ACIR.1976.Understanding the Market for State and Local Debt

8/3/2019 ACIR.1976.Understanding the Market for State and Local Debt

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COMMISSION MEMBERS(MARCH 1876)

PRIVATE CITIZENSRobert E. Merriam, Chairman, Chicago, Illino isJohn H. Altorfer, Peoria. IllinoisF. Clifton White, Greenwich, ConnecticutMEMBERS OF THE UNITED STATES SENATEErnest F. Hollings, South CarolinaEdmund S. Muskie, MaineWilliam V. Roth, Delaware

MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVESClarence J. Brown, Jr., OhioL. H. Fountain, North CarolinaRichard Vader Veen, MichiganOFFICERS OF THE EXECUTIVE BRANCH, FEDERALGOVERNMENTJames T. Lynn, Director. Office of Management and BudgetJames M. Cannon, Assistant to the President for Domestic AffairsCarla A. Hills, Secretary. Department of Housing and Urban Development

GOVERNORSDaniel J. Evans, WashingtonRichard F. Kneip, South DakotaPhilip W. Noel, Rhode IslandVacancyMAYORSHarry E. Kinney, Albuquerque. New MexicoJack D. Maltester, San Leandro, California

John H. Poelker, St. Louis. MissouriVacancyMEMBERS OF STATE LEGISLATIVE BODIESJohn H. Briscoe, Speaker, Maryland House of DelegatesRobert P. Knowles, Senator. WisconsinCharles F. Kurfess, Minority Leader, Ohio House of Representatives

ELECTED COUNTY OFFICIALSJohn H. Brewer, Kent County, MichiganWilliam E. Dunn, Commissioner, Salt Lake County, UtahConrad M. Fowler, Shelby County. Alabama


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LADVISORY COMMISSION ONINTERGOVERNMENTAL RELATIONSAWashington. KC. 20575 l May 1976M-104


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Preface The New York fiscal cr isis has stimulated con-siderable interest in urban finance problems ingeneral and the market for state and loca l debt inparticular. This information report outlines theessential characteristics of this market through whichan annual volume of nearly $60 billion in short andlong-term obligations is sold.This Information Report was co-authored by JamesN. Patton, Assistant Professor of Business Ad-ministration, University of Pittsburgh, and CeorgeH. Hempel, Professor of Finance. WashingtonUniversity. The report was prepared under the general supervision of John Shannon, AssistantDirector, Advisory Commission on IntergovernmentalRelations.

Robert E. Merriam Wayne F. AndersonChairman Executive Director


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ContentsPage

Summary..............................................................llntroduction............................................................2Sireofrhe Market..................................................... 4WhoBorrows......................................................... 8Short-Term State and Local Borrowing,, _. _. _. _. _. _. _. _. . IOLong-Term State and Local Borrowing . 14Who Owns State and Local Debt . 16Cost of Borrowing for State and Local Units . 19The Quality of State and Local Debt . . 23Operation of the Market for State and Local

Debt Instruments _, . . _, _. . _, _. _. 28

Exhibits1. Annual Volume of New State and Local Borrowing ...................... 52. Total State and Local Debt Outstanding , ........ . ..................... 63. State and Local Debt as Percentage of Net Total Debt andNet Public Debt ................................................4. Number of State and Local Governmental Units by Type. ................. 95. State and Local Debt Outstanding by Type ofGovernmental Unit., ....... ...................................... 96. Annual Dollar Volume of State and Local Borrowing -Long-Term Versus Short-Term. .................................... .I27. State and Local debt Outstanding by Character .. .......... .......... .138. State and Local Long-Term Debt Classif ied by Purpose .................. .I59. Net Purchases of State and Local Debt ......... ............ ........ .I8IO. Holders of Outstanding State and Local Debt ........................... 18

11. Yields on 20-Year Treasury Bonds and Bond Buyerll-BondIndex..................................................2 012. Yield on I-Year and ZO-Year Good Grade Municipals .................... .2113. Yields on 20-Year Prime Grade Versus 20-Year Good andMedium Grade Municipals ........................................ .2214. Percentage Distribution of Rated Long-Term State and Local BondsIssued, by Dol lar Value in Year of Issue ................... , ......... .2515. Recorded Defaults from 1839 through 1969, by Type of GovernmentalUnit and Geographical Region ..................................... 2616. Summary of Results of Cases Filed Under Chapter IX of theFederal Bankruptcy Laws ......................................... .27


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Appendices PageAppendix A:A- l Annual Volume of New State and Local BorrowingA-2 State and Local Debt as a Percentage of Net Total Debt

and Net Public DebtA-3 Annual Dollar Volume of State and Local BorrowingA-4 Selected Yield Indexes . . . . . .

,. 333435

. 36Appendix B:B- l New Municipal Debt by Month (1966-1975).B-2 Tax Rates an d 20.Bond Index (1912-1974).B-3 Issues, Retirements, and Ownership of State and Local Debt

(1969-1975) _. _.B-4 Statutory Interest Rate Ceilings on State and Local BondsB-5 State Constitutional and Statutory Limitations onLocal Government Power to Issue General ObligationLong-Term Debt, 1971

, . . . . 40_. . . . 42

4344

_.. . . 46Appendix C:Selected Bibliography.. 55


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Summary During 1975, state and local governments marketed$58.2 bill ion of new debt in about 8,000 separateissues. That is about ten times the dollar volume of1950 and more than double the volume of 1968.State governments account for nearly one-third ofstate and local debt outstanding. Incorporated munic-ipalities account for roughly 29 percent, while schooland special distr icts account for about 13 percent and16 percent of such debt, respective ly. The remainingstate and local debt is the obligation of counties andunincorporated areas.Short-term debt is usually issued in anticipation ofrevenue or other receipts or to cope with expenditurerequirements that are not covered by operating rev-enues. The financing of current operating explndi-tures with debt that is not retired by the end of thefisca l year may be a signal of potential future financialdifficulties . Prio r to 1975, short-term state and localdebt had been increasing more rapidly than long-termdebt and in most recent years exceeded the annualdollar volume of long-term debt issued. This pheno-menon has led to some refinancing problems and maylead to more in the future.Long-term borrowing is usually used to financelarge state and local outlays that cannot be covered bycurrent revenues. As a rule, the full faith and creditof the government stands as the guarantee that thedebt wil l be repaid. but some debt does not have thistype of backing. Non-guaranteed or limited liabi l-ity debt has increased as a proportion of total long-term state and local debt. Furthermore, the debateover the precise meaning of full faith and creditbacking has intensified because of the well-publicizedfinancial problems of New York City and the State ofNew York.

The profile of state and local bond ownership haschanged over time. The most important factor

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g ownership has been the Federal tax posi-potential owners. Commercial banks currently50 percent of all state and loca l securit iesTheir purchase of such securities is influenced by

reason to question whether commercial banksll continue to absorb the majority of state and loca les in the latter 1970s.In recent years, state and local borrowing costsincreased. One common indicator, the 20-bond

first time ever in 1975. The longer the maturitylower the quality of a munic ipal issue theA comparison of market yields on U.S. Treasurysecurities shows that state and localperceived as relatively more r isky in periods ofrisky in more prosperous periods.A recent study concluded that the introduction of

The recent financial problem of New York Cityork State may have affected the interests of other state and loca l governmental units.The distribution of bond ratings assigned to long-debt issues since 1945 shows that thequality of municipal debt increased in the earlyand deteriorated in the late 1950s and 1960s.Municipal defaults have occurred in periods of

good and bad economic conditions, reaching signi fi-cant magniiudes only during periods of major eco-nomic deprebsion. Only a small percentage of munici-pal defaults have been resolved through thebankruptcy process. Only I8 municipal bankruptcycases have been filed under Title IX of the Federalbankruptcy laws since 1954.Most long-term municipal issues must. by law, beoffered through competitive bidding. The winningunderwriter (syndicate of investment bankers andcommercial banks offering the lowest net interestcost) reoffers the bonds to the public at prices thatcover the underwriters expenses and compensate himfor his risks . Many short-term municipal issues arenegotiated with local banks or other institutions, theinterest rate paid being determined through negotia-tions.After they are issued, state and local issues are

traded in the over-the-counter market. An activesecondary market is important for a state and loca lissue because investors are more like ly to be willing topurchase securities when initially issued if they believethey can liquidate their holdings when they want to.Most short-term and smaller municipal issues do hothave well developed secondary markets.The 1975 Securities AC/ Amendments have alreadycaused substantial changes in the operation of themarket for state and loca l debt instrumenta. Recentproposals could caubr this market to undergo evenfurther fundamental changes. I


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Americans have come to assume that borrowingat a reasonable cost would be an available method offinancing for nearly all state and local governmentalunits. This assumption has been challenged in recentyears. The higher level of all interest rates and in-creased borrowing by many state and local units havemeant that some units have been unable to borrow be-cause of statutory ceilings on interest rates they canpay or on the amount they can borrow. By the late196Os, the rising cost of municipal services coupledwith slower increases in tax bases began placingstress on many municipal budgets. In 1971, PresidentNixon raised the question of the health of the stateand local sectors to national prominence with hisstatement I. if we do not have it [revenue sharing],we are going to have states, cities, and counties goingbankrupt over the next two or three years. The pas-sage of Federal general revenue sharing in 1972 helpedto alleviate some of the pressures in the state andlocal debt market.By the l97Os, the stress had further intensified andthe recent severe financial problems of New YorkCity and state raised serious questions about theabi lity of state and loca l governments to obtain thedebt financing they may need in coming years.Legislation that has been proposed to allev iate theseconcerns includes: (a) having a Federal agency(simila r to the Federal Deposit Insurance Corpora-tion) insure state and local issues: (b) authorizing, asan option to the tax-exempt municipal bond,. ataxable, subsidized bond on which the U.S. Trea-sury would pay a portion of the interest; (c) having theFederal government guarantee state and loca l debt;(d) requiring state and local borrowers to register newissues with the Securities and Exchange Commissionand meet prescribed full disclosure reporting require-ments; and (e) revising the current municipal bank-ruptcy laws.This summary study is designed to assist the readerin understanding various aspects of the market forstate and local debt (also called the municipal bondmarket). The presentation is organized around eighttopics: (I) Sire of the Market, (2) Who Borrows, (3)Short-Term State and Local Borrowing, (4) Long-Term State and Local Borrowing, (5) Who Owns Stateand Local Debt, (6) Cost of Borrowing for State andLocal Units, (7) The Quality of State and Local Debt,and (8) Operation of the Market for State and LocalDebt Instruments. It is hoped that the factual materialpresented on these eight topics will enable the readerto place into context the current problems in themunicipal debt market and will be useful in consider-ing legislation proposed to deal with these problems.


