Municipal Finance: CURRENT CHALLENGES AND OPPORTUNITIES Robert Weissbourd, RW Ventures, LLC London School of Economics City Reformers Group Workshop Public Finance and Debt — Cities March 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-down Image 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… and Out of Date The dynamic, knowledge-based economy requires a new, more nimble style of governing.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 Gross Domestic Product % Change Over Last 50 Years Source: Newsweek, Manyika, Lund and Auguste, “From the Ashes,” 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 & Research Centers Universities & Research Centers 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 Primary Sources of Revenue Taxes Fees State and Federal Government Interest, Investment Returns Sale of Assets Financing

Revenue Strategies Primary Sources of RevenueRevenue 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 Primary Areas of Expenditure Labor Program Operation Capital Outlays Assistance and Subsidies Debt Repayment Intergovernmental

Primary Areas of ExpenditureExpenditure 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 OptionsExpenditure 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 London School of Economics City Reformers Group Workshop Break Out Group 4: Public Finance and Debt — Cities March 22, 2011