Market Commentary: Are Tax Hikes Inevitable?

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by Gayl Mileszko

All the daily headlines lead us to believe that significant tax hikes are inevitable. There are innumerable fiscal challenges. We have spent $5.3 trillion so far in response to the pandemic-induced recession. There is serious talk of another multi-trillion infrastructure package. The balance sheet of the Federal Reserve has ballooned to $7.7 trillion. Our projected budget deficit — just halfway through the fiscal year — exceeds $1.7 trillion. The national debt now exceeds $28.2 trillion, a figure so large that it has lost meaning for most of us. The President who took office 100 days ago is seen by a good portion of the electorate as having a “mandate” to impose higher taxes on wealthy citizens and big business.

It is easy to understand why tax-exempt municipal bonds are now becoming scarcer and pricier amid all this tax hike chatter. The financial markets seem to sense a growing consensus for action based on media attention to various policymakers with platforms if not jurisdiction. Last year there was a “tax the rich” and “stick it to the corporations” campaign narrative that appeared to generate support for bogeys at around $400,000 in income, $1 million of gifts, and estates over $3.5 million. There are big bulls-eyes on companies seen as benefitting from the 2017 Trump tax cuts. Talk of retroactive applications makes the current grab for tax advantages all the more understandable.

Not a lot of opposition to the talk of tax increases has yet emerged. First of all, the specifics have not been presented, so special interest groups have nothing solid yet to analyze and object to. Some information was expected in the President’s address to the Joint Session of Congress on Wednesday, but the real details are being fleshed out and will take time. U.S. stocks nevertheless took a dive last Thursday on mere reports of plans to almost double the capital gains tax. The Dow dropped more than 320 points. The S&P 50, Nasdaq and Russell 2000 also fell, as did Treasury, corporate and muni yields.

In America, a tax rebellion is always right around the corner. And, given the changes in work and living arrangements brought about by the coronavirus, we are seeing how quickly our fellow citizens in states like New York and New Jersey now vote with their feet when informed that they must pay a higher so-called “fair share”. Companies with operations in multiple nations do not hesitate to move their headquarters, jobs, ingenious products and tax revenue to more friendly host nations. Any efforts to standardize tax laws among 195 different sovereign nations have about a zero chance of success.

We know of no legal prohibition against tax measures that apply retroactively. However, for a variety of reasons, retroactive tax provisions are not common or practical. In Washington, there are strong accounting, financial planning and litigation lobbies. There is also the simple matter of IRS logistics: printing the new forms and instructions affecting virtually every taxpayer and business, publishing the necessary regulations and guidance, educating customer service representatives and enforcement staff, and so on. If you examine past tax legislation, you will note that some provisions have different forward effective dates. Others may be temporary, with sunset dates in order to conform with the requirements of the enabling legislation. There are quite a few provisions in the 2017 Tax Reform bill that expire in 2025 without further action.

As many presidents have learned, tax reform bills are not so easy to get through Congress. They are nearly impossible if rolled out in pieces or phases. There have been at least 21 bills that increased federal tax revenues over at least one fiscal year since 1940 but the only recent major overhauls took place in 1986 and 2017. In order to succeed with cuts — never mind hikes — an administration has to draft very detailed proposals, preferably supplying specific statutory and explanatory language in its annual budget. Given the number of departments, agencies and offices involved, internal consensus is not easily obtained. The Tax Code is so unwieldy there are really no single source experts. In 2020, there were nearly 10 thousand sections. On the legislative side, numerous congressional committees and subcommittees are involved, with testimony, drafting and re-drafting, mark-ups, votes, speeches, and dialogue with constituents. As we saw in 2017, there are leaks, deep intra-party divisions, odd rules and unusual motivations. It is just plain impossible to “fast-track” anything without very heavy and sustained leadership pressure. In the process, hundreds of errors are made and so many unintended effects are revealed that there is typically at least one “technical corrections” bill required within a year or so of passage. That in and of itself can be a magnet for many unrelated and controversial provisions, and difficult to pass.

