Public Policy

Is Municipal Debt the Next Housing Crisis?

Ian Scott on Wednesday, November 10, 2010 at 4:15:32 pm 

An article today’s Wall Street Journal highlights growing concern among investors about the creditworthiness of local governments.  As examples of municipalities that are failing to make payments on debt, the article cites the relatively small communities of Menasha, WI, Buena Vista, VA and Cicero, NY.

Here’s an excerpt:

For more than a year, Menasha, Wis., hasn't paid back about $23 million in principal for short-term notes tied to a failed steam plant, even though the deal's offering documents include a statement that the city would use tax revenue to cover any debt payments, if needed.

But that statement "was no guarantee" to repay the debt, says Edward Fuhr, a lawyer for Menasha, a small industrial city that has spent an average of $80,000 a month to fight investor lawsuits in three courts over the notes, which matured in September 2009.

The tangle underscores concern in the municipal-debt world about the longstanding assumption that local governments will do whatever it takes to repay their debts—including raising taxes—because failing to do so would make it more expensive or even impossible to turn to investors for future financing.

 While the article notes that "greatest default risk is in small municipalities with overleveraged projects," this trend should be a concern for all cities.

Read more at - New Risks Emerge in Munis

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Florida Prop 4 Fails

Ian Scott on Wednesday, November 3, 2010 at 12:20:55 pm 
Florida Proposition 4, also know as  Hometown Democracy, failed largely due to unified opposition from the business community.  Prop 4 would have mandated voter approval to change city, town and county comprehensive land-use plans, effectively halting growth by bogging down all zoning changes.

I've written about the issue multiple times on this blog since it first appeared as a petition in 2007.  It failed to make the ballot in 2008 and was soundly rejected by Florida voters yesterday.

Read more from the Miami Herald - Florida Voters Reject Land-Use Amendment.

Check out the No On 4 campaign for more info on the measure -

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Ballot Measure Results Recap

Ian Scott on Wednesday, November 3, 2010 at 12:00:55 pm 

If you’re like me then you were a little bleary-eyed this morning from staying up too late watching returns from the west coast.  And if you were up late watching election coverage, you may also be suffering from acute pundit analysis overload.  So rather than hold forth on the implications of Rubio’s win or Strickland’s loss, I’d like to share an article from our friend Pam Prah at Stateline.

In an article posted this morning - Sweeping statewide tax proposals nixed – Prah recaps significant results from the 160 statewide ballot measures that were decided yesterday. 

No discernable trend emerged among the dozens of measures with major tax and fiscal implications.  Colorado and Massachusetts rejected major tax cuts while Washington voters rejected a measure what would have implemented the state’s first income tax.  Arizona decided not to raid land conversation and early childhood education funds to close their budget gap, while Californians made it easier on their legislators to pass a budget.  Prah summed it up writing, “Voters approved measures that could both help and hurt their states' bottom lines.”

Read the full article - Sweeping statewide tax proposals nixed

For more info check out Stateline’s Guide to Major Ballot Races.

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Tough Choices After Election Day

Ian Scott on Tuesday, November 2, 2010 at 10:38:22 am 

Today is Election Day and everyone has politics on the brain.  Can the GOP take the Senate?  Will Strickland hold on in Ohio?  Will Californians pass Prop 19? 

But after all the results are in and the concession speeches are given and the victory celebrations are over, elected leaders will still have to govern.  And governing through this economic slump is no picnic.

Elected leaders have lots of tough choices ahead, particularly at the state level where governments must try to bridge budget shortfalls without help from federal stimulus funds.  They will have to address issues like state employee retirement costs and the costs of our state corrections systems.  But they can’t neglect our future competitiveness with deep cuts to key infrastructure and education.

Here are three news articles from the past week that illustrate the extent of the challenge:

From - New York State Faces $315 Million Budget Deficit on Lower Tax Collections

From the Dallas Morning News - Legislature likely to cut deep to meet possible $25 billion budget gap

From the Oregonian - Hard choices: Oregon governor, Legislature face grim choices on worker pay

The business community cannot afford for local chambers to sit out the debate over state budgets.  To help you and your business members better understand the budget challenges states face and offer research-based solutions, ACCE has partnered with the Pew Center on the States to organize a free, three-part DIALogue teleseminar series called:

The Looming Crisis – Getting a Grip on State Budgets and Spending

Each session will feature both an issue expert from Pew to provide an overview of national data and trends and a business leader-advocate to share experience in a specific state.  Click for more information on this important series.

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Why You Should Care About State Politics

Ian Scott on Tuesday, October 26, 2010 at 3:25:39 pm 

Besides general interest in politics, why should you care about the outcome of gubernatorial and statehouse races in states other than your own?  Simple – redistricting.

As a result of the 2010 census, next year 18 states, including New York, Ohio, Florida, and Texas, will gain or lose representation in the House of Representatives.  In total 24 seats will change.  The outcome of next week’s state races will play a big role in the balance of power in the House of Representatives for the coming decade.

