Friday, January 25, 2008

Just released: A capital and debt management tale of two governments

The following is an excerpt from the Public Policy Forum's new report on capital and debt management practices at the City of Milwaukee and Milwaukee County.


"Infrastructure – literally in the case of roads and sewers – underlies the growth and development of cities and regions. And because infrastructure serves generations of citizens, governments generally pay for it through long-term borrowing. Meanwhile, the political process focuses on a much shorter timetable. Elections are about the issues of the day, and candidates rarely focus on long-term issues such as debt and infrastructure.

Even so, Citizens need to be confident that the people they elect to local government office will be good stewards of the public infrastructure – and will ensure the burden of paying for it is dealt with responsibly. In light of the long-term consequences of election outcomes, this paper offers a brief overview of how the city of Milwaukee and Milwaukee County have been managing their capital spending and debt obligations over the past decade.

Overall, the city of Milwaukee and Milwaukee County both comply with state statutes regarding debt levels; both adequately secure high bond ratings. They also both recognize that it is good public policy to take additional measures to control debt levels. The county has an ambitious set of debt management goals, and has also been spurred into tightening them by the fiscal crisis caused in large part by large pension obligations. Nothing as dramatic has happened to city government, but its continuing structural deficit also has necessitated debt management goals. It remains to be seen how well these policies will work in controlling the debt burden in the city and county.

Meanwhile, when it comes to the other side of the debt management coin – capital spending – the city and the county have differed over the past decade. In the case of the city, poor capital financial management has led to a higher debt burden than desired. In the case of the county, the opposite has occurred in a sense: Strict controls on debt have led to a decline in capital spending, suggesting the county has been putting off infrastructure maintenance that will end up burdening taxpayers sometime in the future."

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