Cuyahoga County taps investment tool to buy city debt amid coronavirus budget crunch

Cuyahoga County taps investment tool to buy city debt amid coronavirus budget crunch

The Budish administration is using a little-known investment tool as a way to help local governments affected by dwindling tax revenues due to the coronavirus pandemic. Home page Guru Aswath Damodaran said value and growth investing has become a lazy categorisation of investing. If you have waited enough, Please click

CLEVELAND, Ohio — Cuyahoga County recently used a little-known investment tool to help Euclid, Seven Hills and Broadview Heights refinance debt, and is touting the method as a way to help local governments affected by dwindling tax revenues due to the coronavirus pandemic, according to County Executive Armond Budish.

“We can use this tool again to help other cities as well. Just give us a call,” Budish said at a Friday news conference.

The investment tool allows the county to buy debt in the form of low-interest municipal notes from cities, villages, and school districts. The cities or other entities issue the notes to refinance previous notes, or invest in new projects, according to Councilman Jack Schron, who has long advocated the mechanism. He and Budish called the tool a “win-win” for both the county and municipalities.

Cities often issue new notes to pay off old notes that funded projects such as street improvements. But poor market conditions spurred by the pandemic means normal investors aren’t interested in buying new notes, leaving cities with two options: default, or tap money in their operating budgets or reserves.

Budish and Schron described either option as a “disaster,” particularly as cities struggle to make ends meet as sales tax and other revenues decline amid the economic downturn caused by the pandemic.

The tool allows the county to step in and buy the debt, providing a solution for the cities and earning interest for county taxpayers on money that would otherwise remain in the county’s reserves.

Former county councilman and current state representative Dave Greenspan, in one of his first moves after being elected to the statehouse, spearheaded a bill that increased the maturity period for such transactions from five to 10 years, making the tool more helpful. This is the first time the county has used the tool since those changes were made to state law, Schron said.

The county recently purchased four municipal notes from the three communities. They are:

  • City of Euclid — $1 million note for roads, street-scaping, and equipment.
  • City of Seven Hills — $7.8 million notes for refunding of road and street improvements.
  • City of Broadview Heights — $750,000 note for refunding for cash flow management and public improvements.

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Source: www.cleveland.com

Author: By
Courtney Astolfi, cleveland.com


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Cuyahoga County taps investment tool to buy city debt amid coronavirus budget crunch

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