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the Size oiMarket


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ANNUAL VOLUME OF NEW SfATE AND LOCAL BORROWINGPar Value(billions)

$5 !

$5 C

$4 5

$4 C

$3 5

$3 0

$2 5

$2 0

$1 5

$1 0

s 5

Number ofIssues

Total Dollar Par ValueAll issues Offered

Exhibit I

L I 11 1 / 1 / / 1 ( , 1, / 1 , 1 1 / , , / , , , , ,1950 52 54 56 58 60 62 64 66 68 70 72 74 76Sources Exhb ,, A~, I P.ppendrx A Calendar Year

10

9

8

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Exhibit 2TOTAL STATE AND LOCAL DEBT OUTSTANDING

!, Year

TotalBillions Percentof ofDollars Total

stateBillions Percentof ofDollars Total

LocalBillions Percentof ofDollars Total

1952 $ 30.1 100% $ 6.9 23% 5 23.2 77%1957 52.7 100 13.7 26 39.0 741962 81.3 100 22.0 27 59.3 731967 114.6 100 32.5 28 82.1 721968 121.2 100 35.7 29 85.5 711969 133.5 100 39.6 30 93.9 70 *1970 143.6 100 42.0 29 101.6 711971 158.8 100 47.8 30 111.0 701972 174.6 100 54.5 31 120.1 691973 188.5 100 59.4 32 129.0 681974 206.6 100 65.3 32 141.3 68

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Exhibit 3STATE AND LOCAL DEBT AS PERCENTAGE OFNET TOTAL DEBT AND NET PUBLIC DEBT

Percent

4(3t3c3r3;3(2E2c2f2i2C1s16141210

8642

State and Local D ebttate and Local D ebtas Percent ofs Percent of

Public Debtublic Debt

State and Local Debttate and Local Debtas Percent ofs Percent of

Public and Private Debtublic and Private Debt

I I I I I II I I I I I I II III I I I I I III195051 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74Sll.C, E.hb,I $2 8 Apendlx A,


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who Borrows Another perspective on state and local debt cometfrom examining the basic types of governmental unitswhich borrow in this market. Exhibit 4 presents theCensus Bureaus classification of the types of gov-ernmental units for various years. The most obvioustrend revealed in this exhibit is that the total numberof local units has decreased significantly in the past25 years. In particular, the number of school dist+ictshas declined dramatically over times as a result of con-solidation and reorganization of distr icts. The numberof special districts has increased. Most of these aresingle-purpose entities - over 50 percent of them areconcerned with fire protection, natural resources, orwater supplies.3

Exhibir 5 shows a percentage distribution of stateand local debt outstanding class ified by type ofgovernmental unit. The most obvious change is thatstate debt increased gradually throughout the twodecades. Several other gradual shifts have occurredover the last 20 years. Debt of general-purpose localgovernmental units (counties, municipalities andtownships) constituted a sligh tly lower percentage oftotal state and local debt outstanding in 1974 than itdid in 1955. This is the net result of a gradual increasein the percentage of debt originated by counties and alarger decrease by municipalities. The trend re flectsthe assumption of urban-type functions bysomecoun-ties. An examination of the debt of single-purpmegovernmental units shows that school districts per-centage decreased, while special districts increased.Thus, both the number of units (Exhibir 4) and therelative amount of indebtedness of spec ial distr ictshave been increasing. Some special districts owe theirexistence to borrowing limi ts that were placed onmany general-purpose local governments during the1930s.


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Exhibit 4NUMBER OF STATE AND LOCAL GOVERNMENTAL UNITS BY TYPE

Type of Unit 1952* 1957 1962 1967 1972stateCountyMunicipality

503,05216,807Township 17,202School District 67,355Special District 12,340Total 116,806

50 50 50 503,050 3,043 3,049 3,044

17,215 18,000 18,048 18.51717,198 17,142 17,105 16,99150,454 34,678 21.782 15,78114,424 18,323 21,264 23,885- - -102,391 91,238 81,298 78,268

1955196219671968196919701971197219731974

Exhibit 5

STATE AND LOCAL DEBT OUTSTANDING BY TYPE OFGOVERNMENTAL UNIT(expressed as percent of state andlocaldebt outstanding)

State County25% 7%27 728 729 730 729 830 831 832 832 8

Municipality Township SchoolDistrict SpecialDistrict Total36% 2% 17% 13% 100%33 2 17 14 10032 2 16 15 10031 2 16 15 10030 2 16 15 10030 2 16 15 10030 2 15 15 10030 2 14 15 10030 2 13 15 10029 2 13 16 100

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Short-Term Short-term state and local borrowing (defined asdebt hdvmg an average maturity of less than one year)I,.S genernlly used for one of four purposes. First. overState and

one-third of short term state and local borrowing isfor public housing or urhan renewal pro~jPcts.4 Asecond common use of short-term municipal horrow-local ing is as an aid in synchronizing the llows of currentdisbursements with current tax receipts. Many munic-ipal units use tax anticipation notes (TANS) short-term debt issued to meet current expenditure needsand repaid as current taxes are collected to smoothout seasonal expenditure and revenue imbalances.

Another use of short-term municipal debt is for thepurpose of reducing the financing costs associatedwith capital projects. Bond anticipation notes(BANS) are issued in order to avoid borrowing theamount required to finance an entire capital projectbefore all of the funds are needed and/or in hopes offinancing the project at lower long-term interest ratesthan are available when the project is beingconstructed. In many states there are laws whichrequire the issuer to refinance BAN S with long-termdebt within a period of one or two years of the date ofissue.

State and local units have also used short-termborrowing to finance expected and unexpected cur-rent operating deficits ~ current operating cxpendi-rum in excess of current revenues. If continued overseveral years, this type of financial strategy may causesevere financial strains as the governmental unitattempts to refinance its rising short-term indehted-ness by issuing new debt to replace maturing ohliga-lions. The dangers of this form of short-term horrow-


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were pointed out in an ACIR report, City Finan-Emergencies: The Intergovernmental Din~rk~n.report concluded that borrowing to refinanceng deficits is an early warning signal of potcrr-future financial difficu1ties.s

Short-term state and local debt has been increasingrecently, as Exhib it 6 shows. The annualamount of short-term municipal debt issued,h was about half the amount of long-term stateal debt in the 195Os, has exceeded or equalledamount of such long-term debt issued in each oflast five years. This is important because, as theYork cr isis has painfully demonstrated, unfore-

seen negative market conditions can make the re-financing of short-term debt difficult and costly foreven financia lly strong state or local governmentalunits6The growth in short-term debt outstanding is lessnoticeable because short-term debt is retired orturned-over (a maturing issue repaid by a new one) sofrequently. Exhib it 7 demonstrates that short-termdebt has increased as a percentage of total outstand-ing indebtedness. It also shows that local govern-mental units have a higher proportion of their totaldebt outstanding in the form of short-term obligations(9%) than do states and state agencies (6%).

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Exhibit 6ANNUAL DOLLAR VOLUME OF STATE AND LOCAL BORROWING -LONG-TERM VERSUS SHORT-TERM

1950 52 54 56 58 60 62 64 66 68 70 72 74 76

source: ExhibitAd in Appendix A.Calendar Year

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Year19621967196219671968196919701971197219731974

1962196719621967196819691971197219731974

35.7 100 14.7 41 18.9 5339.6 100 16.2 41 20.7 5242.0 100 17.7 42 21.1 5047.8 100 21.5 45 22.8 4854.5 100 25.3 46 25.3 4659.4 100 28.4 ~48 27.3 4665.3 100 30.9 47 30.8 47

LOCAL DEBT OUTSTANDING BY CHARACTER1962 B 23.21957 39.01962 59.31967 82.11968 65.51969 94.01970 101.61971 111.01972 120.11973 129.1,974 141.3

Exhibit 7STATE AND LOCAL DEBT OUTSTANDING BY CHARACTER

$ 30.1 100%52.7 10 081.3 10 0

114.6 10 0121~2 100133.5 100143.5 100158.8 100174.6 10 0188.5 10 0206.6 100

48.3 59 29.262.8 55 44.665.1 54 47.670.9 53 52.675.3 52 56.084.0 53 59.895.9 55 63.0

102.9 55 69.7111.0 54 79.0

363939383938363738

5 1.4 4%2.2 43.8 57.0 68.5 7

10.1 812.3 915.2 915.7 915.9 816.7 8

STATE DEBT OUTSTANDING BY CHARACTERS 6.9 100% $ 4.9 71% $ 1.7 25%

13.7 100 6.5 47 7.0 5122.0 100 10.3 47 11.3 5132.5 100 13.6 42 17.6 54

* .3 4%.2 2.4 2

1.3 42.1 62.7 , 73.2 83.5 73.9 83.7 63.6 6

100%10 010 010 010 010 010 010 010 010 010 0

518.5 79%26.2 6738.0 6449.2 6050.4 5954.7 5857.6 5762.5 5670.6 5974.5 58 42.4 3380.1 57 48.2 34

* 3.6 16%10.8 2817.8 3027.2 3326.7 3431.9 3434.9 3436.6 3337.7 31

* 1.1 5%2.0 53.4 65.7 76.4 77.4 89.1 911.7 11

11.8 1012.2 913.1 9

Source: Adapted from Mun;cip al Finance SfafLvt;cs. p. 8. and GovernmenralFinances. publishe d annually by the Govern-ments Division. U.S. Bureau of the Census (Washington, D.C.: U.S. Government Printing Office. 1952 .76).

