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No. of Recommendations: 4

I think certainly looking at a community's indebtedness and approach to development has become a factor in choosing a place to live, even though I'm sure it wasn't something most of us used to think about. Beware of anywhere with a downtown development authority or the like, with earmarked tax revenues, unless you have a vested interest in downtowns at the expense of police and emergency and neighborhoods. And beware of officials who pump public-private development as a win-win. We get told these things will generate new tax revenues, only we aren't told it will take 30 years before the added taxes will go for anything but the development. Inevitably they say public expenditures (usually bonds), will be paid for by the added taxes, as if all developments succeed (just from the communities in my immediate vicinity, there are a half dozen public-private projects that have been aborted or cut short and twice that many private only developments that have gone under before completion). The possibility that taxable values will fall short for tax capture plans seems never to have occurred to anybody but me. I estimate, smoke and mirrors financing aside, the pursuit of public-private development (including planning for developments that so far remain on the drawing board and economic development initiatives that have brought neither jobs nor new revenues) has drained at least $1 million a year for the last decade from public services, with drainage rising. And that assumes we kill the beast that seeks to eat us all.

As to muni bonds, historically munis don't default much. We know communities have unfunded pension obligations and that state governments have cut way back in revenue sharing (I think we're losing another 20% to the general fund this year). I presume grants and sharing from the feds will be high up on the budget cutting list. So, communities that have been borrowing on hope are going to get squeezed. Will it lead to default? Hard to tell. But I'd want a lot higher return for these project bonds than the ratings suggest.
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