Category Archives: State & Local Finance

QRATE Quantitative Ratings Estimator

Source: Dan White, Sunayana Mehra, Martin Wurm and Emily Mandel, Regional Financial Review, July 2018
(subscription required)

QRATE is a quantitative ratings estimator designed by Moody’s Analytics to estimate municipal issuer credit quality based solely off of quantitative economic, demographic and financial metrics for a given issuer at a given time. The models cover all 11 sectors of the municipal market and allow users to calculate quantitative QSCORES based off some of the same analyst-adjusted financial data used by Moody’s Investors Service. A QSCORE is a numerical value that can be mapped to a standard letter rating equivalent, as well as estimated probability of default and loss-given-default measures.

Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance

Source: Pengjie Gao – University of Notre Dame, Chang Lee and Dermot Murphy – University of Illinois at Chicago, July 11, 2018, presented at the Brookings Municipal Finance Conference July 17, 2018

From the abstract:
Local newspapers hold their governments accountable. We examine the effect of local newspaper closures on public finance for local governments. Following a newspaper closure, we find municipal borrowing costs increase by 5 to 11 basis points in the long run. Identification tests illustrate that these results are not being driven by deteriorating local economic conditions. The loss of monitoring that results from newspaper closures is associated with increased government inefficiencies, including higher likelihoods of costly advance refundings and negotiated issues, and higher government wages, employees, and tax revenues.

Related:
View Murphy’s slides
View McGranahan’s slides

How closures of local newspapers increase local government borrowing costs
Source: Vivien Lee and David Wessel, Brookings Institution, Up Front blog, July 16, 2018

Local newspaper closures increase local government borrowing costs, according to a paper to be presented at the 2018 Municipal Finance Conference at Brookings. The paper, “Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance,” also finds that local newspapers are especially important in states with low quality governance, and that online media are not acting as sufficient substitutes for local papers.

Pengjie Gao of the University of Notre Dame and Chang Lee and Dermot Murphy of the University of Illinois at Chicago are among the first to examine the effect of reduced local news coverage on local government finance. From 2003 to 2014, the circulation of local newspapers decreased by 27 percent, and statehouse reporters decreased by 35 percent.

Using data on local newspapers and municipal bond yields from 1996 to 2015, the authors compare municipal bond yield spreads for counties with three or fewer local papers before and after a closure, to counties where no local papers closed. Three years after a newspaper closure, municipal bond yields in that county increase by 0.05 to 0.11 percentage points, they find. The authors find similar results when comparing the effect of closures on bond yields between counties with few local newspapers and counties with many papers. They argue that this is because closures in counties with high numbers of local newspapers will probably not affect local news coverage, as other newspapers may fill in any potential information gaps.

RAND Hospital Data Web-Based Tool

Source: RAND, 2018

From the summary:
Medicare-certified hospitals and other institutional providers are required to submit an annual cost report to a Medicare Administrative Contractor. Cost reports contain provider information such as facility characteristics, utilization data, cost and charges by cost center (in total and for Medicare), Medicare settlement data, and financial statement data. The Centers for Medicare & Medicaid Services (CMS) maintains the cost report data in the Healthcare Provider Cost Reporting Information System (HCRIS). The RAND Hospital Data tool is an effort to enhance CMS HCRIS data to make them more accessible and useful to a broad audience of academics, analysts, and hospital executives and their consultants. The tool provides users with data sets that are conveniently packaged and documented and that include value-added fields derived from HCRIS data, such as measures of occupancy and profitability. The goal of the tool is to make analytic tasks easier for those who work regularly with the data and to broaden the set of users.

What It Costs to Run Prisons in Your State

Source: Michael B. Sauter, 24/7 Wall st., July 26, 2018

Nearly 1.5 million Americans were incarcerated in state prisons in 2016. That same year, U.S. states spent about $58 billion to keep these people locked up.

How much each state spends on prisons goes far beyond a simple per prisoner calculation. In fact, there is little to no correlation between the states that spend the most per capita and the states with more prisoners per capita. Instead, variations in state spending boil down to a range of budgetary factors and policy decisions.

Prisons have many expenses related to their main function of confining lawbreakers. In addition to securing the prisoners with infrastructure, technology, and personnel, they have to provide inmates with basic necessities such as food, health care, and even entertainment. On a per capita basis, state prison spending ranges from less than $100 per person to nearly $500 per person. 24/7 Wall st. reviewed the states with the highest and lowest prison spending per person. ….