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Long-TermIn their book, Conc,epls and fruc~lic~e~ in L~~YI/

Govemmenr F inance, Moak and Hillhouse suggestthat the primary purpose of municipal borrowing is toState and permit governments to achieve timely financing ofneeded expenditures without causing unsettling fluc-tuations in tax rates and charges. Long-term statelocal and local borrowing (average maturity exceeding oneyear) most often serves this objective by financingcapita1 projects or refunding maturing debt. 1Borrowing The purposes for which state and local units issuedlong-term debt in various years is shown in Exhih ir 8.There has been a drop in the percentage of long-termstate and local issues devoted to education and trans-portation. Pollution control, a new category. hasbecome an important reason for state and loca lborrowing. Recent environmental legislation permitscompanies to borrow through state and lora l agencies(allowing them to enjoy lower interest rates becauseof the tax-exempt status of interest on state and localdebt) for pollution control purposes.Exhibit 7 classifies long-term state and local debtby the extent of the backing or commitment support-ing the debt service payments. The two major claxs i-fications are general and limited liability obligations.General obligation debt is secured by the full faith,credit, and taxing power of the issuing governmentalunit. As the name implies, a limited liabilit y obliga-tion does not pledge the full resources of the govern-ment to pay the interest and principal requirements


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the debt. The debt serv ice payments are generally

While both categories of state and local long-termhave increased in absolute terms over the last 20Exhibit 7 shows that the relative growth hassignificantly different. In the ear ly 1950s limited

approximately one-fourth ofstate and one-sixth of total local debt outstand-the latter 19505 non-guaranteed debt hadroughly half of tofal state debt and one-thirdpercentages have remained rela-steady since that time. Moak and Hillhousethe primary reasons for the increasedof limited liability obligation debt is to circumventon general obligation borrowing.8

Since limited liability debt is backed by fewerissues of this kind are considered tomore ris ky than general obligations and, therefore,a higher return (net interest yield) to theThe priority of holders of general obligations (fullh orcrcdit) has itself been il subject of considerablein the last year or so. Previously, it wasdebt serv ice charges would he paidny other oblig.;ltion was met. At the present

obligations are possessed by the holders of such debt,the municipal employees, and the citizens of thedefaulting municipality.The priority of holders is even less clear with re-spect to moral obligationdebt issued byanauthorityor agency of a state or local unit. The state or localunit is morally (but not legally) obligated to appropri-ate funds if the authoritys or agencys revenues arenot sufficient to cover its debt service requirements.The extent of the backing or commitment required bysuch moral obligation has not been clearly defined.qLong-term state and local debt issues can also beclassified by the repayment pattern of the debt. Mostlong-term state and loca l debt is in the form of serialmaturity, i .e., portions of the principal come dueperiodically. Many limited liability municipal bondsare term bonds, i.e., the entire principa l is liquidatedin a single payment at the maturity of the debt. Ser ialbonds have the advantages of (I) attracting investorswith different preferences concerning the maturitydate of their investments and (2) avoiding the needfor a large (balloon) payment at maturity. Termbonds can be used in a mnnner similar to seria l issuesby retiring portions of the principal as funds becomeavailable. The retirements can be accomplished bypurchasing the debt in the market place or by insert-

not completely clear what rights and ing a call provision in the bond indenture

Exhibit 8 /STATE AND LOCAL LONG-TERM DEBT CLASSIFIED BY PURPOSE

(percents)

TMlS: Public Industrial PollutionYear Schools Utilities port&ion Housing Aid Control Other Total1959 30% 15% 12% 4% -% -% 39% 100%1962 35 15 14 4 1 31 1001967 31 14 8 3 9 - 35 1001968 29 12 10 3 10 36 1001969 28 12 14 3 0 - 44 1001970 28 13 8 1 0 50 1001971 24 15 11 4 1 45 1001972 23 13 9 4 2 49 1001973 21 15 6 5 1 9 43 1001974 22 14 4 2 2 10 46 100

aLeSShan .a percent.source: PIdapted ram Mnic;pal Finance statistics. p. 8.


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Exhibirs 9 unrl IO show that commercial hanksWEK the major purchasers of state and IOC~II dchl inthe 1960s. increasing their proportion of owncrihipfrom 25 percent to 49 percent. Liquidity considc~.;~-lions and loan demand significantly influence urn-meraa l hank dema nd for such investments. thcwfore. their pattern of purchasing munic ipal dcht~surs is fairly erratic. The cxhihits also show coni-mercial hank holdings of municipals declining ~5 itpercentage of the total in the last three years. I.oanlosses of banks have reduced lhcir tax liabilit y makingmunicipa ls less attractive investments. l~hea vailahilityof other low or no-tax investment alternatiws such asleasing operations have attracted hank investments.There is reason to question whethcrcommcrcial hanks

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l be able or willing to continue absorbing theof state and local issues in the future,lly if there arc other strong demands on theirChanges in exposure to high income tax rates havethe demand of casua lty insurance compa-

and households for municipal debt securities.taxable incomes have risen (due, in part,inflation) and the average effective tax rate forinsurance companies has also increased.both of these groups have shown greaterthe munic ipal debt market in the 1960sand1970s.. Large insurance losses reduced demands

by fire and casualty insurance companies in 1974 and1975, while the increased holdings in the othercategory in 1975 reflected purchases of New Yorkrelated issues by some state and local retirementfunds. Recent increases in the effective income taxrates paid by life insurance companies should makethe tax exemption feature of state and local debt moreattractive to these institutions. Nevertheless, some ofour fastest growing financial intermediaries, e.g.,pension funds and savings and loan associ~.tions, paylittle or no income taxes and generally find the lowerrates on state and local debt less attractive thanalternative taxable securities.


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Exhibit 9NET PURCHASES OF STATE AND LOCAL DEBT

(billions)Com mercial Fire and Casua lty

Year Households Banks Insurance Companies Other1963 5.2 .81964 2: t.713. 6 .41965 2.1 L5 )5.1 .41966 2. 7 1.2)1.9 .7 .41967 (1.6) 8.9 1.51968 10 8.5 .91969 4. 3

(::,.2 1.1 1. 5

1970 3.7 10.5 1.51971 4. 3

(1.0)12.8 3. 4 1. 2

1972 0.0 7.1 4.4 1.31973 71 3.9 3.61974 1.5)64 5.7 2.2 .21975" 3.2 5.1 2.4 2.7

'Corporations. ,, fe lni",a"Ce compa nies. mutual sa v,ngs hanks. and State and local retiremen, f""&, ) = decrease.e = estima,e'3S'jd,rce Siw~iy and Dema nd for Credit ;n 1970. 1 97.5 (New York: Salomon Brothers).

Exhibit 10HOLDERS OF OUTSTANDING STATE AND LOCAL DEBT

(Percent)Comm ercial Fire and Casua lty

Year Househo lds Banks Insurance Comp anies Other Total1950 40% 33 % 4% 23% 100%1960 44 25 11 20 1001966 36 39 11 14 10 01966 38 39 12 11 10 01967 33 44 12 11 10 01968 30 48 12 10 10 01969 35 45 12 8 10 01970 31 49 12 8 10 01971 28 51 13 8 1001972 26 53 14 7 1001973 27 51 15 7 1001974 31 48 15 6 10 01975 34 45 15 6 10 0

"Mainly corporafions and l i fe in*urance comp anies.source: Adapted from MunicipalF;"a"ce Srarisrrcs. p. 17.


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cost of . Ihc important elements of the municipal debtmarket are the cost ( from the issuers standpoint) andthe return lfrnm the holders standn oint) rewired for1Borrowing the issuing unit to obtain funds from inves tors. The

for State general. (2) the perceived general quality of municipaldebt issues relative to alternative inves tme nts. (3) thetax-exemot status of interest income received fromand Local state and local debt se curities. (4) the matu rity of thedebt issue . and (5) the quality of the individual issue.Erhihir // comp ares awrap mark et yields for 20.Units year municipal bonds with those on L1.S. Treasurybonds of the same maturi ty. The basic reasons for thedif fercnces between the yields arc qual i ty di f fcrcnccs(probability of default. l iquidity. etc.) and the value ofthe Federal income tax exemption of the interestincome from state and local debt issues. This spread isalso affected b!; changes in business condit ions. t i txrates. and other factor s. Finally. while these trio yieldindexes ha\se move d in similar general patterns . theyields on state and local deht ha\e lluctuat~d morethan the yields on Federal debt. ~l.his phenomenon 1spart ial ly caused by changes in commercial banksdemand for new state and local issues.

Exhihir /2 demonstrates the effect of the matunt!of an issue on the interest yield in the municipal debtma rket. Ihe longer the ma turity. the higher the yeldtends to be. Yields on short-term municipals arc mtrrcvolatile than those for longer-term municipa ls. a-though the pr ices of short- term issues arc ICC volat ilebecause the principal will be repaid in a shorter time.I hese character ist ics are also comm on to mos t other

types of debt instruments.


