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After Sarasota County voters approved a local-option sales tax to fund parks, libraries, roads and other projects in 2007, county finance officials set up a series of bond issues to jump-start the construction.
Florida CEO Alex Sink has appealed to federal officials to include local governments in the Federal Reserve’s plan to stabilize bond markets. [Photo: Jeffrey Camp] |
The first bond, for $73 million, hit the market in September with an interest rate of 4.2%. But, by the time the next bond came up just a few weeks later “the you-know-what had hit the fan” in the nation’s banking industry, says county debt manager Richard Gleitsman. The new interest rate: 6.5%.
Sarasota put on the brakes. “It was a shame because the whole idea was to bond ahead of time and get projects under way to put people back to work in the community after the construction industry had been hurt so badly,” Gleitsman says. “Commissioners felt that this would be a way to help the builders, the designers, the architects and the others being impacted by the downturn.”
The story is the same all over Florida. Local governments already had delayed projects because of declining property values, reduced revenue and substantially lower returns on investments. Now, the credit crunch has drastically slowed the construction of roads, schools and other facilities. State and local governments have little or no access to credit to finance cash-flow needs or infrastructure. Port Manatee has backed off its major infrastructure project, and Collier County has shelved a $50-million road project to link Ave Maria University and Interstate 75 — direct results of illiquidity in the commercial paper market.
| Government Jobs in Florida |
| Branch |
Oct. 2007 |
Oct. 2008 |
Change (statewide) |
| Local |
803,900 |
810,100 |
+0.77% |
| State |
219,100 |
218,600 |
-0.22 |
| Federal |
127,800 |
131,700 |
+3.1 |
| Total government |
1,150,800 |
1,160,400 |
+0.83 |
| Source: Florida Agency for Workforce Innovation |
Efforts by Gov. Charlie Crist to stimulate the economy with state roadwork and other projects are faltering amid the larger Florida budget crisis [“The Not-So-Sunny State,” right]. State economists predict things will get worse before they get better. Florida CFO Alex Sink, Christopher Holley, executive director of the Florida Association of Counties, and other advocates have appealed to federal officials to stabilize government markets, for example, by extending stimulus relief under the Troubled Assets Relief Program (TARP) and Commercial Paper Funding Facility (CPFF) to local governments. President-elect Barack Obama has promised to include state and local governments in the massive economic stimulus plan he wants Congress to tackle this month.
“The credit crisis,” Sink said in a letter to Fed Chairman Ben Bernanke, “has caused the tax-exempt bond market to cease functioning for all practical purposes.”
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