A & 2017B Revenue Bonds. The outlook is stable.
• Moody's assigned A2 to Ithaca College's Series 2017 Bonds. The outlook is stable.
• S&P assigned BBB- to Rider University's Series 2017F Revenue Bonds. The outlook is stable.
• S&P affirmed its AA- rating on Southern Methodist University. The outlook is stable.
• S&P assigned AAA to Institute for Advanced Study, NJ's Series 2017 Taxable Revenue Bonds. The outlook is stable.
• S&P affirmed its A- rating on St. Francis College, NY. The outlook is revised to negative from stable.
• S&P assigned A to Tulane University's Series 2017A & 2017B Revenue Bonds. The outlook is revised to stable from negative.
• S&P affirmed its AAA rating on Pomona College. The outlook is stable.
• S&P affirmed its AAA rating on Massachusetts Institute of Technology. The outlook is stable.
• S&P affirmed its AA+ rating on the University of Richmond. The outlook is stable.
• S&P affirmed its A+ rating on Wayne State University. The outlook is stable.
• S&P assigned AA- to University System of New Hampshire's Series 2017A & 2017B Revenue Bonds. The outlook is stable.
• S&P assigned A+ to University of Oklahoma's Series 2017A, 2017B, & 2017C Revenue and Refunding Bonds. The outlook is stable.
• S&P affirmed its AA- rating on Auburn University. The outlook is stable.
• S&P assigned its AA- rating to Reed College's Series 2017A Revenue Bonds. The outlook is stable.