Read more in this article from CNN - Why it matters: Elections outside your state can affect you

To discuss this issue and the numerous other ways national politics impact local policy and vice versa, join the ACCE Government Relations Division for a conference call this Thursday at 11am eastern.  Click here for more info on this Peer-to-Peer Conference Call - 2010 Election Politics and State/Local Policy

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Regional GR in NC

Ian Scott on Friday, October 22, 2010 at 10:21:47 am 

I’ll stick my neck out and pose two assertions this Friday morning:

  1. Advocacy is an essential chamber function, but many smaller chambers lack the professional staff horsepower to drive a robust government affairs program.
  2. Whether in your state house or on Capitol Hill, there is strength in numbers – provided that members of the group are all on the same page.

Hopefully you’ve been nodding along so far so I don’t need to make a stronger argument for chambers joining together to forge a regional advocacy alliance.

Regional advocacy is an issue I like to talk about because it makes so much sense for so many chambers.  In fact, I wrote about this topic for the summer 2010 issue of ACCE’s Chamber Executive magazine – check out Joining Forces for Effective Advocacy.

Now I can add a new regional advocacy alliance to my growing list – Eastern North Carolina.  While they are still developing a legislative agenda, the seeds of government affairs cooperation have sprouted among chambers in a predominantly rural, 13 country region between Raleigh and the Outer Banks.

Read about the blossoming regional coalition in this article: Region's chambers setting legislative agenda

Learn more about the region and the alliance here:  

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More on Florida Prop 4

Ian Scott on Monday, October 18, 2010 at 4:18:21 pm 

Florida’s Hometown Democracy proposal has been a reoccurring topic on this blog for several years now.  I’ve discussed this issue at chamber meetings across the country and it invariably draws a lot of head scratching and some perplexed questions.  They generally sounds like:  “How could voters possibly be asked to make every land use decision?” 

I can’t answer that question, but the issue does perfectly illustrate the absolute mandate chambers of commerce have for involvement in public policy.  If state and local chambers aren’t mobilized to fight against benignly named but economically devastating proposals like Hometown Democracy, who will?

Read what the Orlando Sentinel editorial board had to say about Prop 4 - What we think: No on Amendment 4, Hometown Democracy' costly, unwieldy and unwarranted.

For more on the measure check out -

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Public Pensions in the Press

Ian Scott on Friday, October 15, 2010 at 10:03:40 am 

If you’ve been following the opinion pages at major national papers over the past week, you may have noticed that everyone suddenly seems to care about public sector pension costs.  The folks at the Pennsylvania Economy League have done a great job compiling links to resent pension headlines in a blog post yesterday:

Finally the "Popular Girl:" State pension funds

The dueling columns by David Brooks and Ezra Klein are worth reading to get a perspective on both sides of the issue.

I also suggest that you check out The Trillion Dollar Gap, a report published last February by the Pew Center on the States.

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DeMint on Earmarks

Ian Scott on Wednesday, October 13, 2010 at 3:23:06 pm 

There should be no mistaking America’s current appetite for federal spending and debt.  Polls suggest that we’ve had more than our fill, and candidates are crafting their message to match our mood.  But what about spending on projects close to home that we desperately need?

That is the debate South Carolinians are having with their junior Senator Jim DeMint.  DeMint has refused to support an appropriations request made by fellow South Carolina Republican Lindsay Graham for $400,000 to fund an Army Corps of Engineers feasibility study on deepening the port of Charleston.  Deepening the port is necessary to accommodate massive cargo ships from Asia that will reach the East coast after the expansion of the Panama Canal is complete in 2014.  The State Ports Authority and the Charleston Metro Chamber are among the proponents of the project.

Senate appropriations subcommittee chairman Byron L. Dorgan (D-ND) has thusfar denied funding request saying, “It is our general policy that if there is not unity among senators from a state about funding requests, we would not proceed to fund it.”  DeMint has accused the subcommittee of playing politics with the request, but stands firm on his pledge to oppose all earmarks.

Read more here.

What do you think?  Should earmark spending be opposed at all costs or are they merely the reality of governing?  Add your comments.

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Candidates Rail Against Rail

Ian Scott on Tuesday, October 12, 2010 at 11:48:11 am 

Last week New Jersey Governor Chris Christie made national headlines by halting work on a commuter rail tunnel that would increase capacity between New Jersey and downtown Manhattan.  His rationale - state transportation officials project that the $8.7 billion project will run over costs by at least $2.5 billion, leaving New Jersey taxpayers on the hook.  $600 million has already been spent on the nation’s largest public transit project and the Federal Government and Port Authority of New York and New Jersey have each committed $3 billion to the project.  Click for more.

But Christie is not the only Republican politician railing against rail.

Wisconsin gubernatorial candidate Scott Walker has launched to detail his opposition to a high speed rail line connecting Madison and Milwaukee.  The proposed line is funded by $810 million in stimulus dollars.  Ohio’s John Kasich is opposed to a $400 million stimulus project to link Cleveland, Columbus and Cincinnati by rail.  Florida gubernatorial candidate Rick Scott has raised questions about the $1.25 billion stimulus funded rail project to connect Orlando and Tampa.

In all cases, construction cost overruns and the ongoing cost of operation are major concerns.  There is also a sense that these rail projects are diverting badly needed funds from crumbling highway infrastructure.  Click for more.

What do you think about rail expansion plans?  Are they important projects that will reduce road congestion and spur investment?  Or are they costly boondoggles that will be underused?  Share your thoughts by leaving a comment…

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