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Surely you jest. Every municipality has some debt. Frugal ones have limited debt for infrastructure, etc. Foolish municipalities are effectively bankrupt due to borrowing to fund yearly expenditures in excess of income, unfunded employee retirement benefits, upside down investments.
No municipalities have to do large projects by selling municipal bonds. The tax payers cannot afford cash same as most people can't buy a home with cash. But the most dangerous at hearing by experts was Ill. who sold bonds for general revenue use; not projects. They had never seen this done. Many states and municipalities have balance budgets just like homeowner paying a mortgage as required by law. In other words they can afford the project payments. My local is balanced with a emergency fund much like many people including myself. My state also requires balanced budget and we just released some of emergency funds on vote to spend on highways.
You do not want that for a city. Just like going completely without use of credit will be harmful for most Americans in that credit ratings will plummet and you essentially go off grid.
You do not want that for a city. Just like going completely without use of credit will be harmful for most Americans in that credit ratings will plummet and you essentially go off grid.
Not only that but it's a completely inefficient way to run a business
Are there any U.S. municipalities debt free and using cash for it's daily and capital expenses?
It would have to be a small town, not a major city. Major cities simply have too many large expenses to pay cash for and it would not be politically feasible for a city to save up money for 20 years to pay cash for a large capital project such as building a bridge. Before that could happen the taxpayers would be upset about the city's money-hoarding, so it would not last. At least not in America.
Are there any U.S. municipalities debt free and using cash for it's daily and capital expenses?
You use cash for operating cost, salaries, electric, operation of facilities. You issue bonds for capital expense. Most grants have a local contribution, that's usually cash.
Most municipalities do invest excess funds in short term investments, in MD it's the Local Government Investment Pool which bundles from all the municipalities and Counties. Very conservative investing.
With most grants you have to pre-pay before you get reimbursed out of the grant, so you have to have a cash account with funds in for that.
As others have mentioned, it's almost unrealistic to expect any local government, or larger, to be debt free and pay cash for capital projects unless they're really small projects.
That's what people don't understand about gas taxes specifically. The funds aren't supposed to cover cash cost but bonding debt service. Which got a lot of states in trouble the last few years. Legislatures saw this pot of money sitting there and raided it and now there's not enough money to cover debt service for new roads. MD did the same thing with the Retirement System, raided it and took it from 100% fully funded to 60% and threatened with insolvency.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Our small suburban city of 50,000 weathered the recession with only a few layoffs in the permit department, because they had nothing to do. They had plenty of operating capital. With the average home value at $745,900 and a tax rate of $2/1000 so cash on hand is $65 million, to be spent down to $34 million by the end of 2016 with many capital projects. They still do have general obligation debt, currently at $3,733,333.
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