,

This Government Bond Insures Against Failure

,
The first-ever environmental impact bond gives an agency some of its money back if its idea doesn't pan out.
BY  | NOVEMBER 10, 2016

As the drive for accountability in government spending increases, many are looking for ways to keep from paying the full price for programs that don't work.

In Washington, D.C., that desire has led to the first-ever environmental impact bond, issued this fall by DC Water, the city's water and sewer authority. The $25 million bond will pay for new, green infrastructure like rain gardens and permeable pavement to reduce stormwater runoff.

But if the projects don't work as expected, that's where the new financing structure comes in. Under the terms of the bond, which DC Water sold directly to Goldman Sachs Urban Investment Group and the nonprofit Calvert Foundation, the utility stands to get a multimillion discount on its total borrowing costs if the project doesn't meet a certain threshold.

It's essentially an insurance policy on the project's effectiveness. Here's how it works: After five years, the new infrastructure will be evaluated. If stormwater runoff isn't reduced by at least 18.6 percent, investors will owe DC Water a $3.3 million "risk share" payment. The payment represents a near-full refund of the 3.43 percent interest rate payments DC Water made during the first five years of the bond. After that, the bonds would likely be refinanced into 25-year bonds. DC Water would also drop green infrastructure projects and go back to so-called gray ones (like pumps and water tunnels) to reduce runoff.

,

Missouri Passes Nation's First-Ever Ban on Services Sales Taxes

,
As states increasingly try to tax services like Netflix and yoga, Missouri voters have decided to keep that from ever happening. How that will impact consumers is unclear.
BY  | NOVEMBER 9, 2016

As more governments look to expand their sales tax to services like Netflix and yoga, Missouri has become the first state to pass a ban on doing so.

With nearly all precincts reporting, voters approved the ban Tuesday 58 percent to 42 percent, persuaded by the argument that the measure was designed to protect the state's middle class and lower income earners.

The sales tax is generally seen by economists as regressive, meaning it places a bigger burden on low-income families because it takes a bigger chunk of change from their income.

“The time was right to make a stand," said Scott Charton, a spokesperson for the ballot measure's backers. "This is a victory for Missouri’s hard-working taxpayers and their families."

Arkansas, California Voters Approve Spending on Mega Projects

In an anti-debt climate, voters in the two states cleared the way for spending on major economic development projects.
BY  | NOVEMBER 9, 2016

In the post-recession era, "debt" is a four-letter word. State debt levels as a whole have been stagnant in recent years and, in 2014, actually recorded the first decline in the 28 years Moody's Investors Service has been tracking them.

It's in this climate that voters in Arkansas and California have cleared the way for more spending on mega projects that could be economic development boons in those states.

In Arkansas, voters overwhelmingly passed a ballot initiative that eliminates the state's current 5 percent cap on debt related to economic development projects. Proponents of Arkansas’ Issue 3, who included Gov. Asa Hutchinson, want the cap lifted so the state can be more competitive in attracting new corporations by helping fund mega projects. Voters easily approved the measure, 65-35.

In California, which has one of the highest taxpayer debt burdens in the country, the results were much closer. Voters narrowly rejected a proposal, 51-49, that could have derailed two of Gov. Jerry Brown's legacy projects. Prop. 53 would have limited the state's ability to issue debt for major projects by requiring voter approval to issue more than $2 billion in revenue bonds.

,

Pleas for More Education Funding Fall Short on Election Day

,
Voters in two states rejected measures that would have raised taxes -- either for consumers or corporations.
BY  | NOVEMBER 9, 2016

Voters in two financially-struggling states have struck down proposed tax increases that would have given more much-needed funding to education.

Public education was one of the biggest casualties of the Great Recession. Nearly a decade since it started, nearly half of states are still providing less general funding for schools than they were the year the economy tanked. But the rejections on election night reflect a feeling among taxpayers that governments are punting on a problem by passing on costs to them, rather than making their own difficult decisions.

In Oregon, which is facing a $1.3 billion deficit, voters shot down a proposal to impose a tax hike on corporations with more than $25 million in annual sales in the state. Opponents, largely corporations, called it a sales tax in disguise because they warned businesses would pass on the costs to consumers.

Pat McCormick, a spokesman for the campaign to defeat the tax, told the The Oregonian/OregonLive that Measure 97 "fell of its own weight when people understood what it would do."

