Public Money

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

Can the ‘Sharing Economy’ Reduce Income Inequality?

So far, 2016 has been framed by unfolding fiscal tragedies in a number of cities -- Flint, Mich.; Ferguson, Mo.; and East Cleveland, Ohio, come to mind. Plagued by high poverty, rising crime rates and diminished sources of revenue, these cities are examples of the increase in income inequality among U.S. municipalities.

Just as the richest Americans have raced ahead of working-class Americans, there are haves and have-nots among cities, too. It got me thinking: What role should states play in all of this? And more specifically, are there ways to use the “sharing economy” to narrow the disparity gap? READ MORE

3 Ways to Take P3s to the Next Level

Public-private partnerships are the future of public finance. That little sentence can light a fire in the world of public money, which is struggling to find the wherewithal to pay for infrastructure.

For a while now, public-private partnerships (P3s), which let a private entity handle everything from the development and operation of a public project to its financing, have become a standard option to replace roads, bridges, wastewater treatment facilities and other core infrastructure. Recently, there’s been talk of using P3s for the reimagining of such icons as New York’s Penn Station and LaGuardia Airport, Chicago’s “L” train, and the Los Angeles Convention Center.  READ MORE

Redefining ‘Special Districts’ Could Have Big Taxing Consequences

Special districts spend more public money than all city governments combined, much of it raised through borrowing in the municipal bond market. But proposed new regulations from the Internal Revenue Service could make it harder for special districts to borrow that money tax-free. And that could be very expensive for states and localities.

All totaled, the Census Bureau counts 39,000 special-purpose district governments, which are usually created to address -- and raise revenue for -- specific functions, such as airports, libraries, wastewater, mosquito control and so on. They exist separately from general-purpose governments, and may cross the borders of cities, counties and states. READ MORE

The Great Recession's Lessons on Rainy Day Funds

So far, 2016 has been a year of tenuous economics. Record losses in the stock market. Slow job growth. Financial turmoil in China and Europe. For the first time since 2007, state budget planners are talking about the next recession.

That conversation naturally turns toward rainy day funds. These funds -- sometimes called “budget stabilization funds” or “counter-cyclical stabilization policies” -- are one of the few tools states can deploy to protect their budgets when recessions cause revenues to drop. The challenge, of course, is that putting money in a rainy day fund means limiting the state’s spending on highways, education, Medicaid and other needs. As such, one of the biggest challenges of state government finance is finding a rainy day fund amount that’s not too small, but not too large. READ MORE