OP here--by the way I am a "she" not a "he" but I guess it does not matter. Back on the issue of municipal bonds in my IRA--I don't have much experience with municipal bonds. One concern I have is that some cities may have to file bankruptcy--how do you tell which munis are safest?
First, it's good to read this report from Moody's. They update it every few years, but the thrust is primarily that defaults in the muni space are extremely rare. Stick to investment grade, and you would be hard pressed to be able to pick one that will default. Carefully review Exhibit 23 on Page 23:
https://www.atlasca.com/wp-content/uploads/2019/02/Moodys-default-study-1970-2017.pdf
So, the first reference point is going to be the Moody's/S&P ratings. If you are looking at AAA rated bonds, it's highly improbable that the municipality would be filing for bankruptcy protection. By the same reasoning, without doing any further research, you're going to want to stay away from anything near or below the cutoff for investment grade (Baa3/BBB-). Moody's, S&P, and Fitch have been fairly aggressive in lowering municipal bond ratings over the past few weeks.
Next, you're going to want to understand exactly what is funding/backing that municipal bond? Is it a General Obligation bond backed by full faith and credit of the municipality, with unlimited ad-valorem tax authorization? Is it a moral obligation bond that depends on annual appropriation, which is not necessary required? Is it a revenue bond which has absolutely nothing to do with the tax authority (e.g. a water system revenue bond, where covenants require setting rates to provide a mandated debt coverage ratio)? Is the municipal bond issue insured? Are reserve funds required? Is there some other entity on the hook to step in and provide funding should the municipality default? Many possible parameters come in to play here, and so you need to be very aware of the terms of the bonds you are considering. All of these details are addressed in the official statements, which are available at
https://emma.msrb.org
Now, beyond all of that, if you're going to make a more educated determination of potential for bankruptcy, you're going to need to get your hands dirty and dig in to the annual audited financials, which are also available on
https://emma.msrb.org . As when you analyze a company for possibly investing in the stock, you're going to want to review the balance sheets and net position, focusing on the debt coverage ratio. Then, over to the income statements - are revenues and profit increasing (rising net position) over time, or is the municipality and local economy on the decline? One point on the financials - generally, they file them a year after the books are closed on their fiscal year. Very different from public corporations which generally file within 4 to 6 weeks after the end of quarter. So, when you review the financial statements, you will have to go to other sources to extrapolate the economic conditions which followed end of the most recent prior fiscal year filed. This may entail going to the municipality's website, googling, and reviewing news.
In general, although there is renewed discussion of the potential for municipalities to file for bankruptcy protection en masse, the likelihood is actually quite low. If the municipality already had a borderline investment grade rating, maybe it's possible. However, even in that case, it's doubtful that it would happen any time near-term. There would first be downgrades and other red flags. Also, understand, like the federal government, most municipalities are in a position where they can borrow additional funds. The Federal Reserve has indicated they will also be buying municipal bonds directly from issuers to provide liquidity. Further, interest rates are still near all-time lows - it is still a very good environment for borrowing at low rates, and calling higher rate municipal bonds which are outstanding.
The municipal bond market goes through these gyrations and questions every so often, and it's always proven to be resilient and concerns blown way out of proportion. Again, refer to the Moody's report from 1970 through 2016 - there's been quite a few economic cycles during that period.