The State Of Municipal Finance in America – with Liz Farmer and Steven Greenhut

In episode 5 of the Market Urbanism podcast, we talk about the state of municipal finance in America. Are cities spending their way into long-term financial ruin? Or do their good credit scores and lack of bankruptcy signal health?

In segment 1, we discuss a general overview of the issue with Liz Farmer, the municipal finance reporter for Governing Magazine. In segment 2, we discuss California’s growing pension crisis with Steven Greenhut,  a senior fellow for the R Street Institute.

Show Notes:

1:07 Scott Beyer begins his editorial

4:31 start of interview with Liz Farmer

7:35 Beyer asks Farmer to respond to Chuck Marohn’s “growth ponzi scheme” argument

11:12 Sergio Rodrigues asks her if she anticipates more future municipal bankruptcies

13:35 Beyer asks her what the common denominator is between municipalities that file

15:45 Rodrigues asks her about Atlantic City’s finances

17:30 Beyer asks her if Detroit’s dubious bankruptcy proceeding hurt the bond market

20:33 Antonio Grana asks her how cities in debt can climb their way out

26:08 start of Steven Greenhut interview

30:10 Beyer asks about the negotiation process that leads to these inflated pensions

31:59 Grana asks him what the reform should be. He says ending the “California Rule”

36:38 Beyers asks how reformers could put a more human face to the pension problem

38:22 Martha Ekdahl asks Greenhut how Prop 13’s property tax cap influences the situation, and whether it should be eradicated. His answer:

“If you get rid of Prop 13 it would be a disaster. You could take issue with some of the results of it. I’ve been here at my house for 8 years, and it’s tied to the rate when I bought it. But if my neighbor moved in yesterday, he’s assessed at the new value. And with the way our property values go up, his taxes are much higher….But overall, the government has not lost revenue because of Prop 13. They’re still getting more revenue than ever, and it remains a spending problem. If we got rid of Prop 13, I don’t see that we would do a tax swap and reduce other taxes. We would just dramatically increase taxes. And the way spending goes here, it wouldn’t be long before that money was gone.”

42:23 write-in question from Howard in Orange County: “are there any greenfields in Southern California where housing could get built, helping alleviate the statewide shortage?”

43:19 Beyer asks whether bankruptcy will be a common future option for indebted municipalities

44:41 hosts react to interview