Short-term interest rates are likely to continue ratcheting down, making it a challenge for state and local financiers to maximize income on investments. But there are a few opportunities here and there.
The taming of inflation was the main financial story. Bond and capital markets were cooperative, even if voters upset about property taxes were not. Governors, mayors, finance directors and pension pros may soon look back wistfully at 2024’s business-as-usual atmosphere.
His second presidency could recolor the landscape for federal spending, with ramifications for states, local governments, schools and public pensions. Governors and mayors will need to try to discern where the political wind is blowing — and what to watch out for.
Given tax-exempt financing and other advantages, continued municipal ownership would seem the way to go. But other pressing public needs can make cashing out these valuable assets seem attractive. A new wave of privatization efforts will give localities a lot to think about.
With strong mayoral leadership, Atlanta is not only leveraging creative financing to provide housing but also getting tough on landlords of blighted properties. It’s a recognition that homelessness is a moral issue rooted in poor public policy.
State and local treasurers have been playing it safe by capturing high short-term rates. Some are wary of longer maturities, but markets spell lower short-term yields. Tricky decisions are in store.
Increasing climate risks are spiking demand for weather technology as businesses try to protect themselves against changing climate and social norms.
While they enjoy today’s high tide in the money markets, state and local treasurers should also promote the case for expanded and targeted federal insurance for public deposits.
Congress could enable cities to employ tax-exempt bonds to help stabilize their office tax bases in a way that’s friendly to both taxpayers and the IRS. There might already be opportunities for brave mayors and crafty public financiers.
Today’s interest rates may tempt public financiers to try to play the spread between tax-exempt and taxable bond yields. That invites heightened federal scrutiny, but there are some strategies likely to avoid the bite of the IRS.
Billions of dollars in tax-sheltered municipal bonds are sold to fund stadiums and arenas that enrich team owners while fueling federal deficits. Local politicians can’t say no, but Congress should.
As inflation and interest rates ease, 2024 will be a perfect time for overdue multiyear strategic planning and keeping up with breakthrough information technologies.
Office workers’ exodus should be countered with wiser state and federal tax incentives, and there’s a novel municipal bond angle to promote. But cities themselves must step up to stem the urban maladies that feed public fears.
Halloween seems an apt metaphor for what state and local financiers will encounter over the next year and beyond: plenty of tricks but a modest supply of treats.
With federal deficits soaring, bond issuers may face higher financing costs. State and local cash managers shine for now, but all eyes will be on the coming congressional budget battle.
Governments need to balance expected returns on their invested cash with the costs of their bonds and other obligations. Shifting a portion of their long-term debt from fixed to floating rate is a way to hedge interest rate risk.
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