CFB: Addressing Racial Bias in Property Taxes

This briefing sheds light on an often missed barrier to homeownership in the United States, particularly for Black Americans and where this had made it more difficult for local governments from a tax collection perspective. While rising costs and a lack of affordable housing are well-known challenges, a resulting racial bias in property valuations in the assessment methodology creates an unfair burden. Black-owned homes are often overvalued, leading to higher property taxes compared to similar white-owned homes. This systemic issue undermines homeownership aims and contributes to wealth inequality.

The briefing goes beyond identifying the problem and explores potential solutions. Learn about initiatives promoting frequent property reassessments, leveraging data science to eliminate bias, and fostering collaboration between assessors and local governments.

Read the full brief here .

CFB: Florida's Insurance Bonds Weather the Headlines For Now

Climate change adds risk. This brief highlights how the state's reliance on financing multiple layers of insurance is inadequate considering the increasing frequency and intensity of storms. This, coupled with the potential for federal support limitations, could lead to a situation where the current system struggles to financially handle future hurricane seasons.

The Problem: Rising insurance costs, insolvent insurers, and frequent hurricanes threaten the stability of the system.

• The Solution (Sort Of): Florida uses a public reinsurer, among other quasi-state run entities, to backstop private insurers. One just raised $1 billion to bolster the public reinsurance.

• The Catch: This "defensive" approach doesn't address the root cause - climate change leading to more intense storms.

• The Worries:

  • The system is expensive, relying on assessments, straining taxpayers indirectly.

  • It relies heavily on historical data, which might not reflect the future with stronger storms.

  • Investors seem hesitant about future bond offerings related to the FHCF.

• The Alternatives:

  • Resilient infrastructure to better withstand storms.

  • Adaptation finance to prepare for future climate impacts.

  • Exploring alternative insurance models like community-based options.

Read the brief here.

Keys to the Green Castle

Contributor James McIntyre of Inclusive Prosperity Capital put down his thoughts on one particular way to meld an existing tool to make homeownership more accessible to the broader public while also engaging with new EPA funding on green technology. The approach of a “green DPA" could be part of the lender toolkit. It combines down payment assistance for first-time homebuyers with incentives to make their new homes more energy-efficient.

This concept could be a win-win. Homeowners save money on energy bills while reducing their environmental footprint. The program would leverage funding from the Greenhouse Gas Reduction Fund and utilize existing successful energy loan programs. However, challenges remain. Green mortgages haven't historically been popular in the US, and designing these programs to be tax-compliant and homeowner-friendly will require careful planning and collaboration between lenders and housing agencies.

Read the Brief here.

CFB: A $27 Billion Opportunity for Climate Solutions

Big news yesterday generated much excitement across the climate change universe. The public finance industry seems to be scratching its head. A search of the public finance industry’s paper of record, The Bond Buyer, reveals just two mentions of Greenhouse Gas Reduction Fund since the idea was born.

Joined by James McIntyre this week we offer a view on the stage that has been set and where traditional community finance elements fit in.

Read the brief here.

CFB: Climate Change Policy at the Local Level

A recent poll of 100-plus mayors around the country highlighted important areas of concern when it comes to the Inflation Reduction Act. The hundreds of billions of dollars worth of policy initiatives will only be as successful as local governments implement plans. That only 7% of respondents said the dollars have had a major impact on their community is a bit alarming. Keeping in mind that many of the initiatives are still in the process of being rolled out, it has been about 18 months since being signed into law.

Aside from long-standing issues that fall under the local verus state versus federal government purview umbrella, we focus on the need for a federal concierge service of sorts. Some non-profits are providing such services but where the most impact will be felt will be in communities where the state has infrastructure to drive dollars where they are needed at the local level.

Learn more by clicking here and reading this week’s Community Finance Brief.

CFB: Empowering Communities, Financing Resilience in Chesapeake Bay

As local governments struggle to finance climate change adaptation and resilience efforts due to limited resources and short-term thinking, a new Resilience Authority in Maryland has taken a novel approach to building a more sustainable future for its residents.

By creating an independent body that functions for two local governments (Anne Arundel County and Annapolis), this community can strategize more effectively. It also participated in an incubator lab, Putting Assets to Work, to help understand the value of its physical assets that were not being utilized.

Learn more by reading this week’s Brief

GFOA: Putting Projects in Motion

With the unprecedented amount of Federal dollars flowing into infrastructure nationwide the need to consider the most efficient, transparent and sustainable methods to stretch dollars out is of the utmost importance. By most assessments, the billions from the IRA and Jobs Acts during the first term of the Biden Administration are pocket change for state and local governments when it comes to the trillions needed in coming decades.

CSG was surprised to learn that outside of active public finance market participant universe, the understanding of how state bond banks and conduit issuers fit into the financing of infrastructure is pretty limited.

The Government Finance Officers Association’s mission is in part to elevate the discourse around public finance and through its Government Finance Review publication, introduced the role of bond banks in the current infrastructure discussion in its February issue. You can read it here.

