Category Archives: State & Local Finance

Default Study: 2017 U.S. Public Finance Transportation Default Study And Rating Transitions

Source: S&P Global Ratings, November 19, 2018
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Although ratings in the U.S. public finance (USPF) transportation sector tend to be lower than in other areas of U.S. municipal finance, the sector is among the most stable. In addition, transportation ratings are less likely than other USPF ratings to be raised, reflecting economic and competitive pressures.

Point/Counterpoint: Should Governments Subsidize the Construction of New Professional Sports Stadiums?

Source: Journal of Policy Analysis and Management, Volume 38 Issue 1, Winter 2019
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Articles include:
Should the Construction of New Professional Sports Facilities Be Subsidized?
Source: Brad R. Humphreys, Journal of Policy Analysis and Management, Volume 38 Issue 1, Winter 2019Is There a Case for Subsidizing Sports Stadiums?
Source: Victor Matheson, Journal of Policy Analysis and Management, Volume 38 Issue 1, Winter 2019
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The case in favor of subsidizing large sports facilities is much harder to make than the one against. The peer-reviewed literature typically finds little or no evidence that the construction of new professional sports facilities results in significant increases in any type of measurable economic activity including personal income, wages, employment, tax revenues, or tourist spending (Coates & Humphreys, 2008). In addition, the privately funded consulting reports that frequently accompany stadium proposals, and which invariably tout large economic benefits from subsidized stadiums and arenas, have been shown to suffer from significant theoretical flaws that make their conclusions suspect at best, and simply false at worst (Crompton, 1995). In fact, some academic economists suggest, only partially in jest, that if one wants to know what the true economic impact of a stadium project will be, simply take whatever number the consultants project and then move the decimal point one place to the left.

However, in specific circumstances, it may be possible to justify some level of public subsidies for the construction of sports venues. This should not be interpreted to mean that the optimal level of public spending is the roughly two-thirds of average stadium construction costs that taxpayers paid for during the period from 1990 through 2008 or cwn the roughly one-third of stadium construction costs that taxpayers paid for on average since the Great Recession in 2008. Rather, the only claim being made here is that the optimal level of funding may be higher than zero percent…..

2019 State Business Tax Climate Index

Source: Jared Walczak, Scott Drenkard, Joseph Bishop-Henchman, Tax Foundation, September 26, 2018

The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement…..

Municipal Brief: New York City

Source: S&P Global Ratings, November 19, 2018
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The City of New York’s recently released 2018 comprehensive annual financial report confirms expected year-end results with those identified in the 2019 adopted budget. The audit presents a story of continued economic strength supporting strong revenue growth, outpacing higher-than-inflation expense growth, thereby supporting a slow-but-steady increase in the city’s reserves.

Rising U.S. States’ OPEB Liabilities Signal Higher Costs Ahead

Source: S&P Global Ratings, November 28, 2018
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Other postemployment benefit (OPEB) liabilities, which consist primarily of retiree health care plans, are a growing concern for certain states’ credit quality and require attention to control higher future costs. Total unfunded state OPEB liabilities have increased significantly for the third year in a row, according to S&P Global Ratings’ latest survey of U.S. states.

Local Government – US: 2019 Outlook Remains Stable With Tax Revenue To Grow Modestly

Source: Sam Feldman-Crough, Gregory Max Sobel, Eva Bogaty, Naomi Richman, Leonard Jones, Alexandra S. Parker, Gail Sussman, Moody’s Investors Service, Outlook, December 5, 2018
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The stable outlook is underpinned by the largely steady and predictable growth in property taxes over the outlook horizon. Most cities, counties and school districts have financial flexibility from healthy fund balances to deal with unforeseen challenges. ….

Water And Sewer Utilities – US: 2019 Outlook Stable As Debt Service Coverage Strengthens But Capital Needs Rise

Source: Ryan Patton, Rachel Cortez, Naomi Richman, Alexandra S. Parker, Moody’s Investors Service, Outlook, December 5, 2018
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The stable outlook for the water and sewer utility sector incorporates revenue growth that will continue to strengthen debt service coverage and liquidity, and the ability to meet operating costs. ….

States – US: 2019 Outlook Remains Stable With Growing Revenue And Adequate Reserves

Source: Kenneth Kurtz, Nicholas Samuels, Emily Raimes, Timothy Blake, Moody’s Investors Service, Otulook, December 6, 2018
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The outlook for US states in 2019 remains stable, reflecting healthy economic and revenue trends, which have strengthened balance sheets and improved most states’ ability to afford fixed costs….

Public power electric utilities – US: 2019 outlook stable, aided by sound cost recovery, adaptability to clean energy shift

Source: Dan Aschenbach, A. J. Sabatelle, Doris Hernandez, Sarah Lee, Kevin G. Rose, Eriq Alexander, Thomas Brigandi, Michael Mulvaney, Moody’s Investors Service, Outlook, December 6, 2018
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The outlook for business conditions in the US public power electric utility sector over the next 12-18 months is stable, supported by self-regulated cost recovery, sound financial metrics and a competitive product. Challenges include the transition to clean energy, continuing efforts to reduce greenhouse gas emissions, cybersecurity risks and lower electricity demand, but we think the sector can adapt to them….

State Revenue Volatility and Optimal Reserve Size Are Directly Linked – Comparison of states provides insight into their ability to weather an economic downturn

Source: Mary Murphy & Steve Bailey, Pew Charitable Trusts, November 14, 2018

The amount of money a state takes in fluctuates from year to year, with a range of factors influencing this volatility. Those factors can include specific tax revenue sources, the state’s economic profile, federal budget changes, and unforeseen events such as natural disasters. Although each state’s revenue swings may be unique, all face the challenges associated with managing these ups and downs.

Policymakers can use reserves to help offset revenue declines during down periods, such as recessions. But how much a state should hold in its reserves—its savings target­—can vary as well, and for many reasons. For example, leaders in one state might have a higher risk tolerance than their peers, meaning they are more willing to save less than enough for the next downturn. Some may more routinely use other budget tools, such as raising revenue or cutting spending, to close a budget gap. These alternative approaches can reduce reliance on reserves…..