Monday, May 19, 2008

Future Committed Resource Allocations

I was checking out Mike Madison's post over at Pittsblog today regarding Municipal Bonds, in which he sort of sums up things that Mr. Briem and Mr. Fester have been saying for quite some time now.

Of course, the scary part of this whole thing is not that the City of Pittsburgh is going to default on its current debt or even that the outlying municipalities are going to default on their current debt* or even that Lamar gave a toaster oven to the Mayor's wife's cousin, but that the City of Pittsburgh needs to continue to issue debt in the future in order to do... you know... *stuff*.

There are roads to fix, buildings to knock down, streetlights to hang, and so forth, all of which are paid for by taxes, yes, but, and this is the nuanced bit, paid on the municipal credit card with its bondholders and over the long run.

Now, this is fine, usually, but with a continuing pension obligation, nervous markets, and rumors of a return to deficits within a few years (despite this year's surplus), you have to wonder what the City's capacity for long term borrowing will really be in a few years... or if it'll have to either (a) find new revenue streams or (b) push these expenses off of its books to... well... somewhere.

But this isn't necessarily a financing discussion; it could just as easily be a foreshadowing of further reductions in City services... which may lead to a further decline in population... which reduces the tax base... which means the City can borrow less... which further reduces City services...

Yikes.

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* Speaking of which, Team 4: you did a really shitty job with presenting those statistics. I mean, sure you give some wacky decimal debt service to expenditure ratio and a hard number for total debt service, but you don't break down things like terms, or rates, or even give the population of these municipalities to give anyone a real sense of how serious those problems are. I mean, hell, $495K in debt annual service sounds like a lot of money, but that works out to about $150/person in Edgewood, which seems reasonable. Of course, the data (and the story) that's presented doesn't get into those kinds of details that would make the information less sensational and more, um, useful.

For shame! Seriously. For shame.

2 comments:

M (not Matt) H said...

I think new taxes are more likely to further reduce population and continue the cycle you mentioned than your theory of reduced services driving the dynamic. I have had much more success mitigating the lack of local services (i.e. 4x4 because of the streets in winter, alarm because of police cuts) than I have at dodging the ridiculous taxes.

O said...

Yeah, I left that step out: maintaining services = increasing taxes.

Serves me right.