CFB: Beyond a Tax Break: Aligning Personal Interest In A Portfolio

This week’s brief explores the disconnect between individual values and their investments in municipal bonds. Individuals and families have a stake in the muni market worth over $2 trillion USD, contributing massively to community finance yet most view the asset class merely as a tax strategy.

If more people knew they were banning books in Florida or hindering reproductive rights in Alabama with their municipal bond investments maybe this would change. Perhaps if a University’s Board of Trustees dedicated efforts to marketing municipal bonds alongside charitable donations from alumni, the impact of municipal bonds would be better understood.

Read this week’s Brief here.

CFB: The Politics of ESG...meh

One can say this about a lot that relates to politics but with ESG it is just incredibly unproductive. Even the most ardent global warming denier can see the value in building sustainably. On the social front, understanding the social effects of government programs funded by municipal bonds cut deeper as segments of the population believe the existence of some programs is anathema to begin with. But the act of analyzing their efficacy should be something all members of a civil society strive for.

While not an early adopter to ‘ESG’ as a whole, I was engaged in ESG, impact and public finance before most regular market participants. That is because I was one of the early employees of a start-up called Neighborly that, among many things it was trying to do, the firm was trying to introduce municipal bonds into the sexy world of impact investing.

That was 2015, just a few months after the “first” green muni bond was issued in the District of Columbia. As is the case with anything new that comes to public finance, a lot of people entered the space with stars (and dollars signs) in their eyes and soon find out that the world of public finance is beast that for good and bad reasons, is unique and very hard to break into. Green, blue and whatever has made advancements in the space and I think it has generally been a net positive for the industry.

What we did not expect, and should have in retrospect, is how ‘ESG’ would become politicized to such a degree. The goals of such politicization have nothing to do with the merits of the arguments for better transparency and sustainability of government policy. The goals of these politicians and advocates is profit and the next election.

Take Ron DeSantis - who still points to his support of the Everglades during his first gubernatorial run as proof of his support for the environment. This ‘hero for the wetlands’ in the state conflicts massively with his move to essentially ban the rating agencies from considering rising sea levels when looking at the credit implications for communities in the state. This insanity has long-term implications that are not good for people thinking about future generations. DeSantis’ bond guy, like a good yesman, hammers home the Everglades argument whenever asked about climate change in the state at any public gathering of public finance officials.

This piece may not add much new to the dialogue around ESG and public finance but for those passerbyers, I hope this clues you in.

You can read the review here.

Community Finance Brief: Inflation Reduction Act's Climate Puzzle

The Inflation Reduction Act promised a clean energy revolution, but a year and a half later, the money still isn't flowing. Meanwhile, micro-focused community finance organizations are booming, but do they have the muscle to make a real dent in global warming? This brief argues that it's time to rethink the IRA's strategy. We need to supercharge climate action by tapping the vast resources of existing financial infrastructure. If you're wondering why shovels aren't in the ground yet or how to actually achieve the goals of the IRA, this brief is for you.

You can read the brief here.

Community Finance Brief: Beyond Averages: A New Era in Climate Risk Assessment for Local Leaders

“Natural disasters are coming with more frequency and with more tenacity than ever before and the costs to governments and the communities they support are growing. We mitigate through urban planning, we prepare by developing emergency response plans and stocking supplies, and we respond to emergencies with most support coming from the federal- and state-level. The cost of this approach is untenable.”

A new approach to climate risk has been proposed by the largest member association of local governments in North America - the Government Finance Officers Association - the largest insurance broker in the world and top five reinsurer by gross written premium - Aon - and some presumably very smart scientists from Stanford that have a nonprofit called Probability Managment. Add some support from Pew Charitable Trusts and this looks like a group to listen to.

Joking aside, the approach is compelling and there is a call to action.

We reviewed their approach to climate risk and contextualized it for the non-statisticians of the world. You can read it here.

“This could very well usher in a new era of government risk assessment. This group does not have a proposition to lower world temperatures or change where people are building new communities where 1 in 3 in the U.S. are in the so-called wild land-urban interface, but it does propose a radically more informed way to better secure governments financially and could be used to eventually help communities address climate volatility in a holistic fashion.”

Community Finance Brief: Bringing Impact to Homeownership

This week we are once again joined by Oswaldo Acosta, President and CEO of City First Enterprises for the second part of our look at mortgage assistance programs and securitization concepts.

Many low- and moderate-income (LMI) individuals struggle to become homeowners due to down payment requirements and limited credit access. While public Mortgage Assistance Programs (MAPs) exist, they lack scale and consistent funding. This report proposes a new solution: Community Benefit Bonds (CBBs). These bonds would attract impact investors by securitizing MAPs, offering financial returns alongside positive social impact. Careful underwriting ensures CBBs target LMI communities, and data-driven frameworks assess their impact. CBBs have the potential to increase homeownership access for underserved communities, leverage private capital alongside public funding, and create a sustainable model for mortgage assistance. Challenges include developing robust standards and attracting investors, but pilot programs and data transparency can pave the way for success. CBBs could revolutionize mortgage assistance and bridge the homeownership gap for many.

Click here to read the full Brief.

