The Patriot-News: Cities Refinanced Debt at Historic Levels, Study Finds
It's no secret that these are rough times for America's largest cities. From Stockton, Calif., to Detroit and Harrisburg, urban leaders are finding their budgets strained by persistent revenue shortfalls and an increased demand for public services.
A report released earlier this month by the Pew Charitable Trusts details the steps that city governments are taking to relieve fiscal pressures even as they try to kickstart the local economy.
In the past, cities issued what are known as "refunding bonds," a mechanism that helped them refinance existing debt, thus saving money over the long-haul.
But the tepid economic recovery, combined with federal aid to states and localities provided in response to the Great Recession, has influenced those borrowing practices, the report found.
- Collectively, the 30 cities examined the Pew Report issued $13.9 billion in refunding bonds in 2012, the largest amount in two decades.
- For the first time since 1991, these issuances accounted for more than half (57 percent) of the total bonds originated by these cities.
- In 2011, new money bond issuances in the 30 cities were at their lowest level in more than 20 years ($10.4 billion), when adjusted for inflation. These issuances remained low in 2012, increasing by just $200 million.
- The Pew study further concluded that the national fiscal and economic policy responses to the Great Recession changed the way cities used debt to finance new projects, compared with past recoveries.
- Federal policy interventions through ARRA (AKA The Stimulus) — notably the Build America Bonds program and direct infrastructure grants to local governments — created incentives for cities to undertake projects during 2009 and 2010 that had been planned for future years.
- Even though these federal policies cleared out a number of capital projects and lowered demand for new ones in the ensuing years, the lack of new money issuances among the 30 cities in 2011 and 2012 was probably driven as much or more by revenue challenges as by a shortage of new infrastructure projects, the report found.
Read the full article at blog.pennlive.com.
- American Cities Project