London School of Economics
City Reformers Group Workshop
Public Finance and Debt — Cities
March 22, 2011
Municipal Finance:
CURRENT CHALLENGES
AND OPPORTUNITIES
Robert Weissbourd, RW Ventures, LLC
Overview


The Big Picture: New Governance for a New
Economy
City Budgets: Challenges and Opportunities
 Revenues
 Expenditures

Summary
Government Is Broken
Image from The Center for Public Integrity
o
Unaccountable
o
Inaccessible
o
Insular
o
Inefficient
o
Bureaucratic
o
Top-down
… 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… and Out of Date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.
Source: Newsweek, Manyika, Lund and Auguste, “From the
Ashes,” 8.16.2010
The dynamic, knowledge-based economy requires a
new, more nimble style of governing.
From Government to Governance
Governance:
Non-profits
Businesses
Citizens
Government
Universities &
Research
Centers
o
Collaborative
o
Flexible
o
Open
o
Innovative
o
Risk-taking
o
“Of the People”
o
Intentional
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
Cities in Crisis: A Look at City
Budgets
Year-to-Year Changes in Cities’ General Fund Revenues and Expenditures
Distinguish
Two
Challenges:
Long-term
structural
deficits
vs.
Recessionary
deficits
Source: Christopher W. Hoene & Michael A. Pagano, National League of Cities, Research Brief on American Cities, October 2010
Sources of Revenue
Primary Sources of Revenue
Average Sources of City Revenue
3.8%
Taxes
15.3%
Fees
1.8%
State and Federal Government
Interest, Investment Returns
Sale of Assets
Financing
30.5%
14.6%
0.5%
1.7%
5.9%
25.9%
Federal Government
Property Taxes
Individual Income Taxes
Other Taxes
Miscellaneous Revenue
State Government
Sales Taxes
Corporate Income Taxes
Charges & Fees
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
Financing
• Privatize asset management
• Sell excess inventory
• Enhanced Bonds:
BABs,
securitization, etc.
• Improvement
Districts
• TIF Districts
Public Private Partnerships
Photographer: Frank Polich/Bloomberg
Photo Source: BusinessWeek
Sources of Expense
Average City Expenditures by
Character and Object
Intergovernmental
expenditure
Current operations
Capital outlay
Assistance and
1.5%
subsidies
Interest on debt
Primary Areas of Expenditure
Labor
0.7%
Program Operation
26.4%
Capital Outlays
56.9%
Assistance and Subsidies
10.9%
Debt Repayment
Insurance benefits
and repayments
Salaries and
0.4%
wages
3.1%
Intergovernmental
Expenditure Strategies
Primary Areas of Expenditure
Labor
Expenditure Reduction Strategies
• 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
Summary: City Financing Options
Revenue Increase 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
Expenditure Reduction Options
• 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
London School of Economics
City Reformers Group Workshop
Break Out Group 4: Public Finance and Debt — Cities
March 22, 2011
Municipal Finance:
CURRENT CHALLENGES AND OPPORTUNITIES
Robert Weissbourd, RW Ventures, LLC