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Exhibit 11-

YIELDS ON PO-YEAR TREASURY BONDSAND BOND BUYER 1 I-BONDINDEXPercents-

6-

7-

6-

5-

Bond Buyer Municipal Index

,:, , I,,,,, I I I I I I I I I195052 54 56 58 60 62 64 66 1966 1969 1970 1971 1972 1973 1974 1975

Annual Yields Monthly Yields

The Treasury ,e,d ,ndex was changed in February. 1973 to be 6ased on Sorce:AnAn alyf,calRecordof ;eldsand;eldSpread slNewYark: Salon, ,iss1,es With CopOS of 6-3 4 percenr and higher rather th an 3-1,s to 4-l 14 Brothers, ,976,~ptXGet


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YIELD ON 1 -YEAR AND 20-YEAR GOOD GRADE MUNICIPALS

l-Year Municipals

I I 1 I I I I I I I / I I I I I .A I I 1 I I 1 I350 52 54 56 56 60 62 64 66 1968 1969 1970 1971 1972 1973 1974 1975

Annual Yields Monthly YieldsSource An Analytical Record of Ytelds and YieldSpreads (New~ork. Salomo n Brothers. 1976)


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Exhibit 13

PercentYIELDS ON 20-YEAR PRIME GRADE VERSUS PO-YEAR GOODAND MEDIUM GRADE MUNICIPALS

Medium Grade Municipals

Good Grade Municipals

y Prime Grade Municipals

1950 52 54 56 58 60 62 64 66 1968 1969 1970 1971 1972 1973 1974 1975Annual Yields . Monthly Yields

'Nole:Goodg,ade~,,~~~~~.,~~l~~~~r~~~dfurdnnualdata 1950.67,med,um Source AnAnal~rrcalRecoidofY,eldsandYieldSpreads(NewYork-Salomongrade were used for n,on,hly data 1968 75 Brothers 1976)


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The Quality ofState andlocal Debt

One of the primary problems in understanding thequality of state and local debt is determining exactlywhat is meant by credit quality or simply quality.Two distinct approaches to measuring quality areexamined in this summary study - prospective andtested quality. Prospective (or ex ante) quality isconcerned with the likelihood of payment of principaland interest when they come due. Because prospectivequality purports to measure the likelihood of futureevents, it is a less certain measure than tested quality.Tested (or ex posr) quality involves a comparisonof the actual incidence of payment of interest andprincipal with that promised by the state and loca ldebt being studied. Therefore. tested quality can bemeasured only after interest and principal paymentsarc due. Two measures of prospective quality -yielddiffcrcntials and bond ratings -~ as well as twomeasures of tested quality - estimated defaults oninterest and principal and results of municipal bank-ruptcies filed -are examined in this study.One potential approach to measuring the prospcc-tivc quality of municipal debt was introducgd in thesection on the cost of borrowing, where comparisonswere made between the market yield on U.S. Treasuryand municipal securities of similar maturity. Al-though factors other than basic credit quality alsoaffect these yield comparisons. the risk factors asso-ciated with munic ipal debt appear to become less of aconsideration in intervals of prosperity than in reces-sion periods. If generally high interest rates accom-pany prosperity. however, the burden of the addeddebt service costs may lead to higher municipaldefault risks and rclatlvc ly greater state and localintrrcst costs, especially for cities whose debt issuesrccciw fairly low bond ratings.

Other factors can also have an impact on therelationship between the quality of Federal and mu-nicipal debt issues as mcasurcd by their relativeintcrcst costs. One recent influcncc was the introduc-tion of the Federal general revcnuc sharing program.Recent empirical work has found that a structuralchange in the relationship between risk premiums onFederal wrsw state and local debt issues occurred inthe early 1970s. While intcrcst rates rose generally in


34/68

the early 197Os, the relative rise in state and local ratessince the introduction of general revenue sharing wasless than might have been expected. This change inthe relationship between the interest rates may betraced to improvements in the overall revenue-expenditure situation of state and loca l governmentalunits because of the receipt of general revenue sharingfunds. The availability of these funds appeared tohave changed investorssub jective perceptions of stateand locals governments ability to pay debt servicerequirements. By decreasing the estimated probabilityof municipal financial problems, general revenuesharing lowered (relatively ) the cost of state and localborrowing. Unfortunately, recent uncerta inties aboutthe permanence of general revenue sharing nowappear to have negated much of its earlie r positiveeffect on interest costs.Another special factor has influenced the relation-ship between U.S. Treasury and municipal yields inthe last year or so. The scope of the financ ial prob-lems of New York City began to emerge in late 1974,when it was revealed that New Yorks financialposition was worse than previously anticipated andthat the city might not be able to raise the additionalexternal financing it needed. For the IS monthspreceding November 1974, the differential betweenTreasury and the Bond Buyer II-bond municipalyield index averaged about 210 basis points (2.10%).In November 1974, the differential fell sign ificantly(about 70 basis points). This lower leve l of yielddifferential has since persisted through December1975. This narrowing of the average yie ld gap indi-cates that the market perceived a change in therelative quality of the two types of securities. Whilemany other factors may be involved, the bad fiscalnews from New York City and. more recently, NewYork State during this period appears to have had asignificant negative effect on the relative financingcosts of other state and loca l governments. However,testing the validity of this assertion wi ll requirefurther observations and investigation of the eventsand relative yie lds from late 1974 through early 1976.

A second potential way of investigating the prospec-tive quality of municipal debt focuses on the ratingsthat such debt issues receive from the two major rat-ing agencies, Moody Investors Serv ices and Standardand Poor, Inc. Although there is some debate over thereliability and validity of ratings as a measure ofcredit risk (quality), they are often cited as a standardfor comparison among quality lev& in municipaldebt issues (being rated). Exhibit 14 presents thedistribution of ratings from Aaa (smallest degree ofinvestment risk) to Ba (greatest r isk of non-payment)24

among those issues having a rating which have beenassigned by Moodys to long-term municipal debtissues in various years since 1945. The data representthe percentage of the total dollar volume of ratedmunicipal bonds which received a given rating inthat year. The data in Exhib it 14 show that thequality of munic ipal debt. as measured by ratingagency classifications, increased in the early 1950sand deteriorated somewhat in the late 1950s and1960s. The fact that the major rating agencies begancharging governmental units for assigning ratings totheir debt in the late 1960s may make comparisonsbetween current ratings distr ibutions and those ofearlier periods less valid.One method of measuring tested quality , anexamination of recorded municipal defaults. is pre-sented in Exhibit IS. Three general conclusions maybe made from the data in this exhibit. First , defaultshave occurred under both good and bad economicconditions. Second. it was only in major depressionperiods (1837.43, 1873-79, 1893-99. and 1929-37) thatthe defaults on state and loca l indebtedness reachedsignif icant magnitude. Third, defaults occurred inevery major type of governmental unit and in everygeographical region.Annual data on the amount of munic ipal debt indefault and permanent losses of princ ipal and interestare not available. However, it has been estimated that7.2 percent of the total amount of munic ipal indebted-ness outstanding was in default at the height of the1929 depression period, but that only 0.4percent ofthe total munic ipal indebtedness in the early 1970swas in default.>Another approach to measuring tested quality in-volves an examination of municipal bankruptcy data.Exh ibit 16 presents a summary of the governmentalunits which have filed under Chapter 1X of the Fed-eral bankruptcy laws from fiscal 1938 through 1975.The data in Exhibit 16 show that admitted losses con-stitute about one-third of the $223 mill ion of totaladmitted debt in the bankruptcy cases filed. How-ever, it is particularly noteworthy that only IX newcases havebeen filed since 1954, and that most recentcases have been concluded with little or no perma-nent losses to creditors. Finally, a comparison of thefigures in Exh ibits 15 and 16 shows that on ly a smallproportion of munic ipal defaults have been resolvedthrough the bankruptcy process. Other alternatives,such as no action, direct agreement between a dc-faulting unit and its credito rs, and agreements rc -viewed, approved, and supervised by other courts(e.g., state courts ) or administrative bodies appearedto be more popular methods for settling defau1ts.J


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Exhibit 14PERCENTAGE DISTRIBUTION OF RATED LONG-TERM STATE AND LOCALBONDS ISSUED, BY DOLLAR VALUE IN YEAR OF ISSUE

(percent in rating category)YeFIr AM1945 4.2%1946 7. 61947 16.41948 33.91949 9.41950 12.61951 27.01952 23.51963 24.41964 22.41955 22.21956 11.71957 11.31958 16.41959 15.31960 14.61961 12.51962 17.31963 17.51964 13.21965 12.31966 10.01967 12 51968 8. 71969 13.31970 9.51971 12.51972 14.41973 13.31974 15.71976 16.2

Due to rounding. ma y not add to 100%

AA A Ba a Ba and Below16.2% 46.1% 27.0% 6.4%22.7 47.6 19.2 2.850.2 20.2 11.6 1.423.2 31.2 10.5 1.130.2 38.3 20.1 2.041.2 32.6 12.0 1.531.4 28.6 11.6 1.521.2 42.5 10.6 2.131.9 32.1 11.0 .627.0 38.1 11.0 1.529.6 35.0 12.2 1.032.5 42.0 12.3 1. 538.2 38.9 11.0 .536.1 35.0 10.8 1.729.9 41.0 13.0 .930.0 39.6 14.4 1.336.4 37.4 12.8 .9 122.6 45.6 13.2 1. 321.2 42.5 16.7 2.128.2 41.6 15.5 1.529.7 37.9 18.8 1.332.5 32.2 24.1 1.332.7 303 22.8 1. 627.9 40.3 22.1 .931.1 37.0 18.0 .629.2 41.1 19.8 .429.9 38.1 18.9 .626.8 40.9 17.7 .222.3 51.8 12.5 .l23.2 51.6 9.4 .l23.7 54.5 5.6 .O

2


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Exhibit 15RECORDED DEFAULTS FROM 1839 THROUGH 1969 , BY TYPE OF GOVERNMENTALUNIT AND GEOGRAPHICAL REGION

Number ofstate and

l .ClCal,839 1860 ,860 1870 1880 1890 1900 ,910 ,920 1930 1940 1960 1960 Total Governmentr

-49 -69 -69 -79 -89 -99 -09 -19 -29 -39 -49 -69 -69 Defaults in 1972*

6 Type 0 nit:states 9 2 1 9Counties and parishes 7 15 57 30incorporated municipalities 4 4 13 50 30Unincorporated municipalities 4 9 46 31Schoo l districts 4 5Other districts 2 1

By Geographical Region:New England Statesb 1 I 1 1Middle Atlantic StatesC 2 5 6 1 9 11Southern Statesd 6 2 40 29Midwestern Statese 4 10 28 84 46Sothwestern States 1 20 7Mountain Staterg 2Pacific Statash 2 2 3

Totals 13 17 38 168 97

949350

912

2133689791722

The number of government units has changed rapidly. For example. in1932 there were 127,108 school districts. 9,580 other districts, and 175,369state and local governmental units.

bConnecticut. Maine. Massachusetts. New Ham,,shire, Rhode Island. andWlD,.

