• Muni Nation

    Green on Fertile Ground

    Jim Colby, Portfolio Manager
    May 10, 2013

    Green ImageMunicipal bond investors may not think of themselves as "doers" as much as they think of themselves as "receivers" (of tax-free income). I offer here an example of how muni investors can regard themselves as both, by supporting green initiatives1 when buying tax-free bonds.

    The Milwaukee Metropolitan Sewerage District, an issuer of municipal bonds, is responsible for the production of Milorganite®, one of the oldest, branded fertilizers on the market today. It is not widely known that the Milorganite® program is one of the world’s largest recycling efforts or that it was started in the 1920s by reform-minded socialists to become a rare profit-generating municipal enterprise. The District captures wastewater from the metropolitan Milwaukee area, including local industries such as MillerCoors. This water is then treated with microbes to digest the nutrients. Cleaned water is then returned to Lake Michigan. The microbes are then dried, becoming Milorganite®, which is sold throughout North America as golf course, home lawn and garden fertilizer.

    Having been to the facility and having seen the product itself, I continually marvel at the simplicity of the process, as well as the benefits the community derives from Milwaukee’s long-standing recycling initiative.

    Other broad-based municipal programs, such as light-rail mass transit, are also green and ought to be recognized for their contributions to general welfare and for utilizing low cost, tax-exempt financing. Municipal bonds, however, are in the crosshairs of the ongoing budget debate, and despite these examples of beneficial mandates, all municipal programs may have to compete for higher cost of capital if tax-exempt financing were to be capped or eliminated.

    1Projects funded through municipal financing may not be aligned with every investor’s values. Some municipal bonds are secured by alcoholic beverage taxes, legalized gaming taxes and payments from the tobacco settlement agreement. In addition, some municipal bonds are issued to support and construct nuclear power plants and prisons.

    Any discussion of specific securities mentioned in this blog post is neither an offer to sell nor a solicitation to buy these securities. A fund’s holdings will vary.




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