Bilingual Education Will Make a Comeback in California

The state, which has more English-language learners than any other, restricted bilingual education in the '90s. Voters are bringing it back.
BY  | NOVEMBER 9, 2016

Nearly two decades after voters made California one of the most restrictive states for bilingual education in public schools, residents on Tuesday reversed that decision.

In California -- which has the nation's highest rate of students who speak a non-English language at home -- fewer than 5 percent of public schools now offer multilingual programs. But by approving Proposition 58, school districts can now offer regular dual-language programs.

In 1998, voters approved Prop. 227, a law passed amid anti-immigrant fervor that said students whose first language isn't English can only take one year of intensive English instruction before transitioning to English-only classes. Parents who wanted bilingual classes for their kids beyond that had to sign a waiver each year.

Prop. 58 essentially repeals the waiver system but keeps intact the part of the law requiring proficiency in English. It cruised to victory Tuesday night by a nearly three-to-one margin.

Facing 652% Interest Rates, South Dakota Voters Regulate Payday Lending

They joined the growing number of states that regulate the industry that critics say traps poor people in a cycle of debt.
BY  | NOVEMBER 9, 2016

In South Dakota, where payday loan interest rates average a whopping 652 percent and are among the highest in the nation, voters have struck back by approving a 36 percent rate cap.

With more than half of precincts reporting Tuesday night, results showed voters approved the move to regulate the industry by a margin of three to one. More than a dozen other states have enacted a similar cap on loan interest rates.

Critics of the payday industry say lenders prey upon low-income borrowers who are unable to access financing from mainstream banks. These borrowers, they claim, easily get trapped in 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.

The push for the rate cap was led by South Dakotans for Responsible Lending, which also fended off a rival measure placed on the ballot more recently and backed by the payday lending industry. That measure proposed an 18 percent cap -- unless the borrower agreed to a higher rate. Opponents said the measure was intentionally misleading and would have essentially legalized sky-high interest rates for payday borrowers in South Dakota.

Voters Give Georgia's Plan to Take Over Failing Schools an "F"

As other states launch similar plans to improve education, Georgia is back to the drawing board.
BY  | NOVEMBER 9, 2016

Georgians have rejected Gov. Nathan Deal's plan to take over chronically failing schools amid concerns that the proposal was too vague and alienated local officials.

The ballot measure, which would have led to a new state agency with its own state school superintendent appointed by the governor, failed by a 3-to-2 margin.

The result was largely expected as polling showed public opinion moving against the idea in recent months.

Lisa-Marie Haygood, president of the Georgia PTA, celebrated with other opponents of the measure on Tuesday night. Opponents also included teachers, school boards and former Atlanta Mayor Andrew Young.

“We did it,” Young told the Atlanta Journal-Constitution. “We all wanted to stop a bad law from taking effect.”

,

New Jersey Voters Refuse to Build Casinos Outside Atlantic City

,
With Atlantic City in financial crisis because of casino closures, the state's voters aren't willing to take any more gambles.
BY  | NOVEMBER 8, 2016

Atlantic City will keep its monopoly on New Jersey's gambling industry. Voters overwhelmingly rejected a ballot measure that would have added two new casino sites in the northern part of the state.

The results are a rare win for the struggling seaside resort town, which has met repeated disappointment in recent years as casinos have closed and pushed the city into a fiscal crisis.

In the weeks leading up to the vote, polling showed the measure headed for defeat. With about half of precincts reporting on Tuesday night, results showed the referendum failing 78 percent to 22 percent.

Although the measure said about one-third of any new casino revenue would have gone to Atlantic City for 15 years for economic revitalization, opponents said they doubted the revenue-sharing proposal would generate enough money to make a difference. Opponents included casino worker unions and Atlantic City-area stakeholders.

, , ,

The Week in Public Finance: NYC's $3 Billion in Giveaways, Weak Revenues and Jacksonville's Pension Fix

, , ,
A roundup of money (and other) news governments can use.
BY  | NOVEMBER 4, 2016

Why New York City Gave Up $3 Billion in 2016

New York City is the first major government this year to release what it gives up in economic development-related tax incentives to corporations, following new financial reporting requirements. In its annual financial report, the city disclosed that it waived more than $3 billion in potential tax revenue in 2016 alone, mostly in uncollected property taxes.