Community Finance Brief: Improving Access to Homeownership with Impact Bonds

This week, we teamed up with Oswaldo Acosta, President and CEO, of City First Enterprises to look at the financial tools available to support low- and moderate income (LMI) families' ability to purchase homes in the U.S. 

This is the first part of a series that will review the current landscape of homeownership in this country, the financial tools available to support broader access to homes and next week we will look at the securitization options that we believe are on the horizon to scale fair private mortgage assistance programs through impact bonds. 

"...it is time to offer a new paradigm that can increase liquidity and capital availability to those who need it most while minimizing friction within the current mortgage industry. A proposition for change would be to marry the explosive growth in impact investing within the existing securitization model through scaleable mortgage assistance programs (MAP). A thoughtful secondary mortgage and/or down payment assistance tool for LMI families offers a new solution." 

Read the full Brief by clicking here.

Community Finance Brief: The Debt of Your Community Will Be Priced Differently

This week CFB gets a little wonky and in the weeds on municipal bonds and pricing.

With very little attention, the way in which municipal bonds are benchmarked is undergoing an important shift to a Bloomberg product that while more transparent, has shown real limitations in the past. A muni bond benchmark may seem insignificant but recall that public funds are priced to these benchmarks every day, as are the prices of ones tax-exempt municipal bond fund.

You can read more here.

Community Finance Brief: Power Transition Canary Case

Last year, the islands of Hawai’i were in the news for a catastrophic fire on the island of Maui. In the aftermath, some focus was on grasses that could/should have been removed by a biomass company that was part of a larger power purchase agreement that was cancelled by the state’s large utility company.

Community finance encompasses the way in which we plan to finance the future of energy and in this edition, we look at this legal dispute between renewable energy providers and monopolistic entities as an example of what is to be expected in the future as the energy transition continues.

Our communities need to balance reliance on fossil fuels and the infrastructure in place with thoughtful plans for the future. Investors in energy proposals and the large utilities companies that make them possible will be watching this case and others.

Read our take here.

Community Finance Brief: Thoughts About Next Year

Brace for an unpredictable year in community finance, where a confluence of global turmoil, mandatory tech advancements, legislative implementation, and potential political upheaval all  collide with an already fragile insurance market. While the presidential election may be a noisy stalemate, this chaos presents a hidden opportunity for agents of change to make real progress. Think private tech solutions for public entities, strategic bond issuances, and innovative solutions to climate-induced risks.

You can read the full Brief by clicking here.

Community Finance Brief: Lead Pipe Removal Should See Impact Muni Bonds

Costing anywhere from $35 billion to as much as $90 billion are the estimates for lead pipe removals nationwide as mandated late last month by the Environmental Protection Agency. Droughts, aging infrastructure and treatment has already increased the cost of water dramatically in the U.S. and put the sector under pressure. This new mandate will require a lot more than the $15 billion in federal grants authorized by the Jobs Act for the issue.

Turning to municipal bonds and perhaps some novel ideas regarding impactful security structures and leveraging state-level financing mechanism are two ideas we offer the internets this morning.

A summary of the issue and solutions can be read by clicking here.

Community Finance Brief: Milwaukee's Financial Woes Demonstrative of Larger Dynamic

Milwaukee, which translates to “the good land” in Algonquin, came close to being the second largest American city to declare bankruptcy this year. Historically (and still) a very segregated city, long term challenges with the state legislature and poor private partners, among other things, brought the community to the precipice of a very challenging process.

We led with the city last week in our review of post 2008 bankruptcies because it exemplifies many of the problems that local governments face in modern America. With this piece, we zero in on ‘the good land.’

You can read the Brief here.

Community Finance Brief: Local Insolvency Stories & Parallels

“Since the 2008 financial crisis there have been a number of local governments that have declared Chapter 9 bankruptcy and had some process of default on their bonds. In this brief, we look at the broad parallels of communities in the table, page 3, which comprise many of the local government defaults in this time period. These bankruptcies were caused by a variety of factors, including economic downturns that were exacerbated by dependency on a certain industry in the local economy, the mismanagement of funds (from either specific projects or structured government benefits), as well as the role that the state government, race and politics played in the fate of the community’s finances.”

Read the full Brief by clicking here.

Community Finance Brief: Impact Obstacles, Disclosure & Tower Amendment

When a practiced public finance professional brings up the Tower Amendment to a lay observer of the municipal bond market, eyebrows are furrowed. Taken with no context, the fact that state and local governments are not held to the same expectations as other regulated market entities is bizarre.

We explain it: “To summarize the reasoning behind this: it is constitutional (a check on federal overreach into state and local sovereignty), it is political (the market itself represents the federalist approach to American democracy), it is practical (the market is made up of thousands of very small borrowers that lack the ability and resources to meet corporate bond disclosure litmus) and it is does not pose a risk (default rates are minuscule and diligence requires so-called sophisticated investors to participate in the marketplace). “

In the second part of our impact and disclosure discussion, we get into Tower and the likelihood that climate change and materiality will be decided in court, not by the industry. We also offer some ways forward that are already in place with an eye towards future solutions.

You can read it here.