Bond Market Woes Hit Cities

Cities that dipped into the municipal bond market to help publicly finance venues such as football stadiums and arenas may find themselves in a cash bind in the worst-case scenario resulting from recent market turmoil.

In one instance, the public agency running Houston’s Reliant Stadium financed its construction with the help of a 30-year bond. J.P. Morgan Chase & Co. recently took control of the debt that it “back-stopped” in 2001 that requires the agency to repay the bond in less than four years, according to the Wall Street Journal.

“Think of having a 30-year mortgage, and then someone suddenly says you have to pay your house off in five years,” Janis Schmees, executive director of the Harris County Houston Sports Authority, told the paper.

A recent bond selloff and pullback by mutual fund groups including Vanguard Group sent the market to its lowest level since early 2009, at what was considered the height of the recession.