CDelaware, District of Columbia, Maryland. New Jersey . New York . an dPennsylvania.

dAlabama , Arkansas. Florida. Georgia. Kentucky. Louisiana. Mississippi,North Carolina. South Carolina, Tennessee, Virginia and West Virginia.

ell l inois. Indiana. lowa, Michigan, Minnesota. Missouri. Nebraska. NorthDakota. Ohio. South D akota. and Wisconsin.

4351

13256827

214

149

17 15

17 395 10

147 107

1 14 49 516 185 258 173 70

36 186

4171434

8812411590

7251

18631152

707270520

4770

6 1231 31

7 45 23

30 42

9161825

65

79

4333436

41

11 2

2411 4

286070

4107676

11 23

13

22 50727 3.044

1911 18.517313 16.991

1372 15,781,872 23,885

19351

218616331044

329655

6217

3,10210,26210,20333,624

9,7424,2447,091

78,268

Armna, Kansas. New Mexico. Oklahoma. and Texas~oColorado. Idaho, Montana, Nevada, tab, and Wyoming.Alaska. California. Hawaii. Oregon. and Washington.Sources: Default information in The Daily BondBuyer. The Cornmercbland

Fimnc;alChron;cle. and The ,vesfmenfBanXersAssoc~~r;ansBul/et;n: defaul tl ists from Federal Deposit Insurance Corporation, Life Insurance Commission.and U.S. Courts; and Albert M. Hil lhouse. DefauhedMun;o;~a lBonds(Chicago:Municipal Finance Officers Association. 1935). Number of local governmentunits from: U.S. Departmentof Commerce. Bureau ofcensus. Censusof Gavern-merits. 1969, Vol. 1. Governmental Organization (Government Printing Office.1974).


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Exhibit 16SUMMARY OF RESULTS OF CASES FILED UNDER CHAPTER IX OF THEFEDERAL BANKRUPTCY LAWS

YlXlr Filed3571

104194313587772431502110230010022120020010

cases casesCOll- Dis-eluded missed

2 017 022 737 846 340 2318 214 3a 18 412 12 05 53 017 12 24 14

0 01 12 01 03 02 00 03 10 00 20 00 01 01 00 10 02b 01 00 01 10 0

Statis tics for Cases ConcludedAdmitted Debts$ 67,6756.587.01215.500.00028.466.000

33.704.00026.633.00018.014,OOO39.816,OOO13.086.5554.651.1682.464.215224,3611.253.1831.308.68710.043.6482.183.413934,733 ,163,615353,562

639,0952.171.44816.1242.077.382306,500

211.300,629,44816,124544,668148,500972,642 891,701

2.599.700-0

3.714.500b230,000

5.450.000

Amount Paid or tobe Paid as Extended$ 67,6753.924.149

6.674.00016.332.00024.458.00016.032.00011.457.00027,185,OOO9.594.9842.715,2341.632.987136,525464,094582,8688.424.662

2.599.700-0-a

3.714.500b95,000

5.450.000

Admitted Losses$ -

2.662.8638.826.00012.134,0009.246.00010,601.OOO6.557.00012,631,OOO3.491.5711.935.934831,22887,836789,089

725.8191,618,9861 ,019,798581,171427,795542,000 I1.532.714158,000

80,941

135,000

27


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Operation ofthe MarketThe most important distinction to make in descrih-ing the operation of the state and local debt market isthe difference between the primary and secondarymarkets.The primoq~ marker for state and local debt refersto the process of initial issuance of such debt. The first

c c1d 1ror 3tafa step for the state or loca l governmental units is to,&b receive authorization (voter referendum. existing sta-tute, etc.) to issue debt. A summary of the results ofand LocalDebtrecent state and loca l bond elections is presented inExhibit 17. Although the results vary from year toyear, since the mid-1960s there appears to be rela-tidy less voter support for bond issues than existedpreviously. The shock waves from the severe financialproblems of New York C ity and state were f#t in the

Instrumentsvoting booths across the nation during 1975, as votersapproved only 29.3 percent of the $11,575,599,210submitted in 1,835 bond financing programs by 1.539state and loca l governmental units. Th is is the lowestapproval percentage ever recorded since The Bond&VU began compiling this data in 1926.14After the state or local debt issue receives theappropriate authorization, the issuer determines thedetails (e.g., dollar amounts, maturities, coupon rates)of the issue. For some short-term issues and mostlong-term issues, the next step is competitive biddingfor the issue. The basic description of the issue isnormally placed in The Bond Bu.yrr and other finan-

cia l publications. This advertisement sets in motionthe underwriting process and frequently (nearly al-ways for larger, long-term issues) the debt ratingprocess. The rating agencies contract with the issuerto rate the debt issue and publish the ratings. Therating agency collects the information it requires forthe analys is and then publishes the rating a weekbefore the sale of the debt issue. Instead of requiringformal competitive bidding, many short-term munici-pal issues (Federally guaranteed issues being a notable


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exception) and some long-term issues are privatelyplaced with local commercial banks or other institu-tions. the interest rate paid being determined throughnegotiations.Nearly all long-term state and local debt issues aresold initiall y to underwriters (usually investmentbankers or commercial banks), who generally formsyndicates or groups to purchase the issue and thenre-offer it to investors. The syndicate submits a bidstating net interest cost to the municipality and if it issuccess ful (accepted because it has the lowest netinterest cost to the governmental unit), the syndicatethen owns the securities.The underwriters then try to sell the securities toinstitutional and individual investors at prices thatcover their underwriting expenses and provide themwith an adequate profit for their risk. The marginbetween the issuers proceeds and the amount receivedby the underwriter has averaged around I percent.sThus, in the primary market, the municipa lity sells itsissue to underwriters who act as wholesalers by re-offering the debt issue securities to the public orsometimes hold the securities in their own inventory.If the underwriters have misjudged the yield that themarket will require on such issues, or if the marketdeteriorates before the issue is sold out, they may haveto sell them at a loss to avoid the costs of carrying thesecurities in their own inventories.The secondary market refers to all transactions inan issue that occur after the original underwriting andsale. A good secondary market is important for a debtissue. Investors are more lik ely to be willing topurchase state and local securities if they believethey can easily liquidate their holdings when theywant to. Liquidity is a more important factor forlong-term than short-term municipal debt since mostshort-term debt seems to be purchased and held tomaturity. Data on the sire of the secondary marketfor state and local deht are scarce since the market isconducted over-the-counter, i .e., the securities arenot listed or traded on a formal exchange. This meansthat participants dealing in the secondary market arenat required to report on their transactions. Thus,

little is known about the size of the market or thecharacteristics of the participants in the market.However, since a round lot in this market is generally$50,000, one might infer that the participants areconcentrated in those categories of investors who canmarshal fa irly large amounts of money. There iscontinuing concern for the fact that the market doesnot always function well for holders of small blocks ofmunicipal issues.Recent Changes

In late June 1975, as New York City was flounder-ing, Congress enacted the Secur ir ies Act Amendmentsof 1975. These amendments brought municipal bonddealers under Federal regulation. At the same time,there was increasing concern over possib le legalexposure resulting from the fact that municipal bondsare subject to the anti-fraud provisions of the Securi-t ies and Exchange Act. This act makes it unlaw-ful to make any untrue statement of a mater ialfact or to omit to state material fact in public sale ofsecurities. The amendments, while not reducing theobligations of issuers under the anti-fraud provisions,continued to exempt state and loca l units from theregistration and reporting requirements of the securi-ties la~s.~Underwriters of municipal issues warned that fewbids would be submitted for issues on which fulldisclosure was even a potential problem, that market-ing such issues would become a lengthy and costlyprocedure, and that some potential borrowers mighteven lose access to the market. In late 1975, under-writing syndicates decided not to bid for $9.5 millionof New York State bonds; furthermore, Richmondfailed to sell $25 million of bonds and Suffolk County(New York) was stymied from selling a $54 millionissue reportedly because of disclosure problems. As1976 progresses, it seems likely that the operation ofthe market for state and local debt instruments willcontinue undergoing fundamental change as a resultof both,recent and possible future laws and pressureson the market.

29


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Exhibit 17RESULTS OF STATE AND LOCAL BOND ISSUE ELECTIONS

Year Approved Amount Percent Defeated Amount Percent1950 $1,537,517,326 76% s 497.983.399 24%1951 2.249.602.957 88 301 ,174,640 121952 2.383.970.390 84 458.278.500 161953 1,851,594,537 83 388.769.450 171954 2.781.901.503 84 544,154,550 161955 2.885.666.121 65 1.524.453.871 351956 4.642.488.809 87 665.689.492 131957 2.733.435.486 77 806.795.602 231958 3.728.455.966 75 1.263.754.101 251959 2.752.942.464 72 1.087.633.605 281960 5,916,951,404 85 1.007.889.410 151961 2.544.327.858 67 1.263.606.943 331962 4.263.609.903 70 1.850.443.358 301963 3.626.886.529 63 2,156,807,833 3711964 5.715.400.806 78 1.582.926.248 221965 5.611.653.628 73 2.095,491,659 271966 6.515.833.687 77 1,944,831,423 231967 7,365,194,080 74 2,549,704,766 261968 8.686.075.169 64 7.459.875.274 461969 4.286.542.050 40 6.534.047.453 601970 5,366,441,359 63 3,194,042,145 371971 3,142,846,335 35 5.862.362.912 651972 7.875.500.983 64 4.445.857.080 361973 6.306.039.592 52 5.800.848.1 14 481974 8,021,389,589 62 4,865,370,237 381975 3.392.270.729 29 8.184.238.481 71


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31


42/68

Appendix AGraphic Source Tables


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Exhibit A- 1ANNUAL VOLUME OF NEW STATE AND LOCAL BORROWING

