By Gayl Mileszko
Market Commentary
The Largest Room
The Farmer’s Cabinet was a four-page weekly newspaper first published in Amherst, New Hampshire in 1802. Over its century-long history, it had a focus on practical husbandry and matters of local interest. Various sections of the paper were dedicated to everything from managing winter feed rations to shielding apple orchards from late frost and caterpillars. There were notices of farm sales, wartime casualties, weddings, births and deaths, instructions on how to make small batch maple syrup, and ads for patent medicines. The little room remaining was saved every week for a poem or some folk wisdom. To this day, it is famous for one motivational proverb that appeared in the December 25, 1862, edition: “Somebody has discovered that the largest room in the world is the room for improvement.’”
Improvement Needed: Ethics
With just 11 weeks to go until election day, we are reminded nearly 24/7 by TV ads, billboards, lawn signs, postcards, and urgent texts how much policy improvement is needed in Washington, at the state capitol, and in elective offices across the country from mayor to tree warden. The headlines are also often ablaze with scandalous behavior on the part of numerous Members of Congress, senior executive branch and judicial officials, and captains of industry across all the various abhorrent levels and categories of misconduct — personal, domestic, and workplace — plus actual criminal activity, prompting ethics-driven investigations, calls for terminations, expulsions, resignations, and prosecutions. There is definitely room for reform here: more education and training, higher standards in governance, lessons in how to be a role model for all those in key positions of leadership.
Improvement Needed: Appreciation
We are celebrating our nation’s 250th anniversary this year. Well – most of us are celebrating. The majority are taking time to learn about and honor the men and women who fought and fight for independence and individual rights, for democracy, equality, the rule of law, free enterprise. We are teaching the youngest generation American history and civics, the importance of critical thinking, respectful debate, and our duties as citizens. There is much that we take for granted today, however, much that we need to appreciate now before it is lost or taken. There are a few among us who prefer to rewrite history, who want to radically restructure our government, our system of criminal justice, our foreign policy, our ways of life. The Democratic Socialists of America are the latest example of an organization with a radical agenda that enjoys but disrespects our uniquely American rights, privileges, and responsibilities. The DSA platform which proposes drafting a new constitution, abolishing the Senate, presidency and Supreme Court, calls for universal health and childcare and rent control, and advocates for abolishing police and prisons has in fact garnered enough support that more than 35 of its candidates have won primaries and will appear on ballots in November. We note that Election Day will come less than two months after we commemorate the 25th anniversary of 9/11 and a point in time when our nation came together, proudly displayed flags, comforted our neighbors, donated to charities supporting the families of victims, applauded the heroes among us: the firefighters, police, doctors and nurses, clergy, community leaders and volunteers. There is plenty of time, room, and need for us to recapture that spirit and show appreciation for our republic, our history, and our freedoms.
Improvement Needed: Economic Data
It is not just our social conduct and gratefulness that can use an upgrade, but the data on which we rely to run our businesses and formulate our policies. My goodness: who among us believes that inflation has only risen 3.2% from last year? Very few who drive and buy groceries, use air conditioning and heat, pay rent, or took out a mortgage on a new home. Cost of living adjustments for Social Security, wage negotiations, and retail product pricings all hinge in large part on numbers now coming from a smaller base of reporting businesses subjected to review by a declining number of federal staff. The new Chairman of the Federal Reserve Board has commissioned an independent task force to look into the timeliness and quality of information relied upon for setting monetary policy judgments: the inflation frameworks and data, how the central bank should define and pursue price stability. We all know there is lots of room for better real-world gauges and targets.
Improvement Needed: Intergenerational Cooperation
The U.S. is just one nation facing the challenges of an aging population, declining birth rates, and escalating debt service costs. Here, rising demands on mandatory spending programs — Social Security, Medicare, and interest on our $39 trillion debt — will intensify the competition for the limited public resources remaining at the very time younger generations need strong investments in K-12 education, AI and other workforce training, affordable housing, and family support programs. Some younger Americans are already framing the challenge as a zero-sum conflict between young and old. Intergenerational cooperation is essential to future economic growth and social stability. Policymakers, community leaders, and even individual households will need to prioritize a well-educated and productive younger workforce to support retirees, while arranging for financially secure older adults to contribute time, experience, and caregiving to alleviate burdens on younger Americans raising families while building careers and creating new opportunities for success. There is an enormous amount of room to start building consensus and planning to meet the obligations we have to care for our seniors, our children, and all those in between.
Improvement Needed: K-12 Education
How to best prepare young Americans for the workforce of the future is a question faced by every generation of parents, students, educators, and policymakers. Rapid technological advancements now require discussions at the local, state, and federal levels on how to better target funding to STEM and AI programs, skilled trades, financial literacy, entrepreneurship, and career-focused learning pathways that align with evolving labor market demands. Most states now allow for expanded educational choice through charter schools, magnet programs, career academies, virtual learning, and other innovative models that enable families to select environments that best meet their children’s needs. It goes without saying that more choice often encounters heated resistance from stakeholders who benefit from existing structures. traditional models, work rules, and funding arrangements. But poor performance outcomes and advances in technology are disrupting conventional approaches and assumptions about curricula, teaching, learning and even the role and scale of brick-and-mortar school facilities. We know that the solution is not to throw more money at the education sector, particularly in regions facing declining student enrollment. We already spend an average of $21,065 per pupil per year on public K-12 education, with some states paying much more. The challenge for policymakers and taxpayers is not simply to spend more on education, but to direct resources toward successful learning platforms with proven outcomes, workforce readiness, and educational models that equip students with the skills needed to succeed in an increasingly technology-driven and globally competitive economy. There is plenty of budgetary room and demand to construct better classrooms of the future.
