Local Governments

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 90,000 local government entities in the US include counties, municipalities, towns and townships, as well as special purpose entities, such as special districts and independent school districts. Local governments generate revenue from taxes, intergovernmental funding, and fees for services provided. They use this revenue to fund the delivery of services for education, health, police protection, highways, public welfare, sewerage, solid waste disposal, parks and recreation, utilities, housing, and government administration.

Dependence On Property Taxes

Taxes are the largest revenue source for local governments and property taxes account for about 72% of tax revenues.

Spending Mandates

Local governments are often required to spend money to comply with federal and state mandates, even when those mandates are unfunded.

Industry size & Structure

The average local government entity employs about 154 workers and generates $21-22 million in annual revenue.

    • Local government includes counties, municipalities, towns and townships, as well as special purpose entities, such as special revenue districts and independent school districts.
    • There are about 90,000 local government entities in the US with over 13.9 million employees and $1.9 trillion in annual revenue.
    • General purpose entities include 3,031 county governments, 19,495 municipal governments, and 16,253 town and township governments.
    • There are 38,542 special districts in the US, such as fire protection districts, public housing authorities, and irrigation management entities.
    • There are 12,754 independent school districts. These do not include school districts run by state, county, municipal, or town governments.
    • The largest city governments in the US, based on population, are New York, Los Angeles, Chicago, San Jose and Washington, DC.
    • The largest county governments, based on population, are: Los Angeles County, CA: Cook County, IL; Harris County, TX; Maricopa County, AZ; and San Diego County, CA.
                              Industry Forecast
                              Local Governments Industry Growth