In the end, so much horse trading for votes is involved that passage of a 500+ page tax bill with an explanatory report of similar size would likely come at the price of all other major administration priorities. This time, it could possibly come at the expense of health care reform, civil rights, climate change, immigration, and infrastructure initiatives. The infrastructure details mean a lot to those of us in the municipal bond markets, most notably tax provisions involving advance refundings. But bear in mind that there are more than 12,000 active, registered lobbyists in DC and almost all of them have at least one special tax provision that they may want included or excluded. The budget committees, Congressional Budget Office, Office of Management and Budget, the Treasury, and the Joint Committee on Taxation are all involved in “scoring” the revenue impact of legislative proposals. These are not simple exercises and they are highly political. If reform is not achieved early in the honeymoon period, sophisticated vote counters and insider knowledge can lead to early pivots by certain classes of taxpayers and international/supranational corporations, significantly altering the projected revenue impacts before debate on the reforms is even over. The 1981 Reagan cuts and 1993 Clinton hikes were enacted by August of the first year in office; the 2001 Bush cuts were agreed to by May.

We will hear more debate on tax policy in Washington in the coming months as plans unfold and we encourage our readers to become involved. There are thin Democrat margins in the House and Senate, and Senate passage would entail a vice presidential tiebreaker and complete loyalty from the caucus. In the current environment, there will have to be close coordination with the Federal Reserve and monetary policy, and with the budget, taxation, and appropriations committees. If reform is enacted this year, mid-term elections may not be seen as a referendum as the full impact will not be felt by all taxpayers until forms are filed in 2023. If a tax reform bill is not signed into law by December, the odds are that tax hikes are unlikely to happen in 2022, an election year. In the meantime, 26 states and the District of Columbia had notable tax changes take effect in January, and more are on tap for new state fiscal years; in New York, the FY22 increases began this month.

In the past week, municipal bonds in high tax states have traded at extraordinarily high prices. Stanford University bonds with a 5% coupon due in 2049 traded this week at $159.792. Hamilton College bonds issued through Oneida County’s Local Development Corporation with a 5% coupon due in 2051 priced at $158.567. New York City Municipal Water Finance Authority bonds and Port Authority of New York and New Jersey bonds with 5% coupons due in 2031 are trading in the $136-$137 range. Long Island Power Authority and Monmouth County Improvement Authority bonds with a 5% coupon due in 10 years offer yields of only between 0.975% and 1.077%. Many individual and institutional investors are holding on to the bonds with federal as well as state tax exemption while looking for more to buy directly or through mutual funds and exchange traded funds. However, new supply is lacking. This week’s calendar, for example, totals only about $5.5 billion, and more than 20% is being issued for refunding purposes in federally taxable structures, and more than 20% is offered with forward settlements. Last week, the most yield we found was in a $10.9 million BB+ rated Michigan Math and Science Academy bond deal that had 2051 term bonds priced with a 4.00% coupon to yield 3.03%

This week, the Federal Open Market Committee met on Tuesday and Wednesday and kept its ultra-loose policy and near zero rates in effect, as expected. Investors are obsessed with guessing how much more economic ground has to be gained before the Fed begins tapering its monthly Treasury and mortgage bond purchases of $120 billion, and official conversations about rate increases begin. To be clear, Fed futures traders expect no changes in rates this year.

Where do you invest? We encourage you to contact your HJ Sims representative. Our banking, trading and sales executives are active in the day-to-day markets. For investors, our credit-driven strategies are designed for the outcome of income.

Is this the right time to borrow? For senior living communities, we point out that we are seeing some of the strongest lending conditions in our 86-year history. Our aim as always is to Partner Right, Structure Right and Execute Right.

