The Road Less Traveled

2 1/2 Days. 1000+ Miles. 22 Research Visits.

The Equus team recently took a research trip to California to experience the lesser-known investment opportunities in the California municipal market. 

California’s municipal space can be divided into two spheres: coastal and interior. The coastal sphere is well-known, heavily populated, and home to major employment centers. The coasts’ popularity is reflected in a location premium reflected in municipal bond yields. The interior sphere features a heavy government employee sector in the north and serves as the state’s (and nation’s) breadbasket in the south. Our goal on this trip was to evaluate the opportunities and risks presented by investing in the interior reaches. 

Zoomed In Route.png


Napa and Sonoma are common names, but most people have never heard of Rohnert Park and Windsor. The latter are just north of San Francisco along Highway 101 and serve as more affordable living communities for commuters working in the Bay Area. A recently approved sales tax bond for light rail made this commute easier and has helped spur growth in nearby Marin and Sonoma county communities.


Housing markets in Davis and Sacramento are also benefiting from San Francisco’s high living costs. At 4:00am, we witnessed the “flight to affordability” as Interstate 80 filled with workers making the 80 mile commute. The exodus inland has helped our clients’ Community Facilities District bonds in Sacramento, Roseville, and Folsom.


From the state capitol, we ventured south along Highway 99 through the Central Valley. The cities of Stockton, Fresno, and Bakersfield are nestled among thousands of square miles of almonds, olives and fruit. We spent time in these three cities and left with varying conclusions.


Stockton is the second largest largest city in the nation to file for bankruptcy, and we remain cautious of investing in this city.  Fresno is a step up but leaves much to be desired. A new ballpark and early stage revitalization of downtown shows promise, but a giant 1960’s-era shopping mall left vacant at the city center highlights the fact that redevelopment will not be quick and painless.


Bakersfield shows the most promise for investment due, in part, to its proximity to Los Angeles. One broker stated that he receives calls on a weekly basis from Los Angeles investors who are attracted to the relative value of Bakersfield.


We must also note the construction (or lack thereof) of California’s high-speed rail. We glimpsed quarter-mile sections north and south of Fresno that highlighted the scale of construction.  However, the permitting process required to connect the two metropolises is delaying the project and creating more expense for the state.  In our opinion, this could negatively impact the state’s finances.


Finally, we struck out west toward Paso Robles and north to the suburbs of San Jose. We spoke with one of the largest fruit producers in the region who has called Santa Clara County home for more than 50 years. He explained that, in recent years, the communities of Gilroy and Morgan Hill have transitioned from farm communities to Silicon Valley suburbs. Like Davis and Sacramento, housing development and city finances in these communities benefit from a healthy San Francisco.


When we initially announced our route for this trip, the most common response we received was, “Why?” Our answer was simple: driving these thousand miles, speaking with locals, and experiencing the Central Valley firsthand is far more informative than any filing or official statement we will ever read. 


Yes, we understand the coast’s attraction as a place to live, work, and play. However, the interior of California also has much to offer investors. The Central Valley serves as the nation’s agricultural supplier and provides affordable housing.  As a result of our journey, we are more attuned to the opportunities and risks presented by investment in California’s interior.


This report is for information purposes only and should not be considered a solicitation to buy or sell any securities. Neither Equus Private Wealth nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of Equus Private Wealth Management, LLC. For questions regarding this report, please call Equus Private Wealth at 970-963-9274.