Reports from the GMU Municipal Sustainability Project, Center for State and Local Leadership

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PROJECT OVERVIEW

With support from the MacArthur Foundation, a team from George Mason University’s Center on State and Local Leadership, led by Frank Shafroth, is in the midst of a multi-year study analyzing the fiscal challenges in the wake of the Great Recession. While considerable effort has been devoted to understanding macroeconomic trends, far less attention has been giving to understanding the recession’s impact at the municipal level. This project directly addresses this critical, and under-appreciated, dimension of fiscal crisis.

The study’s goal is twofold. The first objective is analyzing the complex nature of economic policy, outlining the evolving role of local governments in the federalist system. Building from these findings, the team is creating proactive policy prescriptions, aimed at assisting leaders struggling with similar financial challenges. The final report will provide an in-depth discussion of “best practices” and online resources to share with municipal and state leaders.

The project is structured around six struggling cities: Pittsburg, Providence, Detroit, San Bernardino, Chicago, and Baltimore. The case studies incorporated on-site interviews with local leaders, members of the community, and the media to understand the interaction of policy and economic and sociodemographic factors. Each of the selected cities faced financial challenges over the past decade, and their efforts have met with varying degrees of success. Critical to the study’s methodology, the cases fall into two broad categories: cities located in states with or without a formal intervention program. By contrasting states with systematic intervention programs against those without, the project highlights the numerous ways state governments can exacerbate or alleviate crises within their borders.

For more information on the MacArthur Foundation and their support of Policy Research, visit http://www.macfound.org/programs/policy_research.

