Municipal League prez tells bond buyers: Expect defaults



The Bond Buyer is a serious publication that only the elite financial world reads; a subscription costs a minimum of $3,420 per year and is aimed at the serious investor.

Those serious investors were provided a story last week in which Tim Navarre, the president of the Alaska Municipal League, told the publication that Gov. Michael Dunleavy’s budget cut was so severe, that Alaska municipalities would absolutely default on their debts.

That’s because the 2020 budget proposal stops paying for debt chalked up by local governments.

“The funding shift is so severe at the local level that if the budget passes as proposed, there is no question that some municipalities would default on their bonds,”  Navarre told The Bond Buyer reporter.

The Alaska Municipal League represents 165 cities and boroughs in Alaska with a mission of being the “unified voice of Alaska’s local governments to successfully influence state and federal decision making,” and to “build consensus and partnerships to address Alaska’s Challenges.”

The article by Keeley Webster was published March 7, and primarily it addresses the recent Fitch Ratings warning of credit rating downgrades for municipalities across the state, if the state pulls its funding from the school bond debt reimbursement program.

Reductions in state formula school funding could also pressure boroughs, creating budget stress for borough governments and potentially crowding out other services, Fitch has speculated.

In addition, the reduced state funding for locally approved bonds could also lead to higher local taxes.

Although boroughs are responsible for making bond payments on most school districts’ bonds, the state pays about 60 percent of those new school bonds. It’s by tradition, however.  These bond debt reimbursements have always been subject to annual appropriation.

The amount of debt service the Anchorage School District would lose under the proposal is $40 million, as well as $110 million of the state’s contribution to its operating budget.

The Anchorage School District had $259 million of general obligation bonds currently outstanding; those it will pay over the next five years.

During the current municipal election that ends April 2, the school district has bonds worth another $59 million it’s asking voters to approve.

Anchorage and the Mat-Su Borough are the school districts most affected by the budget decision, according to the story, because they have hundreds of millions of dollars they owe. Taxes would go up, and if ratings agencies perceive risks, the cost of borrowing would go up, too.

However, the municipalities have many options with their bonds. Voters could turn down the current $59 million request. And both the district and the muni’s could actually consider belt-tightening, like the state is trying to do.

Navarre, whose brother was one of Gov. Bill Walker’s commissioners, seems to be saying that local governments have become so dependent on state subsidies that they cannot exist on their own without defaulting on bonds.

It was a deeply irresponsible interview, for the head of the Alaska Municipal League to be undermining the perceived creditworthiness of his members and thereby driving up their borrowing costs. In an effort to take a potshot at the Dunleavy Administration, he instead shot his own members in the foot.

Moreover, Navarre reveals a misunderstanding of the budget process. The Administration simply proposes a budget; it is the legislature who, after lengthy hearings and deliberation, actually passes a budget. Navarre is getting way out ahead of his skiis if he thinks the governor’s budget proposal will be enacted as submitted. It will not. In the meantime, he may have spooked the municipal bond markets at a crucial moment.

It will be interesting to see what the Alaska Municipal Bond Bank has to say about Navarre’s take on the helplessness of municipalities.



  1. Is it impossible for these communities to….cut their budgets?

    I really don’t understand the shrieking about this. We’ve known since 2015 when oil prices crashed a reckoning has been coming for public spending. We have had years to make adjustments if we had responsible leaders. We now have one and people are acting like it’s all his fault or something. JFC.

  2. Did you notice that when a person instigates responsibility, everyone panics and misleads those closest to the issues. That’s what this guy is doing.

  3. Stay the Course // Move Forward …. Cutting the overall State Budget 20-25% is priority #1.
    All institutions will make the necessary adjustments and the State of AK will benefit greatly.
    Then, we can evaluate future years’ budgets and brace for more well deserved cuts, starting next year.
    We will most definitely survive these ‘reasonable’ budget cuts BUT, we cannot tax our way to prosperity!!!

  4. Oh, woe is us. For crying out loud. The dims are ratcheting up their game. Outright fear mongering now. “Municipalities are going broke”, shouted chicken little. “The governor wants to take our money”, shouted chicken little. “We need all the money from everyone”, shouted chicken little. “The governor is going to make the sky fall”, shouted chicken little.
    If all the “municipalities” took their fiscal responsibilities seriously, no problems anywhere. Instead, hundreds of millions of $$$ was “borrowed” with the assumption that the state would pay. Now, they are freaking out because they have NO FIDUCIARY RESPONSIBILITY. The state legislature is supposed to carefully exercise “fiduciary responsibility”. They have not! Now, with a governor trying to prevent fiscal disaster, they are acting just like “chicken little”. The state has spent beyond it’s means for years. Now, the piper must be paid or pay much more later. If the liberals get their way, chicken little could be right. It will take a couple years or so, but it will happen (fiscal disaster). Look at the “finance chart” in front of the legislature. In a very few years, the permanent fund will be gone. A few more years, the entire reserve will be gone. What then? That’s probably when the state would see an exodus that will shake Alaska like the “big one”. There won’t be enough tax base left to fund a row boat, much less ferries galore.

  5. Public Schools…………the only endeavor where the worse you perform the more you are paid.

  6. Typical of Democrats, to announce that the sky is falling or may have already fallen, all in an effort to undermine a Republican governor. This tactic, is not new. Old track horse, different jockey. Navarre is brother of Mike Navarre, staunch Democrat and one of Bill Walker’s flunkies. Instead of reporting the complex underlying issues of waste and mismanagement prior to Dunleavy’s election victory, the Democrats play this game to compound Dunleavy’s work early on. No wonder Democrats are such a sad, depressed bunch. They deal in fabricated doom and gloom. The M. League wants Dunleavy to fail and are willing to let Alaska experience rough credit ratings in order to accomplish their political agenda.

