I am erica, director of urban policy initiatives and policy Advisory Group at the urban institute. If this is your first time at the urban institute a very warm welcome to you and if you are a regular participant in our live and urban event, welcome back and also a very warm welcome to those joining us today, the webcast, and cspan2. We hope you are able to participate in the conversation. To follow it, please follow the hashtag live urban. The agenda for this event contains the twitter handle for all participants so you can include us in your tweets. If you have a question and are watching this event on webcast or cspan2 you can email us your question at events urban. Org, events urban. Org. We hope you participate in the conversation. Let me say a little bit about urban. The mission is to open lines, shaped decisions and offer solutions for economic and social policy research, assiduously pursuing the mission since 1968 when president johnson created urban to evacuate programs and strategies aimed at improving quality of life in central cities. We bring expertise and research on the impact of housing and policy and Community Development, Financial Capacity of family, insights about state and local Government Finance, and we work closely with policymakers in translating research, identifying policy problems and solutions. Todays forum represents convergence of our mission and expertise and leadership of our partner. On the growing concerns about municipal physical health and connection to the housing crisis and through the two conversations we will explore how the housing crisis in particular has affected the Fiscal Health of citizens. The recent housing crisis created great uncertainty at all levels of government, not just federal, national and state, but fluctuations in Housing Markets have affected Community Budget in the past the scale and pervasiveness of the mortgage foreclosure crisis has raised attention about strong connections of Housing Markets and Municipal Revenue and cost. These crises were felt in parts of the United States like the fastgrowing sunbelt cities but also over industrial legacies in the northeast and the midwest. While there has been quite a bit of research about the economic finish impact of the foreclosure crisis at the housing level, very few have explored the relationship of the housing crisis on municipal Fiscal Health. With support from the the Carter Foundation through Housing Matters which i had the pleasure of helping launch when i was at the carter, several groups of experts in macroeconomic Housing Markets and financing received support to explore this issue in greater depth. You can find or about this research and other parts of this portfolio on the housing howhousingmatters. Org and we invite you to explore that. Today, our forum will showcase Pulmonary Research from those mission papers. We will consider questions like how can policymakers head off the wave of municipal bankruptcy, what type of data and research do we need, what types of leadership do we need . I am very very pleased to introduce one of the most important leaders of this work, george mccarthy, who leads the Lincoln Land Institute for land policy and through one of the big picture initiatives unusable Fiscal Health, they have been elevating these issues to form with media, journal landline and events like this one. I have always admired mac. We Work Together in our former capacity when mac was at ford and i was at macarthur. In housing policy and admire his ability to see around the curve and and todays event, we are delighted to partner with him and his colleagues at lincoln. With that i will invite matt. Good morning. Thank you so much. It is great to work with the urban institute and those who came to the urban institute, the land policy to engage in efforts to really make land policy relevant to larger challenges of Fiscal Health and how we adapt to mitigate climate change, for many years, 70 years now, over the last few years we have been focusing more specifically on the narrow challenges of things like municipal Fiscal Health. Two years ago we launched a campaign for municipal Fiscal Health on the global level and that was launched where we began with a briefing with congress, and localities are not able to make full use of money allocated from National Government in the United States worldwide. Todays topic is relevant and has come to the 4 recently with the Major Economic crisis in the Housing Market. We have been able to understand the interaction between Housing Market and municipal finance. It is a 2 way street. One of the things we understand about municipal finance and we decided to launch the campaign, we took a more nuanced view of municipal finance or health then most people would take. The imf mantra, Fiscal Health is the equivalent of austerity. Fiscal health is really helping communities to assemble the resources they need, the goods and services to create the quality of life. And citizens understand the role of local government defining their quality of life and Service Local governments are not able to deliver the goods and services that support high quality of life reflected in the Housing Market. Housing values fall, population will leave, and the tax base will erode. That is a 2 way street. Better municipal fiscal house, delivery of the right business sn services and maintenance of infrastructure, all the things that make a city work well also redounds to better performance in the Housing Market, better performance in the Housing Market throws off the revenues primarily through property tax which is the main source of revenue for cities, to pay for the goods and services. Whatever you want to call it is a 2 way street. For us we have really been interested in seeing the pace at which places can rebound when something does happen to the Housing Market. And as erica mentions, the severity of the housing crisis led to a very attenuated rebound, they have not rebounded yet, so 2007 highs in the Housing Markets, they have fewer resources to bring to bear to pay for the things they need. They cant really grow in the ways they would like, cant restore their schools and other things that make them the kinds of places people want to live. It will take a wild but we will understand more today about what is in the realm of possibilities for local government to be able to manage their Fiscal Health. What do we need to do beyond the local governments, the state level, the federal level to make it possible for cities to rebound and thrive in ways that were possible, we have seen it happen in many places including right here in washington dc which within receivership in the 1990s and is