(basis for Exhibit 1 in text)

YEW Amount Number(in millions) of lsslles1950 s 5.304.7 6,5331951 4.914.9 5,8851952 6.450.5 6,4101953 8.314.5 7,2631954 10.318.9 7,747195519561957195819591960196119621963196419651966196719681969197019711972197319741975

8.569.48.152.70.231.71.359.31.859.71.235.72.873.73.321.7

15,587.515,967.417.621.617.612.522.313.325.032.923.243.435,641.650.651.048.162.647.620.051.864.658.197.1

7,7327,6898,2428,5238,5688,3978,4908,6898,5748,1387,9777,4307,9647,8876,3957,6048,8118,4208,1477,7018,080

33


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Exhibit A-2STATE AND LOCAL DEBT AS A PERCENTAGE OF NETTOTAL DEBTAND NET PUBLIC DEBT

(in billions)(basis for Exhib it 3 in text)

Total Total TotalState and State and

Total Local Percent Local PercentYear Privateand Publ ic Pub lic State and Local P rivate1950195119521953195419551956195719581959196019611962196319641965196619671968196919701971197219731974

$ 490.3 $239.4 S 20.7524.0 241.8 23.3555.2 248.7 25.8586.4 256.7 28.6612.0 263.6 33.4665.8 273.6 41.1698.4 271.2 44.5728.3 274.0 48.6769.6 287.2 53.7833.0 304.7 59.6874.2 308.1 64.9930.3 321.2 70.5966.0 335.9 77.01.070.9 348.6 83.91.151.6 361.9 90.41.244.1 373.7 98.31.341.4 387.9 104.81.435.5 408.3 112.81.582.5 437.1 123.91.736.0 453.2 133.31.868.9 484.9 145.0

2.045.8 528.2 162.42.270.2 557.6 175.02.525.8 593.4 184.52.777.3 642.9 205.6

Survey of Current Business, Yarious **ues.

s 250.9282.2306.5329.7348.4392.2427.2454.3482.4528.3566.1609.1660.1722.3789.7870.4953.51.027.2

1.145.41.282.91.384.01.517.61.712.71.932.42.134.4

Total Total Pub lic4.2% 8.6%4.4 9.64.6 10.44.9 11.15.5 12.76.2 15.06.4 16.46.7 17.77.0 18.77.2 19.67.4 21.1'7.6 21.97.7 22.97.8 24.17.9 24.97.9 26.37.8 27.07.9 27.67.8 28.37.7 29.47.8 29.97.9 30.77.7 31.47.3 31.17.4 32.0

34


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Exhibit A-3ANNUAL DOLLAR VOLUME OF STATE AND LOCAL BORROWING

(basis for Exhibit 6 in text)

YearLong-Term Short-Term

Amount Amount1950 $ 3.963.61951 3.278.11952 4,401.31953 5.557.91954 6.968.61955 5.976.51956 5.446.41957 6.958.21958 7.448.81959 7,681 .O1960 7.229.51961 8.359.51962 8.558.21963 10,106.71964 10.544.11965 1 1,084.21966 11.088.91967 14.287.91968 16.374.31969 11.460.21970 17,761.61971 24.369.51972 22.940.81973 22.952.61974 22.824.01975 29.224.3

Source: MunicipalFinan ce Sfarisfics. p. 7. 1975 figures from The BondBuyer.

5 1.611.11.636.82.049.22.756.63.350.22.592.92.706.33.273.53.910.54.178.64.006.24.514.24.763.55.480.85.423.36.537.46,523.58.025.38,658.611.783.117.879.9

26,281.525,221.824.667.429.040.728.972.8

1

.

135


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Exhibit A-4SELECTED YIELD INDEXES(basis for E xhibits 1 1. 12, 13 in text)

Year19601951196219531954195519561967,956195919601961196219631964196619661967

MOth,YearJan. 1968Feb.Mar.AprilMavJWJulyAug.Sept.Oct.NO.Dec.&I. 1969Feb.Mar.AprilMwJWJulyA&l.Sept.Oct.NO.Dec.

Bonds2.39%2.602.662.922.572.833,073,453.454.124~133.904.024.044,lE4.234.724.935.576.375.395.595.476.4753,5.125.205.295.405,655,926.006.086.205.926.296,176,176.216.706.626~80

1 -YearGrade Grade Grade

20.YearMedium

Grade1.76% .90% 1.90% 1.55% n.a1.94 1.10 1.95 1.60 n.a2.18 1.10 2,lO 1.75 n.a2.73 1,50 2~70 225 ~a2.40 .a5 2.30 2.00 ma.2.47 1 .35 2~50 2.15 ~82.75 1.90 2.80 2.40 .a.3.29 2.45 3.45 2.95 ,a,3.16 1.50 3,30 2,80 ,a3.55 2.45 3.65 3,20 .a,3.54 2.30 3,65 3.20 n.a3.45 I,70 3.55 3.15 m.33.17 1.75 3.20 3.00 ~a3.16 1.85 3.20 3.00 n,a.3.22 2.25 3~30 3~05 ma3.25 2.40 3,25 3,lO 3.45%3.81 3.50 3,85 3.65 4.053.92 3~10 3~90 3~75 4~25

4.38 3.76 4.45 4.20 4~654.16 3~45 4.10 3.90 4.554.49 3.55 4.40 4.20 4.664,3, 3.65 4~55 4,35 5004.44 3.70 4.40 4,15 4.604.51 3.75 4,50 4.26 4.754.46 3.70 4.25 4~10 4~404.11 3.15 4.15 3~95 4.354.44 3.10 4.40 4.30 4,664.36 2.95 4~25 4~10 4~404.56 3.10 4,60 4,25 4,654.76 3.20 4,65 435 4,754.85 3.85 4,90 4,60 5.004.96 4.10 4~90 4~75 5~205.19 4,lO 5~20 4.75 5,305.25 4~36 5,35 5~15 5.605.10 4.20 5.10 4.90 5.405.73 4.60 5.75 5,50 5.906.66 5,05 5,80 5,50 6.105.80 5.25 610 5.80 6~406.37 5~30 6~25 6 20 6~856,19 5.10 6~05 5.70 6.206.1, 5.00 6.06 5,90 6.706.72 540 6.60 6.40 7,25

3,043~423.403 343~103,lO3~153.193.723~93

4~274,044,384~194.324~404~364.004,324~254,444,s4.724775,055124~995.61


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6.756.906,746.806~22

1971 6.305.976.115.735.986.136.306~305.945.805.755,791972 5,815.905.855~985.985 815,5365,735.705,865.736.69

1973 5.636~856.886.866.887.037.097~577.317.027.277.11

Exhibit A-4 (Cont.)

6.616.546,OO6,116.696.926.796.256.166.396.285.415.585.165.345~155.695.666.236.055.395.245.115.445~026.355.295.405.205,lO5.435~435.38

5~255.595.345.005.175.16

1 -YearGoodGrade5.605~304.554.404.855.104.904~504.204.153.752.703,162.702.602.502.903.363.663.403.203.102.953.002.552.662.752,x2.902.603.002.903.003,053.lO3.003.103.303.604.004.004~104.204.864.704.304.204~30

20.YearGood

6~856.805,5356,106.606.856.706.305.906.256.005~105.454.905.106.105.505.906,lO5.805.405.204.955.154.855.005.106.165.004.906.166.105.205.055.004.905.005.055.105.104.905.105.206.505.154.806.005.00

20.YearMediumGrade

7.50 6.427.40 6.306.16 5.886.20 5.996.70 6.767.10 6.807.00 6~666.75 6.086.30 5~996.60 6.236.50 6.085.50 5,145.80 5.295.40 4.885.30 5.115.35 4.935.75 5.466.10 5.656.30 6.046.00 5.845.90 5.145.40 4.985.25 4.905.60 6.215.15 4.825.36 5.145.30 5.005.40 5.205.20 5.005.10 4.925.40 5.255.25 5.175.40 5.215.20 5.125.25 4.996.10 4.865.10 5.016.15 5.065.30 5.1 15.30 5.165.10 5.036.20 6.106.25 5.145.65 6.455,20 5.195.00 4.076.20 5.055.30 5.03

37


48/68

Jan.Feb.Mar .AprilM ayJun.2Julyplug.Sept.Oct.Nov.oec.Jan.Feb.Mar.AprilMay.I?2Julyplug.Sept.Oct.NO.DC%.

20.YearT~~~SV

BOdS7.307.387.497.808.148.068.068.328.518.397.727.707.657.647.608.018.358.177.978.098.368.488.028.12

Exhibit A-4 (Cont.)Municipalo

BondBuyers20.Bondlndax5.165.205.265.575.916.086.336.706.916.626.656.717.086.546.556.956.957.097.007.097.187.547.367.39

1 -YearGoodGrade

20.YearGoodGrade

20.Year 20.YearPrime MediumGrade Grade

4.10 5.05 4.954.10 5.20 5.003.90 5.10 5.004.80 5.45 5.305.10 5.70 5.605.10 5.70 5.605.50 6.25 6.155.30 6.20 6.105.70 6.40 6.355.30 6.10 6.005.00 6.20 6.104.40 6.30 6.254.60 6.35 6.363.90 6.10 6.004.00 6.20 6.103.90 6.40 6.304.25 6.40 6.304.10 6.50 6.404.26 6.50 6,254.00 6.40 6.254.10 6.40 6.254.25 7,oo 6.753.80 6.40 6.263,5O 6.40 6.25

5.305.255.305.606.006.206.706.707.006.756.806.506.806.306.506.706.807.007.007.007.007~407.207.20

5.035.085.155,455,785,896,136,446,596.276.316.366~626.176.246,546.556.71IL586.656.727.096.776.78


49/68

Appendix BOther Related Tables


50/68

Exhibit ci- iNEW MUNICIPAL DEBT BY MONTH (1966-l 975)

A Decade Of Municipal FinancingThis table, compiled from data collecteu I)) 1 he Daily Bond Buyer, show s at a glance the sales by

mon ths of both bonds and short-term notes of states and municipalit ies in the United Statesand insular pos session s and municipalit ies therein during the past ten years


51/68

LONG-TERM LOANS

2.265.877.5092,269,843,X32.832.491.1983,093,592.6833,801,201.072

-

41


52/68

Exhibit B-2

TAX RATES AND 20-BOND INDEX (1912-1974)Federal Income Tax Rates and 20-Bond Index Since 1912

The table below comp ares individual and corporate Federal income tax rates with The BondBuyers20.Bond Index since 1912

Income Tax Ratesldiidd

TOPNormal andSurtax Rate

Income Tax Rates

Year

1975,9741973197219711970196919681967196619651964196319621961196019591958,95719 %1955195419531952195119501949194019471946194519441943

70 %7070707071.7575.2575.257070707791919191919191919191929285.6384.35782.127582.127586.4586.45949493

48 %4848404849.252.852.84848485052525252525252525252525250.754238393838404040

TheBondBuyer's 20

BondIndex'

7.08%5.185.085.035.746.614.854.383.763.533.073.263.053.373.393,783.402.973.232.562.382.542.402.1 1I .662.072.192.361.851.421.621.772.17

'Figure isasofthe firs,Thmdayin Januaryfrom ,946todate. For the years 1915th rough 1945 ,the yield is as ofthe first trading day in January and for the years ,912through 1914theyieldisthea"eragefortheyear.

