Craig L. Johnson

The Public Financing of America's Largest Cities: A Study of City Financial Records in the Wake of the Great Recession

This paper employs Comprehensive Annual Financial Reports of the 35 largest population American cities from 2005 to 2011 to examine how these cities managed the Great Recession, which was a global macroeconomic shock particularly damaging to the housing sector. While broader surveys of local government suggest that the Great Recession has been associated with substantive revenue declines, particularly via the property tax, the Comprehensive Annual Financial Reports data indicate that large cities remained relatively stable in revenue by using higher property taxes to compensate for other revenue declines. Furthermore, these cities were able to rely on their net assets to engage in deficit spending. These findings indicate that cities are relying on traditional strengths of local governments, but are also able to engage in the deficit spending that is typically characteristic of national governments. It also seems to be the case that grants for capital projects were largely transferred into highly liquid and spendable assets.

A framework for pricing government e-services

Governments are in the early stages of providing constituents with information and services online over the Internet. E-government service decisions should be rooted in solid finance principles, such as efficiency, equity and revenue adequacy. Pricing decisions should be tailored to meet the demands of particular constituent groups and the revenue needs of government. By so doing, governments can more quickly and broadly expand online service delivery and increase the net benefits to stakeholders. By segmenting e-services into government-to-citizen (G2C) and government-to-business (G2B) transactions and applying different pricing schedules for e-services with different demand elasticitys, governments can increase overall consumer surplus, while generating additional revenue.

The Rise and Fall of Eastside Community Investments, Inc.: The Life of an Extraordinary Community Development Corporation

ABSTRACT: This article presents a case study of the rise and fall of Eastside Community Investments (ECI) of Indianapolis, Indiana—one of the largest, best known, and highly regarded community development corporations in the United States. It addresses three basic research questions: 1) How did ECI become so successful so fast? 2) What caused ECI’s financial collapse? and 3) What are the implications of the ECI failure for municipal, state and federal governments who have grown increasingly dependent on community-based organizations to deliver basic human services, while fostering economic and community development? Answers to these questions have important implications for non-profit CDCs, governments and philanthropic organizations that fund CDCs, and researchers in public and nonprofit finance and management.

Certificates of Participation and Capital Markets: Lessons from Brevard County and Richmond Unified School District

This article analyzes the genesis of certificates of participation (COP) in the municipal securities market. We document the trend in the use of COPs and illustrate problems in the market through case studies of the Richmond Unified School District default and the Brevard County referendum crisis. The valuable fiscal administration lessons drawn from the growing pains of a maturing sector of the municipal securities market can help municipal governments and investors avoid the tragic consequences that seem to inevitably accompany the circumvention of legal debt restrictions and public accountability.

State and Local Financial Instruments

The ability of a nation to finance its basic infrastructure is essential to its economic well-being in the 21st century. This book covers the municipal securities market in the United States from the perspective of its primary capital financing role in a fiscal federalist system, where subnational governments are responsible for financing the nation’s essential physical infrastructure.

Understanding dodd-frankʼs reach into the financing of main street

In response to the financial crisis that began in 2007, United States President Barack Obama signed H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act, into law on July 21, 2010. “Dodd-Frank” is intended to correct certain problems in financial markets by federally regulating the activities of independent municipal financial advisors and comprehensively expanding regulatory oversight over credit rating agencies. This article reviews the legislation and its financial management rationale, and discusses its actual and potential impact on the future operations of the municipal securities market and its participants.

Underwriting of Municipal Debt and Placement Risk Premiums in Broker-Dealer Market Transaction Prices

This study examines the relationship between underwriter placement risk and market transaction prices using a sample of state general obligation bonds. We proxy underwriter placement risk using three variables: “when-issued” trades, underwriter syndicate size, and bond sale method. When-issued trades and larger underwriting syndicates have an inverse association with transaction prices (stated as percentage of par) and have a positive association with transaction yields (based on transaction price), all else constant. Negotiated sales have a positive relationship with transaction prices and a negative relationship with transaction yields.

The Determinants of Bond Insurance Premium

This paper provides an empirical test of the demand side of Thakor’s (1982) theory of bond insurance signaling, namely that the insurance premium charged by municipal bond insurers provides a signal to the market that reduces asymmetric information in the market. We test the theory for a sample of bonds that covers before, during and immediately after the 2007-08 financial crisis. We find empirical evidence consistent with the theory that the bond insurance premium provides a signal to the market regarding the intrinsic, underlying credit risk of debt.