So far this month, non-profit organizations have been active in the tax-exempt market to finance charter schools in Arizona, Arkansas, South Carolina, and Utah that came with maximum yields of 4.80% to 7.75%. Highly rated private schools in California and Pennsylvania have sold bond deals with final maturities yielding from 3.27% to 4.49%.
Improvement Needed: Rural Health Care
Different federal government agencies define “rural” in more than a dozen ways. By some measures, 62% of all counties, 97% of the total U.S. land mass, and as much as 20% of Americans live in a rural community. When we refer to rural health care, we mean the delivery of medical services in sparsely populated, geographically isolated communities where residents often face significant barriers to accessing care. Whether recognized as a rural emergency hospital, rural referral center, Medicare-dependent hospital, sole community hospital, or rural health clinic, they are essential providers of maternity services, geriatric care, acute and emergency care, preventive medicine, behavioral health services, and chronic disease management for underserved and underinsured populations. Since the onset of the COVID-19 pandemic, dozens have closed, converted to outpatient-only models, or eliminated key service lines. Approximately 180 rural hospitals have reportedly closed nationwide since 2010, contributing to a growing number of health care “deserts.”. Financial pressures including low patient volumes, workforce shortages, inadequate reimbursement, rising labor and supply costs, unfavorable payer mixes, and aging facilities have been major drivers of these closures. Rural community affiliations with larger health systems are becoming increasingly important for clinical support, technology, purchasing power, and staffing. For financial stability, these providers rely not only on strategic partnerships but aggressive grant fundraising, community engagement, and telehealth expansion. In addition, federal designations such as Critical Access Hospital (CAH) and Frontier Community Health Integration Program participation can enhance Medicare reimbursement rates. The One Big Beautiful Bill established a 5-year, $50 billion rural health transformation program in an effort to offset losses related to Medicaid program reforms, but we know that there is lots of operating room for improving support for this sector.
Improvement Needed: Senior Housing and Care
As the nation enters an unprecedented period of population aging, we have fallen far behind in devising solutions to meet the future housing and care needs of our elders. Older adults increasingly seek opportunities for socialization, wellness programming, and community engagement following the isolation experienced during the pandemic, but independent living, assisted living, memory care, and skilled nursing facilities are approaching nearly full occupancy while new construction remains near multi-decade lows. Industry research suggests that we require more than 800,000 additional senior housing units by 2030, but for-profit and non-profit developers are vexed by high construction costs, elevated interest rates, labor shortages, and limited access to capital, all of which have made new development difficult and contributed to a growing shortage of options for those middle-income seniors who are too affluent for public assistance but unable to afford most entrance fee and private-pay communities. In response, many providers are pursuing campus repositionings, expansions, and adaptive reuse projects involving vacant schools, shopping malls, office buildings, and other underutilized real estate, although these conversions often face significant regulatory, design, and infrastructure challenges. While most older adults continue to express a preference for aging in place with home health support, home-based care has many limitations and primarily relies upon family members with limited time and training. Of all the areas where improvement is needed, this is where some of our country’s greatest needs lie. Employers, religious, social, and cultural institutions, and community organizations need to quickly brainstorm how to finance and construct suitable rooms of every size and at every price level, for purchase or rent, with and without care options.
The nonprofit community is working hard to arrange cost-effective financing in the tax-exempt market. Deals brought so far this month have successful. The Public Finance Authority placed $98.4 million of non-rated bonds for Citadel Housing acquisitions in Ohio and Pennsylvania; 2061 term bonds priced at par to yield 6.25%. The Louisiana Local Government Environmental Facilities and Community Development Authority sold $51.7 million of BB+ rated revenue bonds for St James Place of Baton Rouge, structured with a 2045 maturity priced with a 5.15% coupon to yield 5.17%. The North Carolina Medical Care Commission issued $71.5 million of non-rated bonds for The Sharon at Southpark in Charlotte featuring a 2061 term bond priced at 5.625% to yield 5.56%. The City of Sioux Falls, South Dakota brought a $44.6 million BB rated deal for Dow Rummel Village that included a 2061 term bond priced at 5.70% to yield 5.80%. And the Palm Beach County Health Facilities Authority came with a $376.4 million start-up financing for Green Cay Life Plan Village in Boynton Beach that had a 40-year maturity priced at 7.00% to yield 7.21%.
Our bankers, traders, analysts and sales executives stand ready to suggest improvements small and large that may be needed in your strategic plan, your financing ideas, or your portfolio. There is always room to grow and improve. This is a good time to reach out to your HJ Sims representative as market activity begins to slow ahead of Labor Day. Count on us to help.