SOURCE: SourceMedia

September 13, 2007 15:29 ET

California Public Finance Survey: Housing Slowdown Could Hit Local Government Budgets

Experts Also Predict State Will Build "Peripheral Canal" to Protect Water Supplies

CARLSBAD, CA--(Marketwire - September 13, 2007) - California municipal finance professionals are watching the state's housing market closely, worried that a broader economic downturn could imperil state and local governments' budgets, according to results of a survey on the biggest fiscal and infrastructure issues facing the state, its cities, and counties. The survey was co-sponsored by The Bond Buyer and MBIA Insurance Corp. and held live at The Bond Buyer's California Public Finance Conference, which drew more than 600 attendees.

"The market is concerned that the slowdown in new construction and housing resales could affect other areas of the economy," said MBIA Managing Director Jason Kissane, who moderated the survey. "In past cycles, we've seen a very different trend, in which a slowdown in the underlying economy, accompanied by job losses, weakened housing prices."

Overall, 58% of the survey respondents said a consumer-led economic slowdown is the greatest risk to state and local government balance sheets. 28% of the respondents -- which include state, city, and county finance officers, along with bond investors, ratings analysts, attorneys, and investment bankers -- said their top concern is the threat that sliding property values could reduce tax receipts.

Over the longer term, the industry continues to believe the state's infrastructure requires significant investment. 63% of the audience said the state would eventually construct a major new water-supply project like the "Peripheral Canal," but few thought the project would be built before 2025.

"Municipal bonds are long-term investments, and these projects require long lead times," Kissane said. "A 2025 completion date for the Peripheral Canal seems far away, but to make that happen, the state will have to begin the financing process very soon."

For more information, including complete results of the survey, or to request an interview with Mr. Kissane, please contact MBIA Vice President Elizabeth James at 914-765-3889.

About MBIA, Inc

MBIA Inc., through its subsidiaries, is a leading financial guarantor and provider of specialized financial services. MBIA's innovative and cost-effective products and services meet the credit enhancement, financial and investment needs of its public and private sector clients, domestically and internationally. MBIA Inc.'s principal operating subsidiary, MBIA Insurance Corporation, has a financial strength rating of Triple-A from Moody's Investors Service, Standard & Poor's Ratings Services, Fitch Ratings, and Rating and Investment Information, Inc. Please visit MBIA's Web site at www.mbia.com.

About SourceMedia, Inc

SourceMedia provides market information, including news, analysis, and insight to the financial services and related industries such as accounting and technology, through its publications, industry-standard data applications, seminars and conferences. Its flagship publications, including American Banker, National Mortgage News, The Bond Buyer, and Accounting Today, have helped build SourceMedia's reputation as the pre-eminent information source in its respective markets. Consulting services, software, and data provided through its two divisions, National Regulatory Services (NRS) and Accuity, facilitate regulatory compliance, funds registration and data flow among institutions in the investment, insurance, and financial service industries.

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