The Current Impact of the Tightening Credit Market on Municipal Borrowing Costs: A Case Study

Jane Beckett-Camarata

Municipal Finance Journal, 2009, vol. 29, issue 4, 77 - 86

Abstract: This paper describes case study research of three municipalities’ borrowing costs in the context of the current tightening of the credit market. Municipal bonds are a critical source of revenue for local governments and are used for construction of roads, schools, and other capital costs. This study finds that in spite of the continuing credit crisis, all three municipal governments were able to borrow at a rate lower than the current rate because they borrowed for a shorter time frame. The data from Suffolk County show a decreasing number of bidders, and anecdotal evidence suggests that this trend will continue for many municipalities. Local governments can anticipate that the credit market will continue to tighten and that issuing additional debt will be more costly now and in the future.

Date: 2009
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