…. To identify how much each state spends on corrections, 24/7 Wall St. reviewed state prison spending from the National Association of State Budget Officers, as collected by The Sentencing Project, a nonprofit focusing on criminal justice reform. Average annual correctional officer salaries are from the Department of Labor. Incarceration rates and the share of prisoners in private prisons are from The Sentencing Project, and crime rates per 100,000 are from the FBI Unified Crime report. All figures listed are for 2016, with the exception of the private prisoner figure, which is for 2015. ….

Credit Conditions: U.S. State And Local Government Credit Conditions Improve As Economic Growth Picks Up

Source: S&P Global Finance, July 26, 2018
(subscription required)

Midway through 2018, accelerating economic growth is providing a favorable near-term backdrop for credit conditions in the state and local government sectors. According to S&P Global Ratings’ updated baseline forecast, U.S. GDP is on a trajectory to expand by 3.0% in real terms in 2018….

Driven into Debt: How Tickets Burden the Poor

Source: ProPublica and WBEZ, 2018

Parking, traffic camera and vehicle tickets generate millions of dollars in desperately needed cash each year for the City of Chicago. But for the working poor, and particularly for African Americans, paying for tickets can be difficult — opening the door to more fines and fees, and spiraling debt. Drivers who don’t pay what they owe face tough punishments from the city and state that threaten their livelihoods.

Articles include:
Chicago Hiked the Cost of Vehicle City Sticker Violations to Boost Revenue. But It’s Driven More Low-Income, Black Motorists Into Debt.
Source: Melissa Sanchez, ProPublica, and Elliott Ramos, WBEZ July 26, 2018

Now, a former official regrets the move and wants the city to revisit it. Some policies, she said, are “terrible.”

How ProPublica Illinois and WBEZ Worked Together to Find Thousands of Duplicate Tickets in Chicago
Source: Melissa Sanchez, ProPublica, and Elliott Ramos, WBEZ July 6, 2018

We heard from you about how ticket debt, especially from $200 city sticker citations, has affected you. And we would like your help as we continue our reporting.

Three City Sticker Tickets on the Same Car in 90 Minutes?
Souce: Melissa Sanchez, ProPublica, and Elliott Ramos, WBEZ June 27, 2018

Chicago has issued 20,000 duplicate city sticker tickets since 2007. City officials are now looking at whether this violates a city ordinance and say motorists might be in for a refund.

Chicago Begins To Rethink How Bankruptcy Lawyers Get Paid
Source: Melissa Sanchez, ProPublica, May 9, 2018

Judges are demanding that lawyers tell their clients that their other debts might not get paid, but their lawyers will.

Some States No Longer Suspend Driver’s Licenses for Unpaid Fines. Will Illinois Join Them?
Source: Melissa Sanchez, ProPublica, March 15, 2018

Our analysis shows suspensions tied to ticket debt disproportionately affect motorists in largely black sections of Chicago and its suburbs.

She Owed $102,158.40 in Unpaid Tickets, but She’s Not in the Story
Source: Melissa Sanchez, ProPublica, March 2, 2018

Still, we want to tell you a little bit about her, and about some of the other people we interviewed, because they helped inform our ticket debt investigation.

How Chicago Ticket Debt Sends Black Motorists Into Bankruptcy
Source: Melissa Sanchez and Sandhya Kambhampati, ProPublica, February 27, 2018

A cash-strapped city employs punitive measures to collect from cash-strapped black residents — and lawyers benefit.

The Many Roads to Bankruptcy
Source: Melissa Sanchez, ProPublica, February 27, 2018

Here are some stories of Chicagoans driven into ticket debt.

Connecticut in Crisis: How inequality is paralyzing ‘America’s country club’

Source: Jared Bennett, Center for Public Integrity, July 25, 2018

The state is caught in an economic straitjacket and there’s no easy way out…..

…. Blue chip companies like General Electric have either left or are threatening to leave. A yawning budget deficit continues to loom over the state, amplified by some of the nation’s most glaring economic inequality. Greenwich, home to hedge funders and Manhattan corporate titans, and the Norman Rockwell suburbs of Westport, New Canaan and Darien share few priorities with Hartford, New Haven and Bridgeport, gritty cities struggling with searing poverty and fiscal disaster. Connecticut’s political leaders must choose between what seem like equally rotten options: cut services, and push more burden onto the urban poor, or hike taxes, and risk repelling both the suburban rich who pay much of the freight and new businesses that might consider moving here. Put simply, Connecticut is in a bind with precious little room to maneuver.

