Friday Financial Five – March 8th, 2013
Friday, March 08, 2013
Providence bonds have a strong showing
The city of Providence was able to sell over $39 million in general obligation bonds and keep the average interest rate around 3.6 percent. The initial projection was an interest cost of around 5%, so this will save the city roughly $200,000 per year in debt expenses. This is less likely an indication of Providence’s improving finances and more likely a result of a rising tax environment. High income earners have continued inflows to municipal bonds due to their tax favored treatment, and Rhode Island has a strong market for such bonds.
Another decrease in the RI unemployment rate
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe jobless rate did drop again in January to 9.8%, but the number of employed residents dropped by 700 from December 2012. The current focus on decreasing the corporate tax and possibly eliminating the minimum tax for some businesses may have some positive effects here. It still remains unclear why Rhode Island, a state filled with small businesses, has a mandatory $500 tax for businesses that might not be making any money.
Long term care costs in Rhode Island
Rare is the client who hasn’t had some experience with a friend or family member needing extended home care, assisted living, or nursing home care. Metlife’s 2011 cost projection for Rhode Island shows a private nursing home room averages over $8,000 per month, with a high over $11,000. A private room in an assisted living facility averages roughly $4,000, with a high of $5,000. Even a home health aide will average $2,000 per month. For those with assets to protect, it’s imperative that they consider ways to protect against possibly devastating costs.
Investment spotlight – Master Limited Partnerships
Master Limited Partnerships (MLPs) provide an avenue for income seekers to increase yield through investment in energy companies. With an MLP, investors (known as limited partners) generally have no voting rights and pay a fee to the general partner. The yield, tax advantages and low correlation to other investments make the MLP worth considering, but there are also considerable drawbacks. Restricted liquidity, volatility, unseen expenses, and rising interest rates can all provide a headwind to a MLPs overall return. There can also be complicated tax implications, including multi-state filings. The complexity of this investment means extreme due diligence before you make an MLP part of your portfolio.
The economics of solar panels
Without considering the environmental benefit, does the cost of putting solar panels on your home pay for itself? The federal government provides a 30% tax credit (through 2016), which accompanies a Rhode Island credit on qualified solar implementation. For a quick example, if you spend $15,000 on solar panels, you should get back over $8,000 in credits. If you’re able to reduce a $150 monthly electric bill by 40 percent, it would take between nine and ten years to recoup your initial investment, not considering any borrowing costs. If you plan on being in your home for awhile, it makes sense to at least investigate the numbers. Also, solar qualifies under the federal Title I program, where homeowners can borrow up to $25,000 for home improvement.
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