Exclusive Opportunities For Our Clients

LWC21 CFO Brunch Session

In this session from our 18th Annual HJ Sims Late Winter Conference, in February 2021, thought-provoking insight from exceptional financing executives across the non-profit and proprietary segments of the senior living industry was shared in a question-and-answer format. The financial leaders focusing on COVID-19-related challenges and lessons learned during the COVID-19 Pandemic. Highlights include:

  • COVID-19’s Impact on Growth Plans
  • Ways to generate expense savings to offset the impacts of COVID-19
  • Low Interest Rate Environment
  • Lessons Learned during the Pandemic

COVID-19’s Impact on Growth Plans

Each organization noted the challenges of acquiring or affiliating with organizations during the Pandemic. However, all organizations believe there will be more acquisition opportunities in 2021, as the Pandemic begins to end. Benchmark Senior Living has seen limited acquisition opportunities throughout the Pandemic, acquiring only one CCRC in the last year. They expect to acquire more properties in the near future, as struggling communities become available for purchase.

Lifespace Communities has focused on redeveloping and/or expanding communities during the COVID Pandemic. Due to the impact of the Pandemic, they had to frequently revisit market studies and reconfigure expansions to meet the current market. Additionally, they have seen more opportunities for affiliations, especially with single-site communities that would like to be part of a strong non-profit system.

While Lifespace is not actively seeking affiliations, they typically bring in communities on a stand-alone basis. Once the community stabilizes, they then merge the community into the obligated group.

Despite the Pandemic, Voralto Senior Living is in growth mode and is actively seeking acquisitions. Voralto believes there are opportunities under all economic conditions. During the next quarter, they anticipate closing on three communities.

Where have you sought expense savings to offset the impacts of COVID-19?

To mitigate the Pandemic’s impact on census levels, senior living providers have had to find various ways to reduce expenses. Voralto has sought to lower staffing and non-resident care expenses. While Voralto has not had to lay off employees, they have seen a reduction in staffing due to a decline in census levels. To lower staffing expenses, they have focused on hiring more part-time staff, conducting cross training and sharing employees between communities. Voralto has lowered non-resident care expenses by negotiating with supply vendors and purchasing PPE in bulk.

Alexia Pozar of HJ Sims has also seen senior living providers lower expenses through reduced staffing. Additionally, she has seen cost savings in the following areas:

  • Advertising: Senior living communities have reduced spending on newspaper/mail advertising and often switched to managing their own social media.
  • Dining: Reduced costs have been experienced through streamlining menus and managing food waste.
  • Activity/Entertainment: Due to Pandemic restrictions, activity expenses have decreased.
  • Deferring Capital Improvements: If possible, communities have delayed spending funds on repair and replacement.
  • Negotiating with lenders: Many communities have been able to negotiate with their banks on lower interest rates or loan forgiveness due to the Pandemic.

Low Interest Rate Environment

One of the few silver linings during the past year has been historically low interest rates. These low rates have allowed senior living communities to refinance loans, resulting in significant debt service savings. Benchmark Senior Living has benefited as actual interest rates on debt associated with its $1.8 billion portfolio recapitalization are below underwritten rates, allowing Benchmark to offset a large portion of lost revenues due to the Pandemic.

Lifespace Communities has seen its financing options increase due to low interest rates. As a non-profit senior living provider, Lifespace Communities has typically
used fixed-rate, tax-exempt bonds to finance capital improvements. Rates have reached a threshold to where typically non-viable options, such as taxable bonds, have become available. In addition, Lifespace has utilized commercial bank loans to reduce debt service, taking advantage of ultra-low bank rates.

Lessons Learned during the Pandemic

The Pandemic forced senior living providers to face  unprecedented challenges, which led organizations to  learn valuable lessons for the future. All panelists  indicated that valuable staff and team culture often  allowed their organizations to overcome the challenges  of the past year. Voralto Senior Living and Benchmark  Senior Living found that rewarding employees, either  through premium pay or other incentives, like providing  meals to staff and their families, enhanced employee  retention efforts.

