Municipal Finance: CURRENT

CHALLENGES AND

OPPORTUNITIES

Robert Weissbourd, RW Ventures, LLC

London School of EconomicsCity Reformers Group WorkshopPublic Finance and Debt — CitiesMarch 22, 2011

Overview

The Big Picture: New Governance for a New Economy

City Budgets: Challenges and Opportunities Revenues Expenditures

Summary

Government Is Broken

o Unaccountable

o Inaccessible

o Insular

o Inefficient

o Bureaucratic

o Top-downImage from The Center for Public Integrity

… and Proliferating

• Fragmented • Uncoordinated • Legacy Governments

… and Out of Date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 Taxes Individual Income TaxesCorporate Income 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, etc.

• Improvement

Districts• TIF Districts

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

Intergovern-mental ex-penditureCurrent opera-tions Capital outlay Assistance and subsidies Interest on debt Insurance benefits and repayments

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

DISCUSSION

London School of EconomicsCity Reformers Group WorkshopBreak Out Group 4: Public Finance and Debt — CitiesMarch 22, 2011