Year

1942,941,9401939,938193719361935193419331932,93119301929192819271926,925192419231922,9211920,9191918,91719161915191419131912

IndividualTOPNormaland

Surtax Rate88 %817%797979796363636325252425252525465858737373677715

777

13.7513.751212111213~5013.501312.5012.5012.501010

412

21111%

Tax Rate

40 %3,24191915151513.7513~75

TheBondBuyer's 20

BondIndex'

2.24%2~142,592.793,162~623.253~815,484.6,4~874.124~234,173,874~134~234,164,374~164~385.064~564,444.623~924~084,2641 64,454.0,


53/68

fxhibil8-3

ISSUES, RETIREMENTS, AND OWNERSHIP OF STATE AND LOCAL DEBT(1969-l 975)

1970 197117.8 24.4

0.1 0.27.1 7.60.2 0.2

10.4 16.417.9 26.313.5 21.0

4.3 5.314.7 21.7

0.0 0.20.1 0.11.5 3.4

-0.3 -0.1

1 .3 3.610.5 12.8-0.8 1 .o

3.7 4.314.7 21.7

1972 1973 1974 19758 197W22.9 23.0 22.8 27.6 26.5

0.3 0.3 0.2 0.3 0.48.3 9.2 10.4 11.6 13.00.2 0.2 0.3 0.3 0.3

14.1 13.3 11.9 15.6 12.625.2 24.7 29.0 28.0 22.026.5 23.9 26.4 30.2 25.1-13 0.8 2.6 -2.2 -3.112.8 14.1 14.5 13.4 9.7

0.50.04.4

-0.2

4.77.11 . o

o,o12.8

0.0 0.0 0.60.0 0.2 0.43.6 2.2 2.4

-0.4 -0.6 1.1

3.2 1.83.9 5.7

-0.1 0.6

7.1 6.414.1 14.5

4.55.10.6

3.213.4

196911.5

0.06.70.24.6

11 .89.32.57.1

0.00.11.1

-0.1

I.10.21.5

4.3,,I

0.50.5271 . o

4.74.50.8

-0.39.7

43


54/68

Exhibit B-4

STATUTORY INTEREST RATE CEILINGS ON STATE AND LOCAL BONDS

u80uv0007. 500u0N75.5000v0868008068N0008u00

7u

1010

7u007u0

107000700

(%IIJv0v80007. 5086NNu0000000080Nu0000N507

10700u000

1%)v06700v7~ 5070v077060v0876870800800087. 586078

1010

8000800

(%Ivv0vv007.597v078060v08068908008N000N07u

1010

8000700

vv0v7vv7.59N0v07806vv080687000u880080u6076v

10800700

I%)008870067.58607078086608788008808000007007880800600

10

LOW-R.StHousing

NotesWI078870007. 58807078

P888087880088080000876078888006000


55/6845


56/68

Exhibit B-5

STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971

state and TypesOf Local

Government CitationRate Limit for

Applied ExceedingRemarks

Alabama:COlltieS c-sMunicipalities c-s

AlaskaArizona:

counties cMunicipalities CSchool districts C

Arkansas:CountiesMunicipalities

School districts SCalifornia:

Counties sMunicipalities b S

School districts SColorado:

Counties Gsa

MunicipalitiesC C aSchool districts S

3.5 to 5 LAV NOe2oa LA None

No limitations No IimitationS

4 EA Ma4 EA M4 EAV M=

No limitationsi No limitations aNo limitatioma No limitations a

LA @ILA NOeLA NOe

LA NoneEA None

EA NOe

46


57/68

Exhibit B-5 (Cont.)STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)

Rate Limit forApplied Exceeding

Percent Against2 Limit3NO rate No ratelimitations= limitations a

Kent CountyFlorida:CountiesMunicipalities SSchool districts

Georgia:COtk* c

Municipalities CSchoo l districts C

Hawaii:COtiS cx

Idaho:Conties

Municipalities SSchool dktricts

Il l inois:Counties C~ SMunicipalities C~SSchoo l districts CXTownships C~S

Indiana:Counties cMunicipafitier CSchool diStriCtE cTownships c

f0V.Q:Counties cMunicipalities CSchoo l districts C

No limitations No limitations10 LA NaneNo limitations NO limitations

7 LA M

7 LA Ma7 LA M

15 MV None

No limitationsa No limitatian*a

15 MV NoneaNo limitations No limc3tion~~

5 EA None5 EA NOe5 EAV None5 EAV None

2 LAV None2 LAV None2 LA None2 LAV None

5 blva None5 MVa None5 MV None

Remarksa Debt restricted to P-114 times the

latest tax receipts. This limit can beincreased for certain purposes (e.g..se.vers. SChoOf build ing projects andban reneWal projects). certain kindsof debt (e.g., for water supply. gas,electric, and transit) are excludedfrom this l imit

Requires 75% approval of cotycouncil.

bReqireS 80% approval of countyCOCil.

a May be modified by individual charters

a Up to 3 ,,ercent additional debt may beauthorized by genera l assembly. subjectto approval by a majority of voters. butsuch additional debt must be retired infive years.

a Debt incurred in any year c annot exceedrevenue for fiscal year withou t approvalby a 2/3 majority of the oters on theIssue.

47


58/68

Louisiana:Parishes (counties)CMunicipalities CSchool districts C

Maine:CountiesMunicipalities C

Maryland:Counties S

,chartered,

ProvisionsRate Limit for

Percent

la

8ta20

Against Limit3

EAV None

EA NOe

7c

2a3t010C2

EA Id)

Exhibit B-5 (Cont.JSTATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)

Remarks


59/68

STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)ProvisionsstateandTyxs Rate imit OrOf ocal Applied ExceedingGOeIWt Citation Percent AgtliSt* Limit3 Remarks

Exhibit E-5 (Cont.)

COtieS(OChStWSJ)Municipalit iesMassachuretts:COtieSMunicipalit ies SSchool districts s

Michigan:Counties c

Municipalit ie* SSchool districts SMinnesota:C0ti.X sMunicipalit ies a STownships sSchool districts S

Mississippi:Counties sMunicipalit ies S

School districts SMiSSOk

Counties c-sMunicipalities GSSch ool districts c-s

49


60/68

Exhibit E-5 (Cont.)STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)

Municipalities c-sSchoo l districts C

NebraskaNevada:

Counties SMunicipalities sSchoo l districts s

New Hampshire:COUntieS sMunicipalities SSchoo l districts s

New Jersey:COUlltiFS sMunicipalities SSchoo l districts s

New Mexico:Counties cMunicipalities CSchoo l districts c

New York:Countiesa cMunicipalities CSchool districts c-s

NoRh Carolina:CountiesMunicipalities

c-sc-s

Remarks


61/68

Exhibit B-5 (Cont.)STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)

NorthDakota:countiescitiesSchool istricts

Ohio:countiesMunicipalitiesTownshipsSchool dktricts

Oklahoma:CO,kSMunicipalitiesSchool districts

Oregon:CountiesMunicipalitiesSchool districts

CCcSSsS

ccc-ssssSss

Aoainst2

EA EA EA

LA VLA LA LA

LA VLA LA V

NI VML !M

LA VLA LA V

Provisionsfor

ExceedingLimitJ

NOW2/3hMC

NoneNOeNOefC)

NoneNOE!3/5 h

NOWNoneNone

Remarks

a Addi tional debt may be incurred.forwaterworks, up to 4 percent.bAdd itional 3 ~ercen,.=Add itional 5 percent.

Net indebtedness ~ha,, never exceed3 percent of firs, *lOO.OOO.OOO oftaxable a ltIe PIUS ,-l/2 percent Oftaxable value in exces* Of5100.000.00 0 and not in exces of5300.000.00 0. PIUS 2-l/2 percent oftaxable ahe in excess Of~3owoo.ccO

Subject to voter approval. Lowerlines are se, Witho, Voter approval.Special needs districts may exceed

hi, if approved by the state sper~intenden , of public imtru~tion.

aA.mo un, incurred in any year may no,exceed revenue for the year. except bya 3,s majority vote.

bAtdition sl 5 percent.

a0.55 percent for grades I-8: 0.75percent for grades 9-12; 1.5 r~~rcen,for community college or area educa-tion district.

Up to 5 percent witho, referendum; 8debt incurred beyond the 5 ,,ercen, lim,.up to 15 percent. requires a Sim plemajority approval of fhe elecforate.

b For Philadelphia. the upper l im it is13.5 percent with up to 3 percentwithout referendum ,castiftianalp~OkiO,.