Further, many of the panelists gained appreciation of the importance of technology and communication. HJ Sims’ Alexia Pozar noted that the Pandemic required organizations to be transparent and communicate effectively with their staff, residents, residents’ families and vendors/lenders in order to retain staff and residents, calm fears and negotiate new lending terms.

Lifespace Communities learned about the importance of a strong balance sheet and operational results in poor economic conditions. Lifespace had a strong balance sheet coming into 2020, which has allowed the organization to “weather the storm.” Additionally, they noted the importance of strong operational results beyond entrance fees, which are often tied to economic conditions outside the control of the senior living provider.

Lastly, Voralto and Benchmark discovered that they needed the ability to adapt in the early stages of the Pandemic to ensure the operational success of their organizations. To meet new challenges, Benchmark often had management oversee processes that were outside their normal role. Voralto found that they had to quickly to new rules and regulations, ensuring that they could continue marketing efforts and visitations. Pozar found that organizations with strong internal policies and best practices were greatest equipped to effectively adapt and face unforeseen challenges.

For more information, please contact Brett Edwards at

For coverage on any of our other conference sessions, please visit our events page.

Panel of Financial Executives

Nick Harshfield
Chief Financial Officer
Lifespace Communities

Alexia Pozar
HJ Sims

Dennis Murphy
Senior Director of Investments
Benchmark Senior Living

Toby Timmermeyer
Voralto Senior Living

Replay our 18th Annual Late Winter Conference

HJ Sims arranges $4M PACE financing for StoneCreek

HJ Sims completed a $3.8 million retroactive Property Assessed Clean Energy (PACE) financing package on behalf of StoneCreek Real Estate Partners and Civitas Senior Living, for StoneCreek Littleton, a 92-unit assisted living and memory care facility in Littleton, Colorado that opened in January 2020. Please read more in Senior Housing News.

LeadingAge MD/DC Joint Conference

Virtual Event: 

A conference “journey forward” created for leaders to connect in a forum where you can discuss the tough moments from the last year, hear ideas that can transform your organization, and make sure you and your teams are ready for the next wave of innovation in the aging services field. 

Session Date & Time: June 3, 2021 from 12pm-12:45pm.

Thought Leadership and Educational Session:

One Doesn’t Have to Be the Loneliest Number: How Single-Site LPCs Can Continue to Thrive

Melissa Messina conducts a high-level discussion of strategic planning for single site communities that do not involve merger and acquisition opportunities. Two single site life plan communities in Maryland – Broadmead, which is located in the rolling hills of Cockeysville, and Edenwald, which is more urban in Towson, will be featured providing in-depth experience and insights. One  LPC is situated in a more suburban/rural setting and one in a more urban setting – and will discuss their experience as the premier senior living providers in the area. In particular, an assessment of the key factors from an operational, financial, and leadership perspective that have converged and allowed the communities to cultivate their reputations for resident service and to thrive from a financial perspective, including commentary around advantages the communities have relative to larger, multi-site organizations. In addition, instead of conveying the fruits of those successes to a parent organization, the communities will discuss how they have been able to leverage their successes to continue improving their ability to respond to the needs of its current and future residents, with recent expansion activity. 

Learning Objectives:

  1. Discuss the key factors, emphasizing those with the greatest degree of transferability and those unique to single-site providers, that financially-sound single-site LPCs share.
  2. Provide insight into the approach to strategic planning of the communities, and how their status as a single-site provider adds to their overall flexibility with respect to decision-making.
  3. Learn from commentary regarding how strategic planning, specifically for the unique challenges that single-site providers face, has been and may in the future be affected as the world continues to emerge from the pandemic.

Featured Speakers:

  • Melissa Messina, Senior Vice President, HJ Sims
  • Mark Beggs, President and CEO, Edenwald
  • Robin Somers, President and CEO, Broadmead


As we continue to experience fluctuations in our capital markets, HJ Sims is committed to Tracking the COVID-19 Impact.

