Chapter 20 - State and local governments in the financial markets. In this chapter, students will be able to examine the marketing process through which state and local government bonds and notes reach investors, and to learn why these instruments are attractive to investors; to explore the various ways in which state and local governments raise the funds they need. | Money and Capital Markets 20 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu State And Local Governments In The Financial Markets Learning Objectives To understand why state and local government borrowing has grown so rapidly in recent years. To explore the various ways in which state and local governments raise the funds they need. To examine the marketing process through which state and local government bonds and notes reach investors, and to learn why these instruments are attractive to investors. Introduction The borrowing and spending activities of state and local governments have been one of the most rapidly growing segments of the financial system in recent years. State and local governments are pressured by rising populations and inflated costs, while many investors are attracted by the high quality, ready marketability, active secondary market, and tax exemption . | Money and Capital Markets 20 C h a p t e r Eighth Edition Financial Institutions and Instruments in a Global Marketplace Peter S. Rose McGraw Hill / Irwin Slides by Yee-Tien (Ted) Fu State And Local Governments In The Financial Markets Learning Objectives To understand why state and local government borrowing has grown so rapidly in recent years. To explore the various ways in which state and local governments raise the funds they need. To examine the marketing process through which state and local government bonds and notes reach investors, and to learn why these instruments are attractive to investors. Introduction The borrowing and spending activities of state and local governments have been one of the most rapidly growing segments of the financial system in recent years. State and local governments are pressured by rising populations and inflated costs, while many investors are attracted by the high quality, ready marketability, active secondary market, and tax exemption feature of state and local debt obligations. Growth of State and Local Government Borrowing $ Billions . Municipal securities Data Source: Board of Governors of the Federal Reserve System Growth of State and Local Government Borrowing What factors account for the strong growth in municipal borrowing? Rapid population growth Uneven distribution of population growth across the . – smaller outlying communities were transformed into cities Upgrading of citizens’ expectations concerning the quality of government services Rising construction and labor costs Sources of Revenue and Expenditures For . State and Local Governments ( For 1998-99 in Millions of Dollars) General revenues by source: Property taxes 240,107 Sales and gross receipts taxes 290,993 Individual income taxes 189,309 Corporation net income taxes 33,922 Revenue from Federal Government 270,628 Other (other taxes, charges, revues, etc.) 409,505 Total revenues .
