municipal financing: current challenges and opportunities
TRANSCRIPT
Municipal Finance:
CURRENT
CHALLENGES
AND
OPPORTUNITIES
Robert Weissbourd, RW Ventures, LLC
London School of Economics
City Reformers Group Workshop
Public Finance and Debt — Cities
March 22, 2011
Overview
The Big Picture: New Governance for a New
Economy
City Budgets: Challenges and Opportunities
Revenues
Expenditures
Summary
Government Is Broken
o Unaccountabl
e
o Inaccessible
o Insular
o Inefficient
o Bureaucratic
o Top-down
Image from The Center for Public Integrity
… and Proliferating
• Fragmented • Uncoordinated • Legacy
Governments
… and Out of Date
Gross Domestic Product% Change Over Last 50 Years
Source: The Wall Street Journal, May 20,
1999.
… and Out of Date
Gross Domestic Product% Change Over Last 50 Years
Source: Newsweek, Manyika, Lund and Auguste, “From
the Ashes,” 8.16.2010
Source: The Wall Street Journal, May 20,
1999.
… and Out of Date
The dynamic, knowledge-based economy
requires a new, more nimble style of governing.
Gross Domestic Product% Change Over Last 50 Years
Source: Newsweek, Manyika, Lund and Auguste, “From
the Ashes,” 8.16.2010
Source: The Wall Street Journal, May 20,
1999.
Governance:
o Collaborative
o Flexible
o Open
o Innovative
o Risk-taking
o “Of the People”
o Intentional
From Government to Governance
Universities &ResearchCenters
Businesses Citizens
Non-profits
Government
Governance in the Next
Economy
Build on your assets
Compete on value added – tax-value proposition
Invest strategically to encourage long-term growth
Inclusive Governance
Distinguish Two
Challenges:
Long-term structural deficits
vs.
Recessionary deficits
Year-to-Year Changes in Cities’ General Fund Revenues and
Expenditures
Source: Christopher W. Hoene & Michael A. Pagano, National League of Cities, Research Brief on American Cities, October 2010
Cities in Crisis: A Look at City Budgets
Sources of Revenue
3.8%
30.5%
25.9%5.9%1.7%
0.5%
1.8%14.6%
15.3%
Average Sources of City Revenue
Federal GovernmentState GovernmentProperty TaxesSales TaxesIndividual Income TaxesCorporate Income TaxesOther Taxes
Primary Sources of Revenue
Taxes
Fees
State and Federal Government
Interest, Investment Returns
Sale of Assets
Financing
Revenue Strategies
Primary Sources of Revenue Revenue Increase Strategies
Taxes • Introduce new/increased taxes
• Expand tax coverage: e.g. include
services in sales tax
Fees • Improve fee collection
• Introduce new fees
State and Federal Government • Currently, limited opportunities
• New Federalism
• Leveraging private sector
financing
Interest, Investment Returns • Portfolio management –
risk/reward
Sale of Assets • Privatize asset management
• Sell excess inventory
Financing • Enhanced
Bonds: BABs,
securitization,
• Improveme
nt Districts
• TIF
Public Private Partnerships
Photographer: Frank Polich/Bloomberg Photo Source: BusinessWeek
Sources of Expense
0.7%
56.9%
10.9%
0.4%3.1%
1.5%
26.4%
Average City Expenditures by Character and Object
Intergovernmental expenditure
Currentoperations
Capital outlay
Assistance andsubsidies
Interest on debt
Primary Areas of Expenditure
Labor
Program Operation
Capital Outlays
Assistance and Subsidies
Debt Repayment
Intergovernmental
Primary Areas of Expenditure Expenditure Reduction Strategies
Labor • Cut benefits, wages or jobs
Program Operation • Inclusive Government/Government
2.0
• Digitalization of health records
• Outsourcing
Capital Outlays • Implement availability payment-
based public private partnerships
Assistance and Subsidies • Reduce inter-jurisdictional
fiscal/tax competition
Debt Repayment • Refinance debt
Intergovernmental • Consolidate units of government
• Pool purchasing power
• Share services with nearby
jurisdictions
Expenditure Strategies
Summary: City Financing
Options
Revenue Increase Options Expenditure Reduction Options
• Introduce new/increased taxes
• Expand tax coverage: e.g. include
services in sales tax
• Improve fee collection
• Introduce new fees
• Privatize asset management
• Sell excess inventory
• Portfolio management –
risk/reward
• Enhanced Bonds: BABs,
securitization, etc.
• Improvement Districts
• TIF Districts
• New Federalism
• Leveraging private sector
financing
• Cut benefits, wages or jobs
• Inclusive Government/Government
2.0
• Program Efficiencies: e.g.
digitalization of health records
• Outsourcing
• Implement availability payment-
based public private partnerships
• Reduce inter-jurisdictional
fiscal/tax competition
• Refinance debt
• Consolidate units of government
• Pool purchasing power
• Share services with nearby
jurisdictions
Municipal Finance: CURRENT CHALLENGES AND OPPORTUNITIES
Robert Weissbourd, RW Ventures, LLC
London School of Economics
City Reformers Group Workshop
Break Out Group 4: Public Finance and Debt — Cities
March 22, 2011