Public Money

Selling Your Sewer’s Story

Every four years the American Society of Civil Engineers (ASCE) deploys a team of experts to grade our national infrastructure. The team analyzes dozens of national data sources to determine the overall condition of our roads, bridges, tunnels and other key infrastructure. Their work is based on a simple concept: When governments invest in infrastructure, the grades improve.

Their most recent Report Card for America’s Infrastructure came out in 2013, and the results were grim. They gave the country’s infrastructure a grade of D+ and said we needed to spend $3.6 trillion just to bring our basic infrastructure back to suitable working condition.  READ MORE

Will Clinton or Trump’s Tax Plans Trickle Down?

During this election season, the presidential candidates have offered up their federal tax reform plans which, depending on who you asked, would either provide much-needed relief for hard-working families or tax America’s middle class out of existence. But there’s an important aspect of the conversation that has been left out. Neither of the candidates have explained how their plans would really affect state and local governments. 

Let me flesh this out. Under that hoary old concept of reciprocal immunity, no level of government should be taxing another government’s essential activities, like, say, financing of public infrastructure -- a critical issue in the decade to come and one the states have increasingly funded. The Congressional Budget Office tells us that public spending on transportation and water infrastructure totaled $416 billion in 2014. State and local governments provided $320 billion of it; the federal government, only $96 billion. According to the Boston Federal Reserve, annual capital spending by state and local governments over the last decade accounted for 12 percent of their total spending. Capital investments account for 14.4 percent of outstanding state and local long-term public debt. READ MORE

A Better Way to Measure Pension Debt's Danger

Last year, I wrote about an emerging theory among investors known as the “new neutral.” The theory holds that for the next several years we’ll see an unprecedented combination of slow economic growth, low interest rates and paltry returns on investments. So far, the new neutral has been spot on. 

To see this theory in action, look no further than state and local pensions. Investment returns have lagged, and as a result, so too have pension fund balances. Pension critics have renewed their calls for reform, saying that pensions are an existential threat to many local governments’ financial health. This is true, but it’s also incomplete.  READ MORE

Airbnb Creates an Affordable-Housing Dilemma for Cities

Home-sharing services like Airbnb are creating an awkward dilemma for cities and counties, especially in areas where housing costs are high. Municipalities are struggling to balance the economic boost from the growth of home-sharing services with the pressing need for affordable housing.

Before we go any further, let’s put the considerable growth of such services into perspective. One study found that 400,000 Airbnb guests who visited New York City in 2012 and 2013 spent $632 million, supporting 4,580 jobs. As compared to tourists staying in hotels, Airbnb guests tended to stay two days longer and spent nearly $200 more at local businesses during their visit. READ MORE

Bias in the Municipal Bond Market

In April, something remarkable happened in the otherwise sleepy world of public money. Orange County, Calif., long considered a problem child in local public finance, announced a plan to return to the municipal bond market.

At the start of the 1990s, the county made some big bets on an early form of financial derivatives -- not unlike those at the heart of the 2008 financial market crisis -- and it lost. It suffered major financial damage and eventually declared bankruptcy. But now the county is looking to borrow once again, and investors are primed to snatch up its new bonds at eye-poppingly high prices.  READ MORE