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City Revenues Expected to Finally Recover From Recession

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But cities are still dealing with slow revenue growth and rising costs, according to a new report.

BY  | OCTOBER 14, 2016

 

City revenues have struggled to get back to pre-recession levels. But things may finally be looking up.

On Thursday, officials announced that they expect city incomes to fully recover by next year -- a decade after the start of the Great Recession.

It’s by far the longest revenue recovery period in more than a generation as the bounce back period after the previous two recessions was done in half the amount of time. Currently, officials estimate that city revenues (accounting for inflation) have reached 96 percent of what they were in 2006, the year before the recession started.

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The Week in Public Finance: New Jersey's Tax Plan, Online Lending Myths and Cities' Recovery

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BY  | OCTOBER 14, 2016

New Jersey: Between a Rock and a Hard Place

Moody’s Investors Service has panned New Jersey’s plan to beef up its transportation funding, mainly because it does so at the expense of other state programs. The legislature this month approved a 23-cent gas tax increase, which will raise approximately $1.2 billion.

Privatization May Be Worsening Inequality

A new study suggests outsourcing government services can disproportionately impact low-income users' finances, health and safety.

BY  | OCTOBER 13, 2016

As state and local governments grapple with fewer resources for things like infrastructure or social services, many of them have opted to contract those responsibilities out to the private sector. But a new report warns that doing so may be widening the gap between the haves and the have-nots.

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The Week in Public Finance: Wells Fargo's Punishment, a Surprising Study and Kansas' Forecasting Blues

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BY  | OCTOBER 7, 2016

Governments Punish Wells Fargo

Some governments are temporarily cutting ties with Wells Fargo thanks to a scandal involving thousands of unauthorized accounts.

This week, Illinois and the city of Chicago announced they're joining California and suspending their relationship with the bank for at least one year. Meanwhile, Massachusetts, Oregon and the city of New York are reviewing their business ties with the firm.

In California, the Battle Over Bilingual Education Is Back

The state has more English-language learners than any other and also some of the country's most restrictions on bilingual education. November could change that.
BY  | OCTOBER 6, 2016

As research shows the benefits of a bilingual education, dual-language immersion programs are becoming more popular and not just for English-language learners. But in California -- which has the nation's highest rate of students who speak a non-English language at home -- getting a bilingual education is harder than in most states.

That could change in November, though, as voters have a chance to repeal a 1998 law that passed amid anti-immigrant fervor and severely limited access to bilingual education in the state. If approved, Prop. 58 would allow school districts to offer regular dual-language programs.

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Houston’s Plan to Cut Pension Costs in Half Overnight

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Mayor Sylvester Turner is garnering praise for his proposal's comprehensiveness and balance.
BY  | SEPTEMBER 29, 2016

Earlier this month, Houston Mayor Sylvester Turner released his outline for fixing the city's underfunded pension system, an issue that earned the city a credit rating downgrade in March.

Observers say the plan is the best effort yet at solving a problem that has eluded past city officials. If approved, the proposal would immediately cut Houston's unfunded liability by $3.5 billion -- or nearly in half -- while putting Houston on a path to pay off the rest of its pension debt over the next generation.

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The Week in Public Finance: Troublesome Sports Arenas, Buying Muni Bonds and California's Tenuous Recovery

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BY  | SEPTEMBER 23, 2016

Nebraska Town Hit With 'Superdowngrade'

The tiny town of Ralston, Neb., was surprised by a seven-notch "superdowngrade" this week when its arena bonds were sent hurdling into junk rating territory. S&P Global Ratings said it moved the rating from A+ to BB because of the financial strain the building is placing on the city of roughly 6,000 people.

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The Week in Public Finance: Pensionomics, Hidden Bank Loans and Private Equity Fees

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BY  | SEPTEMBER 16, 2016

Do Pensions Help the Economy?

A new study on how pensioners spend their money will likely give a boost to those who want to keep traditional, defined benefit pension plans in the public sector.

Published this week by the nonprofit National Institute on Retirement Security (NIRS), the analysis on pension retiree spending in 2014 estimates it resulted in $1.2 trillion in total economic output. The total is based on about a half-trillion in benefits paid to public and private pensioners in 2014. State and local pension benefits account for about half ($253 billion) of those benefits.

Pension Crisis: Could Buyouts Be a Solution?

State and local governments are trying unconventional ways to fund their pension liabilities, such as offering lump-sum cash payments to employees.
BY  | SEPTEMBER 15, 2016

When it comes to chipping away at pension liabilities, there aren’t a lot of options. In some places, lawmakers can freeze cost-of-living increases to pension payments or move back retirement dates for existing employees. But that’s not legal everywhere. So the majority of pension reforms in the past decade have targeted new employees and focused on controlling the growth of future liabilities.

But some places are getting more creative.

