Governors, mayors and finance officers are treading water, awaiting the outcome and impact of a new Washington regime’s vows to slash federal spending and taxes. Meanwhile, state and municipal budgeters and debt managers will need to make intelligent guesses and pay more attention to their rainy-day funds.
Culture wars over environmental, social and governance factors used by pension fiduciaries are in the spotlight, but it’s the municipal bond arena where long-term analysis must trump short-term symbolic politics. Sustainability actually matters to investors.
With a bond issue earmarked for community projects and marketed to individual investors as well as institutional buyers, Chicago is trying to move the needle on social equity. Is it the start of a durable trend, or just a cute public finance anomaly?
If a congressional debt ceiling deadlock persists and capital markets seize up, states and localities will still have to pay their bills. Public financiers need to be ready to adjust their portfolios to establish a liquid cash buffer.
A new federal law will eventually make some data searches and comparisons easier, but implementation will be a challenge. Software vendors will be staking their claims, but public-sector finance associations should take the lead.
Disinflation and economic deceleration will dominate state and local budgets and investments. Cash is king, at least for a while. Payroll costs will outrace revenues. It’s going to be a year for muddling through.
Inflation punished Wall Street and Main Street, and public financiers who ignored it squandered billions. Congress passed two bills important to states and localities. And pensions took a hit, but taxpayers won’t feel that pain for years.
Tax-exempt issuers’ costs have shifted upward dramatically this year as the Federal Reserve has pushed interest rates higher to fight inflation. It’s time to re-strategize debt management programs.
As costs rise, the economy slows and federal grants decline, Tom Kozlik warns that cities, including Philadelphia, may have to adjust the way they manage their finances to prepare for tough times ahead.
The most expensive item on the November ballot will be a general obligation bond measure that could end up being the largest revenue stream in the city’s history, increasing property taxes by $40.91 per every $100,000 in value.
The city approved $1.2 billion in bond money for street repairs, affordable housing developments, a new police station and other projects. But some officials wonder if increasing inflation will force the city to revise its plans.
To combat inflation, the central bank will be raising interest rates and shedding a big chunk of its $8 trillion bond portfolio. Its actions will ripple through the world of state and local finance.
Barring unknowable virus mutation scenarios, state and local fiscal managers have the opportunity to navigate trends and crosscurrents already underway to make better decisions. One factor figures into almost everything: inflation.
Pending municipal finance provisions in the big spending bills before Congress could benefit issuers, investors and taxpayers. To get the best deal, state and local leaders must press their case immediately.
Going into next year, the Fed is likely to throttle back policies that have kept rates near zero. That presents opportunities — and risks. Nobody wants to repeat the local government fiscal disasters of not so long ago.
The city wants to offer $100 million in pension obligation bonds, a move that both lowers pension debt and increases the funds’ earning power by providing more money to invest. But the sale is considered risky.
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