The tax abatements represent a little under 4 percent of the city’s nearly $80 billion in general fund revenue in fiscal 2016, which ended on June 30.

The most expensive abatement was for the commercial conversion program, which cost nearly $1.3 billion in forgone revenue last year. The program encourages new housing in the city by offering a property tax discount on new construction or on commercial space that was converted into residential housing. Developments have to meet certain requirements, like reserving one-fifth of the units for affordable housing.

Georgia's Plan to Take Over Failing Schools Faces Long Odds

Opposition to the proposal has swelled in recent weeks as the state tries to imitate Tennessee's Achievement School District.
BY  | NOVEMBER 4, 2016

Georgia Gov. Nathan Deal wants to join a burgeoning movement that would allow a state takeover of chronically failing schools. But with less than a week left before Georgians vote on the proposal, he faces an uphill battle as the track record of takeovers elsewhere has yielded inconsistent results and public opinion appears solidly against the idea.

The ballot proposal asks whether the state should be allowed to “intervene” to improve “chronically failing” schools. If approved, it would trigger legislation passed last year by lawmakers that creates a new state agency with its own state school superintendent appointed by the governor.

This superintendent would oversee the so-called Opportunity School District, which could take over up to 20 new schools per year and govern no more than 100 schools at any one time. The schools eligible are those that have earned an “F” on the state’s accountability system three years in a row

, ,

The Week in Public Finance: Petitioning for Bankruptcy, Lost Airbnb Revenue and Downgrading New Mexico

, ,
BY  | OCTOBER 28, 2016

'Put Bankruptcy on the Ballot!'

Activists in financially beleaguered Scranton, Pa., are petitioning for a ballot initiativethat would let residents decide if the city should file for bankruptcy. It’s a first-of-its-kind petition and reflects the ongoing frustrations of a city that's been "fiscally distressed" for two decades.

Scranton is one of Pennsylvania’s Act 47 cities, which designates it as fiscally distressed and opens it up to aid and other resources from the state. The designation also means that the city must comply with certain fiscal requirements, such as developing a recovery plan.

But Act 47 has had its problems, the biggest being that it doesn’t seem to provide enough oversight.

,

To Limit Debt or Make It Limitless? 2 States’ Voters Will Decide.

,
In an anti-debt climate, one state aims to rein it in while another tries to uncap it.
BY  | OCTOBER 27, 2016

In the post-recession era, "debt" is a four-letter word. State debt levels as a whole have been stagnant in recent years and, in 2014, actually recorded the first decline in the 28 years Moody's Investors Service has been tracking them.

It’s in this climate that voters in two states are considering nearly opposite proposals on debt.

California, which has one of the highest taxpayer debt burdens in the country, will decide whether to limit lawmakers’ ability to issue debt for major projects. Prop. 53 would require voter approval to issue more than $2 billion in revenue bonds.

In Arkansas, a ballot initiative proposes making it easier for the state to incur more debt. Issue 3 would eliminate the state's current 5 percent cap on debt related to economic development projects.

Each state's history with bond debt has a lot to do with these conflicting proposals

,

The Week in Public Finance: School Funding's Lost Decade, Teacher Pension Pressures and More

,
BY  | OCTOBER 21, 2016

A Lost Decade for Public School Kids

New data this week shows that nearly half of all states are providing less in per-pupil funding today than they were before the recession in 2008. Taking inflation into account, eight of the 23 states have cut funding per student by about 10 percent or more, according to a report by the Center on Budget and Policy Priorities (CBPP).

What's more, five of those eight -- Arizona, Kansas, North Carolina, Oklahoma, and Wisconsin -- have cut education funding while also cutting income taxes, resulting in tens or hundreds of millions of dollars in lost revenue each year.

,

In Need of Education Funding, States Look to Customers and Corporations

,
Tax-raising ballot measures this fall showcase the political power of corporations.
BY  | OCTOBER 21, 2016

Public education was one of the biggest casualties of the Great Recession. Nearly a decade since it started, nearly half of states are still providing less general funding for schools than they were the year the economy tanked.

Two states, however, are asking voters to boost education funding this fall -- but they differ on who should pay for it: customers or corporations.

,

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

,
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.

But to offset the tax increase, the legislature also approved tax reductions.

,

City Revenues Expected to Finally Recover From Recession

,
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.

, ,

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

, ,

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.

,

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

,
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.