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The Week in Public Finance: Unsustainable Health-Care Costs, an Oil State Not in Crisis and More

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BY  | SEPTEMBER 9, 2016

Retiree Health-Care Liabilities Are Dramatically Increasing

State governments’ cost of keeping all their promises to retirees is “unsustainable.” That’s the conclusion of a report this week by S&P Global Ratings that looked at the growth in total retiree health-care liabilities across state governments.

In just two years, so-called "other post-employment benefit" (OPEB) liabilities have increased 12 percent, to $554 billion for states alone. This reverses a trend of stable to declining liabilities found in S&P’s past two annual surveys.

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Is Ending Atlantic City's Casino Monopoly Worth the Gamble?

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The closure of casinos in Atlantic City has left the municipality in financial crisis. Now New Jersey wants to build more in other places.
BY  | SEPTEMBER 8, 2016

A proposal to end Atlantic City’s casino monopoly in New Jersey would spell the end for the struggling seaside resort town. At least that's what opponents of the idea say.

Backers of the ballot measure, however, say it's the city's best hope for revitalizing its downtown and diversifying its economy beyond gaming.

This November, New Jersey voters will decide whether to allow two new casinos to be built in the state. About one-third of any new casino revenue would go to Atlantic City for 15 years for economic revitalization.

The vote comes as Atlantic City, once the East Coast’s gaming capital, has struggled in the face of increased competition in neighboring states. In the past 15 years, more than a dozen casinos have opened in Maryland, New York and Pennsylvania

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The Week in Public Finance: Mega-Subsidies Math, a Comeback for Bond Insurance and More

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BY  | SEPTEMBER 2, 2016

Megadeals Don’t Add Up

When it comes to economic development, spending more often results in a smaller return.

Looking at more than 170 economic development "megadeals" made in recent decades, a new report finds that states and localities spend more than $658,000 per job on average. By contrast, “most workforce development programs cost only a few thousand dollars per job, and studies find they pay off well,” said Thursday's report by Good Jobs First, which tracks government subsidies.

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Would Eliminating Taxes on Services Help or Hurt the Poor?

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As states increasingly look to tax services, Missouri voters can be the first to keep that from ever happening. How that would impact consumers is unclear.
BY  | AUGUST 31, 2016

States have struggled to keep up the same revenue growth as they experienced before the recession. One big reason is that their earnings from sales taxes are declining. That's because these days, consumers are spending far more on services -- most of which aren’t taxed -- than goods, which are.

To remedy the situation, lawmakers have tried and had varying degrees of success expanding the sales tax to services. Massachusetts passed a tax on the cloud and quickly repealed it after the tech industry complained. Pennsylvania enacted the so-called "Netflix tax" on streaming video services. Washington, D.C., added a long list of services to be taxed: yoga, tanning and bowling, to name a few.

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The Week in Public Finance: Pensions' Funding Gap, An Assault on Fees and More

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BY  | AUGUST 26, 2016

Most Pensions Falling Behind

A new analysis of state public pension plans this week shows that only one in three states are actually on a path to reduce their unfunded liabilities.

The report, by the Pew Charitable Trusts, used a new metric called net amortization, which essentially measures whether a pension plan’s accounting assumptions and payment schedule are holding up over time. Only 15 states are achieving positive amortization, according to Pew. In other words, they're following contribution policies that are sufficient to pay down pension debt. The remaining 35 states are facing negative amortization, or are following contribution policies that allow the funding gap to continue to grow.

Like the Industry, Payday Loan Ballot Measures Mislead Voters

In South Dakota, two seemingly identical initiatives in November would have vastly different outcomes for consumers' interest rates.
BY  | AUGUST 24, 2016

Annual interest rates on payday loans in South Dakota are among the highest in the nation -- a whopping 652 percent on average. Yet the business is booming there with nearly 100 stores across the sparsely populated state.

Critics of the industry say lenders prey upon low-income borrowers who are unable to access financing from mainstream banks. These borrowers, they claim, easily get trapped into a cycle of debt. Payday lenders, however, argue that they fill a critical hole in the economy by allowing people with poor credit to get emergency loans.

South Dakota voters have the chance to regulate the industry in November. But two seemingly identical proposals that would have vastly different outcomes are complicating the effort to rein in high interest rate

Would Eliminating Taxes on Services Help or Hurt the Poor?

As states increasingly look to tax services, Missouri voters can be the first to keep that from ever happening. How that would impact consumers is unclear.
BY  | AUGUST 31, 2016

States have struggled to keep up the same revenue growth as they experienced before the recession. One big reason is that their earnings from sales taxes are declining. That's because these days, consumers are spending far more on services -- most of which aren’t taxed -- than goods, which are.

To remedy the situation, lawmakers have tried and had varying degrees of success expanding the sales tax to services. Massachusetts passed a tax on the cloud and quickly repealed it after the tech industry complained. Pennsylvania enacted the so-called "Netflix tax" on streaming video services. Washington, D.C., added a long list of services to be taxed: yoga, tanning and bowling, to name a few.