    • How very true.

      You know the Democrats mantra, right?

      Never let a good crisis go to waste. In the event there is no good crisis, enlist the aid of your buddies in the press to help manufacture one.

  7. I’m a former Alaskan who has long invested in Alaska bonds. So now, I guess I’m going to get stiffed on them so that Alaskans can get their PFDs and go buy that new snowmachine or big-screen TV that they so badly need. Living tax-free and receiving nice PFDs is great so long as the State can afford it, but the music has finally stopped and now Alaskans need to pay some tax and reduce the PFDs just like everyone else in the country. If I still lived there I would gladly agree to this, and view it as the cost of living in the truly magnificent place that Alaska is. You all have a very special life up there. I know, because I lived it fully for over 30 years. You can keep it that way by tapping the marvelous thing called the Permanent Fund to keep the State budget afloat. Put on some tax like there was pre-oil, reduce the PFD, reign in some of the State spending, sure. But why not use the rainy day fund a little more, now that it’s raining? From Outside, it sure looks like individual PFD greed is going to run the place into the ground. So sad.

    • “Alaskans need to pay some tax and reduce the PFDs just like everyone else in the country. If I still lived there I would gladly agree to this”.
      Right! From someone who no longer benefits. Very disingenuous!

    • You are wrong. Alaskans need to quit complaining and relying on government. We waste money in a terrible fashion…….so much, that we’ve become addicted to being treated like spoiled rotten kids. SHRINK GOVERNMENT. REDUCE GOVERNMENT SPENDING. NO TAXES. LIVE WITHIN YOUR MEANS! BALANCE YOUR CHECKBOOKS. BE MORE SELF-RELIANT. Complainers, bitchers, moaners, whiners, Democrats: your plane is waiting for you.

  8. My 49th year here and you couldn’t pry me away. I have seen good times and bad times but Alaska is my home. I am glad for the -50, its keeps the riffraff away lol.
    I support the Governor and his efforts to clean up the chaotic walker mess and so glad he is gone. Now lets all roll up our sleeves and get back on track!

  9. Woa there Tim! Do you have some sort of crystal ball to make such “predictions”? If I were a member of “the league,” I would be a little ticked at Prez. Navarre. How dare he openly suggest this will be the outcome of responsible budgeting by the Dunleavy administration? Maybe I should do a pre-emptive strike and let all the utility companies know right now that I will be defaulting sometime in the future due to State budget cuts, and not my lack of planning. It just clearly shows what suck-leaches they really are.

  10. Balancing a budget, avoiding increased debt, and using funds responsibly…. how antithetical to modern cities and states. Investing in the future requires having a future to invest in.

  11. Navarre didn’t mention the Alaska Municipal League’s “investment pool”.
    What’s the Alaska Municipal League?
    From “The Alaska Municipal League is a voluntary, nonprofit, nonpartisan, statewide organization of over 160 cities, boroughs, and unified municipalities, representing over 98 percent of Alaska’s municipalities.”
    From “The mission of the Alaska Municipal League is to:
    1.Represent the unified voice of Alaska’s local governments to successfully influence state and federal decision making.
    2.Build consensus and partnerships to address Alaska’s Challenges, and
    3.Provide training and joint services to strengthen Alaska’s local governments.”
    “The Alaska Municipal League is committed to a responsible and responsive approach to implementation of online sales tax collection and remittance in Alaska.”
    Why have an “investment pool”?
    From “The purpose of AMLIP is to provide a safe, high-yield, short-term investment option to maximize revenue for boroughs, cities, school districts and other state government entities.”
    How much money are we talking about?
    From Navarre’s Alaska Municipal League has $599,870,402.62 stashed in its investment pool, out of taxpayers’ reach.
    The emerging picture is that Navarre’s Alaska Municipal League exists only to take money from taxpayers, gamble the take to get more money, and threaten bond investors with default if state government does not force taxpayers to give Navarre’s enterprise even more money.
    Then Navarre appears to threaten bond holders and productive Alaskans that his Alaska Municipal League members will quit paying their loans if productive Alaskans aren’t forced to give his League even more money.
    Surely Navarre’s threat is not about government officials getting more money just because they can, not being accountable to anybody for how they spend it, or profiting from bond-market manipulation because they figure nobody’s smart enough to do anything about it.
    But some of us believe otherwise.
    …and respectfully ask for Governor Dunleavy’s help in dissolving the Alaska Municipal League and applying its “investment pool” to the the state’s reported $1.6B debt.

    • Ahhh…Morrigan…. I’ve been waiting for you to chime in and point this all out again as you have before. Thanks for reminding those that may have forgot or never knew.

    • Morrigan, you are spot on. The AML is a nonprofit which is indirectly funded by the state and local taxpayers. Its mission is to lobby for more money from the State for its members–boroughs, cities, etc. Its dues totalled more than $400,000–money from the state and other local govts. The prior president of AML was actually on the state’s PERS retirement program!

      • David, so I may shamelessly plagiarize…
        Where does one find the $400K number, is it annual or monthly, are dues prorated according to the member’s resources?

  12. AMEN!! Gov. Dunleavy…time to get a move on this advice and go for it…..!!! Put your investigators to good use, and if they can’t do the job, look to the US Attorney’s office…

  13. AMEN!! Gov. Dunleavy…time to get a move on this advice and go for it…..!!! Put your investigators to good use, and if they can’t do the job, look to the US Attorney’s office…

  14. Guess I should not be surprised that a person of such sterling reputation and character is in charge of such a convoluted fraud. I best leave it at that.

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