Connecticut’s troubles are extreme but hardly unique. The recovery that has entrenched Connecticut into the haves and have-nots has been unequal in other regions as well – from Florida to California and down to Texas. As the stock market climbs but wages remain relatively flat, the Constitution State serves as a troubling bellwether of national priorities that seem to favor wealth creation for the few before investments in the broader economy. ….

The Return-On-Investment from Your Public Library is Unbelievable!

Source: Oleg Kagan, EveryLibrary, July 17, 2018

If libraries were a business, you’d want to buy that stock.

Wise investors know a good deal when they see it, which is why so many people who are smart and rich love their public library. It’s simple, really, if you consider what the average U.S. household pays for library services (~$7.50/month) and put that next to a public library’s vast offerings, the point is obvious. For under ten dollars you get thousands of books, music, movies, wholesome activities for kids, very expensive market research databases, and a much, much more. But say you’re still not convinced that libraries are a smart investment. Okay, what if I tell you that over and over again research has shown that the Return-on-Investment (ROI) for your local library is around $5 (but could be up to $9), for every dollar spent. It’s true: for every dollar that communities invest in library services they get five back!….

Related:
Should We Replace Libraries with Amazon?
Source: EveryLibrary, July 22, 2018

Of course not. It’s a terrible idea.

So why did Forbes publish this article that made that horrendous suggestion?

We have no idea….

There are, of course, many problems with this idea. First of all, libraries cost the average American taxpayer over 18 years old just $4.50 per month. An Amazon Prime subscription alone is nearly double that price and you get very little for free with that subscription because you still have to buy books or pay more to gain access to premium goods or services. If you want audio books or eBooks on Amazon, you need to pay for an Audible subscription or Kindle unlimited ($10 a month or twice the cost of a library) but you can get that for free through Overdrive (Libby) at your local library. If you want newly released movies, you have to buy the premium Amazon channels or you can get those for free at your library. If you want access to premium music you have to pay another $7.99 a month on Amazon or you can use Freegal or Hoopla at your library for free. And, if you want magazines, you can just get those for free from your library with Zinio or PressReader……

cost of various library services compared to costs of Amazon services

Return on Investment for Public Libraries
Library Research Service
Public Libraries – A Wise Investment
Final Report

Individual Reports for Participating Libraries
Cortez Public Library
Denver Public Library
Douglas County Libraries
Eagle Valley Library District
Fort Morgan Public Library
Mesa County Public Library District
Montrose Library District
Rangeview Library District

Study-Related Information and Resources
Personal ROI Calculator
Calculate your individual estimated return on investment based on your personal library use

Library ROI Calculator https://www.lrs.org/public/roi/calculator.php
Calculate an estimated ROI for your library

CAL Presentation
PowerPoint presentation of “Public Libraries – A Wise Investment” from 2007 Colorado Association of Libraries Conference

Questions for Key Informants
Approaches to use for key informant interviews during the study

Kansas Supreme Court rules in favor of K-12 public schools, a credit positive for districts

Source: Denise Rappmund, Matthew Butler, Moody’s, Sector Comment, July 18, 2018
(subscription required)

On June 25, the Kansas Supreme Court ruled that the Kansas (Aa2 stable) state legislature’s latest K-12 public school funding bills still do not meet the state’s constitutional standards for adequately funding public education. This ruling is a credit positive for Kansas school districts because it will mean a modest amount of additional operational revenue to districts, on top of the $643.9 million in additional funding over the next five-year period covered by the legislature’s current funding plan. Further, the court has also stated that the current plan is to remain in temporary effect with a stay on the ruling through June 30, 2019, during which time the state will need to re-submit to the court a remedy that will bring funding up to state standards for student achievement.

Large, established toll road systems are better positioned for the next recession

Source: Maria Matesanz, Eriq Alexander, Kurt Krummenacker, Moody’s, Sector In-Depth, July 17, 2018
(subscription required)

Large road systems will experience more stable traffic and revenue trends in a recession than smaller or less well established systems, based on our analysis of their performance during and after the last recession. From a financial and operational standpoint, we expect larger toll roads to maintain steady traffic growth and performance with minimal negative credit effects associated with typical traffic and toll revenue drops seen during recessions. We define large, established toll roads as those that operate multiple assets and have been in operation more than 15 years….