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Now showing 1 - 8 of 8

GMU Fiscal Study Preliminary Research
(Center for State and Local Government Leadership, George Mason University, 2012) Shafroth, Frank
In its recent report, the State Budget Crisis Task Force noted one theme arising out of the Great Recession: fiscal stress runs downhill. Local governments are confronting the greatest fiscal challenges in at least a century, struggling to balance their budgets in the wake of the greatest economic downturn since the 1930s. Despite the pressures facing local governments, providing for the continuity of essential services matters. Indeed, what distinguishes Chapter 9 municipal bankruptcy from other kinds of corporate bankruptcy in federal law is the provision to ensure continuity in the provision of essential services. When a corporation faces default, it can simply take the “keys” and hand them over to a federal bankruptcy court—which can sell the remainder assets and distribute the proceeds to the debtors and shareholders. But when a municipality faces default, that is not an option. For the child whose chance for success rests upon learning—access to schooling, to health care, to safety are uniquely local challenges—whether the local government has disparate levels of poverty, crime, inadequate fiscal resources or legal authority; the essential responsibility may not be abjured. Yet, despite the dire predictions from commentators, the numbers of Chapter 9 bankruptcy filings or municipal bond defaults have not risen through the Great Recession. In fact, considering the extraordinary pressures they face, remarkably few local governments have opted to seek Chapter 9 municipal bankruptcy protection or have fallen into state receivership. Where are the risks greatest to the most critical and essential services? What are the options for our system of federalism, especially at the state-local level, for local governments that are at risk? This study will examine the challenges facing local governments flowing from the great recession. The following literature review will place the George Mason University Local Government Fiscal Sustainability Project in the context of the existing literature that answers these questions.
Financial Crisis Toolkit
(Center for State and Local Government Leadership, George Mason University, 2012-06-25) Shafroth, Frank
This toolkit is designed for any municipal jurisdiction. We recognize that many localities do not have the resources to prepare for financial crises, and the tendency is to avoid help until absolutely necessary (or forced). The information contained herein may be useful to managers, elected officials, and the public to assess their municipality’s fiscal health, identify areas of need for improvement, and prepare for future years by establishing well-founded practices.
San Bernardino Case Study
(Center for State and Local Government Leadership, George Mason University, 2013-09-01) Lawson, Michael; Shafroth, Frank
By most accounts, four key factors have contributed to San Bernardino’s fiscal situation: the charter, political culture, state actions (or inactions) and economic shocks. The last two factors caused have caused many cities across the U.S. to stumble in recent years or even in recent decades, but the vast majority of them have been able to regain their footing. A weak charter combined with a negative political culture made overcoming the economic shocks and state actions too steep a hill for San Bernardino to climb. Most likely, it will be several years—as the city works its way through the bankruptcy process— before we know the extent to which San Bernardino stabilizes and regains its fiscal footing.
Chicago Case Study
(Center for State and Local Government Leadership, George Mason University, 2013-09-01) Shafroth, Frank
Chicago, after a significant effort to remake itself into a global city today confronts unprecedented challenges. The city took a serious turn for the worse during the first decade of the new century. The gleaming towers, swank restaurants, and smart shops remain, but Chicago is experiencing a decline different from other large cities. It is a troubled place, one falling behind its large urban brethren and presenting a host of challenges for Mayor Rahm Emanuel. Challenges confronting the city’s fiscal future are: schools, which one commentator cited as “almost insoluble;” police—crime—gangs (also “almost insoluble”); infrastructure (on which the mayor has earned very high marks); pensions, where Chicagoans’ long-term debt and pension obligations per capita rose 185% since 2002—which are inextricably linked to the state; and bringing jobs back to Chicago. These challenges come as state and federal aid are reduced.
Detroit Case Study
(Center for State and Local Government Leadership, George Mason University, 2013-09-01) Shafroth, Frank
Detroit filed for municipal bankruptcy protection on July 19, 2013. The city is in dire fiscal straits and now in a U.S, bankruptcy court for what the city’s emergency manager termed “the Olympics of restructuring.” The filing is a critical step to ensuring continuity of essential services and critical to rebuilding an economy for the city. Michigan Governor Rick Snyder appointed an Emergency Manager in March, who in June announced a moratorium on repayment of all unsecured municipal debt. The emergency manager, Kevyn Orr, issued a report and declared the city insolvent. Detroit cannot stay on its current path and survive, and now its fate will be determined in a federal court, where the city’s financing and operations must be completely restructured. After decades of population decline (In 1950, there were 1,849,568 people in Detroit. In 2010, there were 713,777), the city today is home to an estimated 40,000 abandoned lots and structures. Between 1978 and 2007, Detroit lost 67 percent of its business establishments and 80 percent of its manufacturing base. The city has spent $100 million more, on average, than its revenues since 2008. According to the census, 36 percent of its citizens are below the poverty level, and, last year the city reported the highest violent crime rate for any U.S. city with a population over 200,000. Writer Billy Hamilton calls the city “either the ghost of a lost time and place in America, or a resource of enormous potential.”
Baltimore Case Study
(Center for State and Local Government Leadership, George Mason University, 2013-09-30) Lawson, Michael
Evidence suggests that a number of factors have contributed to Baltimore’s fiscal resiliency. These include the primary role that counties play in the structure of local government in Maryland, the state assumption of the financing and operation of key functions and the equalizing impact of state aid. Local institutions also play a major role—in particular, the responsibility and authority granted to the Board of Estimate by the city charter. Lastly, the confluence of professionalism in budgeting and financial administration combined with a political culture where the advice and guidance of those professionals is heeded by elected officials contributes to Baltimore’s fiscal resiliency.
Providence Case Study
(Center for State and Local Government Leadership, George Mason University, 2013-09-01) Emmans, Sarah
In March of 2011, just a few months after taking office, Providence Mayor Angel Taveras declared that the city was experiencing a “Category 5” fiscal hurricane. Less than a year later, he announced that the city was on the brink of bankruptcy. Taveras and city officials addressed a two-year, $180 million budget gap through layoffs and attrition, school closures, other service cuts, a modest tax increase, major concessions from the city’s unions, and extracting voluntary payments in lieu of taxes from the major nonprofits in Providence. These actions came against the backdrop of state takeover and, ultimately, the Chapter 9 bankruptcy of tiny Central Falls. The impoverished city of 19,000 was the first rescue attempt under the Rhode Island Fiscal Stability Act of 2010, with two more communities following shortly thereafter, and several more currently teetering on the edge.
Pittsburgh Case Study
(Center for State and Local Government Leadership, George Mason University, 2013-09-01) Emmans, Sarah
Facing decades of structural budget gaps and unsustainable legacy costs, the City of Pittsburgh entered two forms of state oversight in 2004. In the nearly ten years since, the city has turned structural deficits into annual positive fund balances, restructured its crushing debt load, streamlined an outsized government, and earned a triple-notch bond rating upgrade this summer. Still, with a $380 million pension liability, many doubt that Pittsburgh is ready to graduate from state oversight – especially given the extra relief from restrictive state laws that Act 47 provides to city officials. Meanwhile, a task force comprised of high-level state and local officials, labor leaders, and other stakeholders has convened to develop reforms to the laws -- including Act 47 – that affect communities’ fiscal sustainability.

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