HJ Sims Partners with StoneCreek Real Estate Partners to Facilitate $3.8 million in Retroactive PACE Financing


CONTACT: Tara Perkins, AVP | 203-418-9049 |

HJ Sims Partners with StoneCreek Real Estate Partners to Facilitate $3.8 million in Retroactive PACE Financing

FAIRFIELD, CT– HJ Sims (Sims), a privately held investment bank and wealth management firm founded in 1935, is pleased to announce a successful April 2021 Retroactive Property Assessed Clean Energy (PACE) financing in the amount of $3.8 million for StoneCreek Real Estate Partners (StoneCreek).

StoneCreek, a Dallas based developer, is a collaboration of professionals with 50+ years of combined experience in the operations, development and ownership of successful senior living communities in TX, CO and AZ. The operator, Civitas Senior Living (Civitas), is a Fort Worth, TX based for-profit owner/operator of senior living communities in TX, FL, OK, NM, KY and AZ. Founded in 2012, Civitas has 100+ corporate employees and manages 45+ senior living communities.

The StoneCreek Littleton development is new construction of a 92-unit senior housing community with 70 assisted living units and 22 memory care units. The community opened in January of 2020 and provides local access to quality senior housing and care in the Littleton area of Denver. With occupancy and operational challenges related to the COVID-19 pandemic, StoneCreek was exploring alternative capital sources to provide additional operational leverage when Sims proposed exploring retroactive PACE financing.

PACE is a Public/Private partnership that allows property owners to finance projects through voluntary assessments placed on the property by a state economic development agency. The program finances 100% of the energy efficiency, renewable energy, water conservation, resilience improvements and the related costs for construction and renovations/retrofits up to about 20% of the property’s appraised value. The financing is collected with regular local real estate taxes and assessment payments are amortized at a fixed-rate over the useful life of the project (15-25 years). The PACE program is typically considered an alternative source of financing to mezzanine debt where interest rates average between 12%-15%. In many states, PACE is allowed to be applied retroactively post-certificate of occupancy for qualified costs for a determinate amount of time.

Sims coordinated with StoneCreek, Civitas, the PACE loan provider and the Colorado PACE Authority for approval for PACE financing from the senior construction lender. Despite the atypical nature of the program, the financing team satisfied the concerns of the senior construction lender while also navigating the various regulatory challenges associated with multi-party financings.

StoneCreek, with the guidance of Sims, was able to borrow $3.8 million in PACE financing at 5.85% to finance necessary operating expenses related to an early 2020 opening and the ensuing impact of the Pandemic.

Financed Right® Solutions— James Rester: 901.652.7378 |, Curtis King: 603.219.3158 | or Ryan Snow: 843.870.4081 |

ABOUT HJ SIMS: Founded in 1935, HJ Sims is a privately held investment bank and wealth management firm. Headquartered in Fairfield, CT, Sims has nationwide investment banking, private wealth management and trading locations. Member FINRA, SIPC. Testimonials may not be representative of another client’s experience. Past performance is no guarantee of future results.  Facebook, LinkedIn, TwitterInstagram.


Your Portfolio Holds So Much Potential

Investment Income Expertise

With more than 85 years of expertise, we help you to reach your investment goals. Why just invest in bond funds when your portfolio holds so much more potential? We offer in-house holistic wealth management, examining equities, individual high-yield instruments, alternative investment strategies, portfolio management and more – helping you leverage the potential within the market, adjusting your portfolio to meet current conditions and better protect your assets.

Watch the video below to learn more.

StoneCreek at Littleton (April 2021)

HJ Sims Partners with StoneCreek Real Estate Partners and Civitas Senior Living to facilitate $3.8 million in Retroactive PACE Financing. The StoneCreek of Littleton development is a new construction, 92-unit senior housing community that includes 70 assisted living units and 22 memory care units providing local access to quality senior housing and care in the Littleton area of Denver, Colorado.

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