51


62/68

Exhibit B-5 /Cont./

STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)

Remarks

Rhode Island:Municipalities

South Carolina:CountiesMunicipalitiesSchool district*

South Dakota:countiesMunicipalitiesSchool districts

Tennessee

Virginia:CountiesMunicipalities

Washington:countiesMunicipalitiesSchool districts

ccc

ccc

c-sccc

3 LA None

No limitations No limitations18 LA None

52


63/68

Exhibit B-5 (Cont.]STATE CONSTITUTIONAL AND STATUTORY LIMITATIONSON LOCAL GOVERNMENT POWER TO ISSUEGENERAL OBLIGATION LONG-TERM DEBT, 1971 (Contd)

West Virginia:Counties C~ SMunicipalities c-sSchool districts c-s

Wk0Kh:covnties c-sMunicipalities c-sSchool district* c-s

Wyoming:counties c-sMunicipalitie* CSchool districts C

Rate LimitApplied

Percent AgainstZ

5 LA5 LA5 IA

$ EAE*5= EA

2 EA 2a EAV

10 EAV

ProvisionsforExceedingLimit3

NoneNoneNOe

Non.2Ia)NOM!

Remarks

bDebt incurrence that would bring totalabove 1.5 percent subject to approvalby 60 percent majority vote. but in nacase may it exceed 5 percent. Haweer.a Con*tittioal amend mef authorizesan addi tiona l 5 percent for capiralOutlays.

=No more than 4 percent for COU~building s or 1 percent ,by sole actionof the COnt board) for highways.

bMun icipalities operating schools.except Milwauk ee. may incur addit ional10 percent for school purposes.

10 percent for *chool districts offeringno less than grades 1~12 and which areeligi ble for highest level of state aid(integrated districts).

Note.-This fable deals only with limiration s that affectgenerally the amount of general obligation debt that coun-ties, munic ipalities. and school districts can issue. I anumber of states general oblig ation debt issued for speci-fied purpo*es is excluded from the genera l rate limitatio nseither by constitutional or statutory provisions. In addi-tion. specific debt l imitatio~ are often imposed uponspecial districts. No attempt has bee made to treat theexceptmw or the special district limitatio ns becau*e oftheir great variety. Also excluded from this table are pro-visions that set maxim um interest rates or time periods forwhich bonds may be issued.

53


64/68

Appendix CSelected Bibliography


65/68

Adviso ry Commission on Intergovernmental Rela-tions, C ity Financial Emergencies: The Inter-governmental Dimension, Commission ReportA-42 (Washington, D.C.: U.S. GovernmentPrinting Office, 1973)., Federal-State-Local Finances: Signify-

canr Features of Fiscal Federalism (Washing-ton, D.C.: U.S. Government Printing Office,1975).American Enterprise Institute, Proposed Alterna-tives to Tax Exempt State and Local Bonds(Washington, D.C.: American EnterpriseInstitute, 1973).Aronson, J. Richard and Eli Schwartz, eds., Manage-

ment Polic ies in Local Government Finance(Chicago: Municipal Finance Officers Asso-ciation, 1975).

The Bond Buyer, Inc., Municipal Financial Statistics(New York: The Bond Buyer, issued annually,1966-1975).Calvert, Gordon L., ed., Fundamentals of MunicipnlBond.7 (Washington, D.C.: Securities IndustryAssociation, 1972).Dougall, Herbert E. and Jack E. Gaumnitz, CapifalMarkets and Insriturions, 3rd. ed. (EnglewoodCliffs, N.J.: Prentice-Hall, 1975).Ecker-Racz, Laszlo L., The Politi cs and Economicsof Store-Local Finance (Englewood Cliffs,N.J.: Prentice-Hall, 1970).Etter, Wayne E. and Donald R. Fraser, Broadeningthe Municipal Market: A Neglected Issue,MFOA Special Bulletin, September 1974, pp.3-4.Hemp& George H., An Evaluation of MunicipalBankruptcy Laws and Procedures, Journalof Finance. XXVIII, No. 5 (December 1973),pp. 1339-1351.

, Ear ly Warning Indicators of MunicipalFinancial Problems, unpublished workingpaper, Graduate School of Business, Wash-ington University, 1976.

, Measures of Municipal Bond Quality(Ann Arbor: Un iversity of Michigan, 1967)., Quantitative Borrower CharacteristicsAssociated with Defaults on Municipal GeneralObligations, Journal of Finance, XXVIII,No. 2 (May 1973), pp. 523-30., The Postwar Quality of State and LocalDebt (New York: National Bureau of Eco-nomic Research, 1971).

Lulkovich, Joan, ed., Statistics on State and LocalGovernment Finance (New York: The BondBuyer, Inc., 1975).Maxwell, James A., Financing State and Local Gov-ernment (Washington, D.C.: The Brookings

Institution, 1969).Moak, Lennox L., Administration of Local Govern-ment Debt (Chicago: Municipal Finance Of-ficers Association, 1975).

, and Albert M. Hillhouse, Concepts andPractices in Local Government Finance (Chi-cago: Municipal Finance Officers Association,1975).Moodys Investors Service, Inc., Moodyk Municipaland Government Manuals (New York: MoodysInvestors Service, Inc., 1975).Patton, James M., Usefulness of Municipal Finan-cial Reporting (St. Louis: Dissertation atWashington University, 1975).Petersen, John E., ed., The Rating Game (New York:The Twentieth Century Fund, 1974).Rabinowitz, Alan, Municipal Bond Finance and Ad-

ministration (New York: Wiley-Interscience,1969).Salomon Brothers, An Analy ical Record of Yieldsand Yield Spreads (New York: SalomonBrothers, 1976).

_ Supply and Demand for Credit (NewYork: Salomon Brothers, issued annually,1966-1976).

55


66/68

Security Industry Association, Municipal MarkerDevelupments (New York: Security IndustryAssociation, issued monthly).U.S. Bureau of the Census, Census of Governments,1972, Vol. I, Governmental Organization(Washington, D.C.: U.S. Government PrintingOffice, 1973).

, Governmenral Finances (Washington,

D.C.: U.S. Government Printing Office, issuedannually).U.S. Bureau of Economic Analysis, Survey of CurrentBusiness (Washington, D.C.: U.S. Govern-ment Printing Office, issued monthly).Yawitr, Jess B., Risk Premiums on MunicipalBonds, unpublished working paper, Wash-ington Unive rsity Graduate School of Business,1975.

56


67/68

SELECTED ACIR PUBLIC FINANCE REPORTSThe Role o/the Srales in Strengthening fhe Properly Tax. A Commission Report A-17, (Washing-ton, D.C.: Government Printing Office, Revised 1976), Vol. I(187 pp.)Srofe-Local Taxation and Industria l Location. A Commission Report A-30, (Washington, D.C.:Government Printing Office, April 1967), I I4 pp.Fiscal Balance in the American Federal System, A Commission Report A-31, (Washington, D.C.:

Government Printing Office, October 1967), Vol. I, 355 pp.Fiscal Balance in fhe American Federal System-Metropolitan Fisca l Disparities, A CommissionReport A-31, (Washington. D.C.: Government Printing Office, October 1967). Vol. II, 393 pp.Store Aid To Local Government. A Commission Report A-34, (Springfield, Virginia: NationalTechnical Information Service, April 1969). I05 pp.Urban America and the Federal Sysrem. Commission Findings and Proposals M-47, (Springfield,

Virginia: National Technical Information Service, October 1969), 140 pp.Federal Approaches To Aid Slate and Local Capitol Financing. A Commission Report A-37,(Washington, D.C.: Government Printing Office, September 1970), 71 pp.Revenue Sharing-An Idea Whose Time Has Come. An Information Report M-54, (Washington.D.C.: Government Printing Office, December 1970), 29 pp.Measuring the Fiscal Capocily ond Effoorr ofStare ond Local Arear, An information Report M-58,(Washington. D.C.: Government Printing Office, March 1971). 209 pp.In Search a/ Balance-Canadas Intergovernmental Experience. A Commission Report M-68,(Washington, D.C.: Government Printing Office. September 1971), 123 pp.Financing Schools and Property Tax Relief-A Stale Responsibility, A Commission Report A-40.(Washington, DC.: Government Printing Office, January 1973). 261 pp.Ciry Financial Emergencies: The Inrergovernmental Dimension, A Commission Report A-42,(Washington, D.C.: Government Printing Office, July 1973), I86 pp.The Value-Added Tax and Alternative Sources of Federal Revenue. An Information Report M-78,(Washington, D.C.: Government Printing Office, August 1973). 86 pp.The Expenditure Tax: Concept, Administrolion and Possible Applications. An Information ReportM-84, (Washington. D.C.: Government Printing O ffice, March 1974), 56 pp.Changing Public Allifudes on Governments and Taxes. A Commission Survey S-3, (Washington,D.C.: Government Printing Office, June 1974), 9 pp.Local Revenue Diversi/icorion: Income, Sales Taxes & User Charges, A Commission Report A-47,(Washington, D.C..: Government Printing Office, October 1974), 85 pp.General Revenue Shoring: An ACIR Re-evaluation, A Commission Report A-48, (Washington,

D.C.: Government Printing Office, October 1974), 65 pp.The Properly Tax in LI Changing Environmenr, An Information Report M-83, (Washington, D.C.:Government Printing Office, March 1974). 297 pp.Property Tax Circuit-Breakers: Current Status and Policy Issues. An Information Report M-87,(Washington. D.C.: Government Printing Office, February 1975), 40 pp.Trends in Fiscal Federalism: 1954-1974, An Information Report M-86, (Washington, D.C.: Govern-ment Printing Office. February 1975). 40 pp.Federal-Stare-Local Finances: Signifirant Features of Fiscal Federalism, An Information Report

M-79, (Washington, D.C.: Government Printing Office, February 1974), 344 pp.ACIR S~afe Legislorive Program. Part 3, State and Local Revenue (M-94) and Part 4, Fiscal andPersonnel Management (M-95). (Washington, D.C.: Government Printing Office, November1975).


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ACIR.1976.Understanding the Market for State and Local Debt

Documents