But in Missouri this fall, voters could put an end to all such efforts in their state. A first-of-its-kind proposed constitutional amendment would ban Missouri lawmakers from ever expanding the sales tax to services

The Story Behind San Bernardino’s Long Bankruptcy

Unlike Detroit or Stockton, this California city’s insolvency can’t be blamed on debt or pensions.

BY  | AUGUST 25, 2016

Four years ago this month, San Bernardino, Calif., filed for Chapter 9 protection. Today, it’s still in Chapter 9 -- the longest municipal bankruptcy in recent memory.

Why so long? Many blame it on San Bernardino’s lengthy and convoluted charter, a document that gives so much authority to so many officials that it’s completely ineffective. “It gets everybody in everybody else’s business,” said City Manager Mark Scott. “And it keeps anybody from doing anything.”

As a result, officials have spent the last two years trying to ensure the current charter is not part of the city’s future. A specially appointed committee is proposing to completely overhaul it.

At issue is that unlike many California cities that either have a strong mayor/council form of management or a strong city manager government, San Bernardino’s is a hybrid, doling out authority to both sides. For example, fire and police chiefs are appointed by the mayor and subject to approval by the council, but report to both the mayor and city manager. This confusing structure played a role in the city’s road to insolvency. “You’d have to say,” Scott said, “the charter made it almost impossible to succeed.”

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SEC Censures 71 Governments for Lack of Fiscal Transparency

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Financial timeliness is a problem that's 'widespread and pervasive,' the SEC said.
BY  | AUGUST 25, 2016

More than 70 state and local governments have been censured for failing to disclose certain financial information about bonds they sold to investors, the U.S. Securities and Exchange Commission announced Wednesday.

The SEC reached settlements with 71 governments across 45 states as part of a voluntary self-reporting program called the Municipalities Continuing Disclosure Cooperation Initiative (MCDC). Only five states -- Arizona, Florida, Nevada, Oregon and Rhode Island -- had no governments or government entities censured.

The number of citations show the problem is “widespread and pervasive,” said SEC Enforcement Director Andrew Ceresney in a statement.

MCDC is part of the commission's push for better transparency in the municipal market. Under the program, governments had to review documents associated with bonds they issued over the past five years. If they found anything amiss -- be it that they failed to disclose a previous annual financial report or didn't notify investors of a credit rating downgrade after the sale -- they could voluntarily come forward and obtain favorable settlement terms.

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The Week in Public Finance: Demanding Better Government Disclosure, Uneven Recoveries and a Party at the Pump

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A roundup of money (and other) news governments can use.
BY  | AUGUST 19, 2016

More Disclosure Pressure on Munis

Investors in the municipal market have long demanded better access to governments’ financial information, particularly since the 2008 financial crisis. But tired of waiting, an industry group stepped up its calls for federal regulators to intervene this week in a letter to the Securities and Exchange Commission (SEC).

“The failure to publicly disclose bank loans to all market participants can lead to unexpected rating changes that negatively impact bond pricing,” said Lisa Washburn, chair of the National Federation of Municipal Analysts (NFMA). The group is calling for governments to disclose all interim but relevant information, such as an approved fiscal year budget and tax receipts, as well as clearly report any long-term debt obligations.

The letter also suggests that the SEC adopt the authority to ensure that municipalities file their financial disclosures in a timely manner. Currently, there is no enforced deadline, and governments typically file annual reports anywhere from six months to a year after the close of a fiscal year.

The Takeaway: The problem from an investor point of view is that the more troubled an issuer is, the more likely it will delay releasing relevant financial information. Take Puerto Rico, which is essentially out of cash and only recently issued its annual financial report for the 2014 fiscal year.

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The Week in Public Finance: Why Some Pensions Are Falling Behind, Stress Testing States and More

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A roundup of money (and other) news governments can use.
BY  | AUGUST 12, 2016

Pollyannaish About Pension Returns

Houston is fighting a losing battle with its pension system: The unfunded liability between Houston’s three plans totals at least $3.9 billion, up from $212 million in 1992. Meanwhile, pension costs as a percentage of the city’s revenue have doubled since 2000 and were one of the reasons behind a recent credit rating downgrade.

A new report from Rice University’s Kinder Institute identifies two main culprits for the funding crisis: Even though the city is now paying its full pension bill, it’s still not enough to chip away at the unfunded liability, and the three plans have assumed investment returns of between 8 and 8.5 percent -- that's higher than the national average and even higher than their own recent experience.

The report's authors looked at examples of pension changes in other major cities and highlighted potential solutions, including raising the cap on the city’s revenues so it can generate more money for pensions; increasing employee contributions; and reducing cost-of-living payments to retirees. “All of these options would generate different amounts of funding in different time frames,” the report said. "[But] none would likely solve the problem alone.”