                              Coronavirus Update

                              Oct 18, 2021 - Report: American Rescue Plan Helped City Budgets
                              • Local governments experienced rising expenditures due to the coronavirus and dealt with falling income as tax revenues declined due to business closures and widespread unemployment. Unlike the federal government, states and localities can’t compensate for lower tax revenues with increased borrowing. They must make up for them with some combination of lower spending, higher tax rates, or fees. However, large spikes in municipal debt that were anticipated early in the pandemic never materialized, according to the Schwab Center for Financial Research. The fiscal health of cities has been helped by federal stimulus policy, both in direct aid to cities and states, and checks to individuals which helped boost tax revenue through increased consumer spending.
                              • State tax collections, an indicator local government tax revenue, held up better during the pandemic than many state and local officials expected. Total US state tax collections in 2020 were only 1.9% lower than they were before the pandemic, according to the State Fiscal Health Project at the Pew Charitable Trusts. However, more than 40% of US cities reported a drop in revenues during the pandemic, according to the 2021 State of the Cities report released in June 2021 by the National League of Cities.
                              • A second round of stimulus relief was passed in December, but it did not include funding for direct aid to state and local governments. However, it did include $600 stimulus checks that helped ease strapped state and local budgets by stimulating spending which increased local tax revenues. In March 2021, President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA). The third round of stimulus included $360 billion in aid to state and local governments. Under the bill, in addition to one-time payments of $1,400 per individual, and another $1,400 for each dependent, many Americans may also receive an existing tax credit that will give most families with children a monthly payment of $300 per child. Payments began in July. The benefit is set to expire at the end of the year, but the Democrats aim to make it permanent. The bill also extended the $300 supplemental unemployment benefit, but it ended on September 6, 2021 in the 24 states that hadn’t ended it already. More than 80% of city finance officers said direct federal aid had a positive effect on their fiscal year 2021 budgets, according to the annual City Fiscal Conditions survey released by the National League of Cities in October. Two-thirds of cities said ARPA funding helped replace lost revenue and more than half used ARPA funds to directly aid households, small businesses, nonprofits, and industries.
                              • The CARES Act provided $150 billion in direct aid to state and local governments (at least $1.5 billion per state), $5 billion in additional funding for Community Development Block Grants (CDBG), $454 billion in emergency loans for businesses and governments, and $25 billion in transit infrastructure grants. The funding from the Community Development Block Grants under the CARES Act (known as CDBG-CV grants) are working their way to the county and municipal level through state governments. The stimulus package passed in December extends to the end of 2021 the period state and local governments have to spend benefits provided under the CARES Act.
                              • Experts are beginning to think about what large cities can learn from the pandemic as they reopen and new patterns of life take shape. Some suggest prioritizing affordable housing as a way to reduce pockets of overcrowded working poor, which could also lessen the impact of future outbreaks.
                              • Billions in federal rent aid has had trouble reaching those who need it, according to The Wall Street Journal. The rent aid program is administered by the US Treasury Department but processing aid applications and dispersing the funds has fallen on local governments and charitable organizations, many of which have been overwhelmed by the volume of demand. In May, Treasury recommended changes to expedite payments, including loosening some documentation requirements, and allowing funds to be paid directly to renters instead of landlords. However, manually vetting and approving the applications is time-consuming, and some local government and organizations had trouble hiring enough staff and drafting funds distribution rules. More than $46 billion was allocated for federal rental relief but as of August 31, only $7.7 billion has been issued, according to Treasury Department data released in September. Treasury required local governments and other organizations that haven’t disbursed at least 65% of rent relief funds by September 30 to submit an improvement plan for expediting payments. Entities that have distributed less than 30% of their allocated funding risk having the funds reclaimed by Treasury and redistributed to other communities with a track record for timely and efficient payments. Rent aid applicants who experience delays may turn to consumer lending services to help make ends meet.
                              • Solid stock market performance during the pandemic and the effects of federal stimulus, have helped ease the pressure on state and local governments’ public pensions, according to a recent report by Municipal Market Analysis (MMA). The effect was the aggregate funding levels for state and local pension funds increased from 72.8% to 74.7%, according to a June 2021 report from the Center for Retirement Research at Boston College. Without the help of stimulus aid, state and local pension plans might have been in worse shape than they were after the 2008 recession, according to MMA.
                              • The rapid rise in new COVID-19 cases fueled by the highly-transmissible Delta variant prompted some local governments to reimpose masking mandates and some implemented vaccine requirements for indoor activities. New cases have since slowed and have been declining since mid-September. Hospitalizations and deaths are also falling. In early August, New York City announced it would require proof of vaccination for customers and employees in several indoor settings, including dining, gyms, and events. Shortly afterward, San Francisco, Los Angeles, and New Orleans announced similar policies. Several cities, including New York City, Los Angeles, Washington DC, and Boston are requiring city workers to be vaccinated. Nine states and the District of Columbia require masks in schools and eight states have banned mask mandates, according to The Pew Charitable Trusts. Bans on school mask mandates have been struck down or temporarily halted in some states. Local governments have clashed with state-level regulations in some states that banned mask mandates when local governments and school districts wanted to require masks in schools due to high rates of COVID-19 transmission.
                              • In September 2020, the Centers for Disease Control and Prevention (CDC) issued a moratorium on evictions for some renters through the end of 2020. The stimulus package passed in December 2020 extended the moratorium on evictions through January 31, 2020. On January 20, 2020 President Biden signed an executive order further extending the moratorium until at least March 31, 2021. Two days before the executive order was set to expire, the CDC extended the eviction moratorium through the end of June 2021. The moratorium was extended two more times but on August 26, the Supreme Court ruled the CDC eviction moratorium extension could not remain in place while challenges and appeals worked their way through the court system. However, as of mid-October, a feared avalanche of evictions had not occurred, according to The Wall Street Journal. Evictions were mostly mitigated by renter protections on the state and local level, federal rent aid, and landlords’ willingness to negotiate with tenants. Evictions increased 8.7% in September over August, according to Eviction Lab, a research project at Princeton University. Even with the uptick in September, evictions remained low on a historical basis and were about half the pre-pandemic level typical to the average September.
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