“This challenged our assumptions and [helped] us understand the myriad funding challenges for municipal governments.”
Public Finance Week was an eye-opening look into the ways governments manage money. Although many of us began the week with limited knowledge of finance, we ended with a much deeper understanding of municipal bonds, taxes, pensions, and city finance.
Process
At the beginning of the week, we mapped out our current knowledge of public finance into two columns: what we knew, and what questions we had. We wanted to know more about bonds, the political dynamics of public finance, and state and local taxes. Over the course of four content-heavy days, we interviewed a state and local finance expert, a city manager, a former city councilman, investment bankers, municipal advisors, and San Francisco city staff.
Impacts of Proposition 13
These conversations with key players in the public finance sector brought up recurring themes throughout the week. An early interview with an expert in California’s municipal code helped us understand the impacts of Proposition 13, a constitutional amendment approved by California voters in 1978, which caps property tax rates at 1975 market values, plus a maximum increase of two percent per year. We also learned that property taxes make up a large share of city revenues. We interviewed a member of Lafayette City Council, who told us how Prop. 13 has negatively impacted the city’s budget. Although the current market value for a Lafayette home is well into the millions, property tax for many homes is still at 1975 levels, which were significantly less — meaning Lafeyette’s city government is not as well-funded as we previously thought! This challenged our prior assumptions and was a key conversation in helping us understand the myriad funding challenges for municipal governments.
Takeaways
We constantly debriefed our experiences. At times, we used Coro tools, such as the “Objective/Reflective/Inference/Decisional” debrief model, which prompted us to recall and contextualize interviews through categorization. At the end of the week, we paired up to develop a diagram or spoken presentation summarizing our takeaways. Many of our presentations mapped out the relationships involved in the municipal bond market: how ratings agencies, bankers, and city officials interact, for instance.
We ended the week by participating in the California Budget Challenge — an exercise where we attempted to solve a nine-million-dollar deficit in the state budget while still funding social programs (spoiler alert, it’s hard). Many of us found that raising taxes was the only way we could continue to fund programs while balancing the budget.
Public Finance Week left us with a much deeper appreciation for how cities raise and spend their money, who the powerful players vying for control over these decisions are, and just how important understanding a budget really is. It also left us with one burning question: is it pronounced FI-nance or fi-NANCE?