now one of the strongest urban markets in the country and most robust Housing Markets so i thank you for coming out. I thank our viewers around the world and i look forward to a great panel. One of our signature contributions you will hear about in a minute, a longitudinal database that tracks the flow of funds through cities for over 35 years called our fiscally standardized city database and i am sure howard and andy will give you a better view of that but that will that is underutilized and im glad to see it is deployed to tell a story about cities needs to be told and retold in a more formal, rigorous and nuanced way so thanks again and i look forward to the discussions. [applause] [inaudible conversations] good morning, everyone. Thank you. As the title suggests, we are going to talk today about a Research Project that talks about the linkages, particularly the linkages between what happened in the Housing Market and the financing and cities. Our coauthor, sandy newman, is in the audience. I want to start by reiterating what max said. A number of cities in the United States i still in the shadows of the Great Recession and the housing crisis. We read the news, per capita revenues below where they were before the beginning of the recession. Not true everywhere but in many cases. Our study is going to focus on 91 central cities across the country, 90 one of the largest central cities and before we talk about Housing Market and finding cities, we need to emphasize, back already alluded to the fixedly s fiscally standardized cities. The problem of comparing Cities Fiscal data are substantial because there is a Great Variety in variance across the country in governmental structures. On the one hand we have a city like boston with City Government raising all the revenue to fund public services. On the other case, las vegas, many cities where the city municipal government raises maybe a quarter of the total revenue and the rest of the revenue is raised by overlying governments, special districts, county governments, providing services and financing of services for City Residents. Here is a picture on the spending side. Compared to baltimore with tampa, if you look just at the City Government spending per capita, the two cities in 2014, baltimore seems very high spending, three times more than tampa, but baltimore doesnt have overlying governance. Tampa on the other hand has independent county, multiple Independent School districts, when you add up a portion of spending that goes to City Residents of those government it turns out baltimore and tampa spend the same amount of money on per capita terms. In general, to allow us to do these comparisons, we find and constructed fiscally standardized cities which involves taking Municipal Revenue suspending and lots of details and adding on a portion of the overlying government. The portion that benefits City Residents. I am going to talk about the Housing Market and talk about average effects among 91 central cities. The red line here of the average, this is core logic Housing Price indices and the pattern you can see very clearly is the boom and bust, rising until 2006, the housing crisis and until 2011 it begins to go up again but i added to this diagram, las vegas, the poster child of the boom and bust, the bubble, incredibly high increase in Housing Prices and on the other hand, you have houston where Housing Prices rose but modestly declined a little bit and now they are way above where they were in 2006. The next slide talks about foreclosure rates and you have a similar picture for delinquency, mortgage delinquency. Again we see in the pre2006 foreclosure rates took 1 of all mortgages, rose fourfalls, 4 by 2011, and by 2014 down to to present, twice the amount what it was pre2005 or 2006. Again, big variation across the city. And to give a picture about the variety and variance in the Housing Market and divide our cities into four groups, four Housing Market so first we have the boom and no bust. And Housing Prices went up. And big decreases. And not much happened. Housing prices grew a little bit, no decline. The detroit case of secular decline where there was no increase and sharp decrease. Now going to look a little bit at what happened on financing. An average of 90, we dont include the district of columbia because the district of columbia doesnt have a safe government. The picture here shows Revenue Sources of the cities on average relative to 2007, the beginning of the housing crisis and the Great Recession. What you can see is a big decline. State aid, 11 , 12 where it was on per capita level and property taxes, those of the big sources of revenue for cities way down. If you look at the black line for federalaid, you see a dip and an increase, the federal Stimulus Program but now federalaid is below where it was in 2007 and it continued to drop. The only source of revenue that has gone up consistently is user chargeds. A similar graph on the spending side for inflation. You can see different expenditures, some are higher than they were in 2007, i will call your attention to two sources, one, funding for education, very important, funding for government outweighs. And an i will turn it over to howard. A nice introduction. With results on quantitative lanes between, a simple but complicated schematic. The relationship between the Housing Market and city revenue through property tax, the most important by 4. A year or two or three, with lower value of the taxable base, local governments can respond to that base in principle, they have the most economy than any tax by offsetting the decline by raising the tax rate, easy to say, to prevent the decline, we identified changes in income and expenditure needs to support an increase in tax rates, changes in other Revenue Sources, stated and federalaid and other nonproperty taxes, all affect the decision. Cities operate under considerable constraints from state imposed, state voted property tax limitations that provide, so this affects the willingness to offset a decline. The net result in property tax revenues. The other channel we didnt think about so much before is Housing Prices to foreclosure rates, foreclosure crisis, we put question marks because this relationship is a little simultaneous but it varies a lot across state so comparable Housing Price declines lead to bigger increases in foreclosure. A direct affect, may be more delinquencies and inability to collect property taxes, the effect is property tax revenue falls. Empirical analysis suggests how important that is, that is the schematic here. A result, the prices go up. And it looks to be approximately symmetric, it depends on the statistical model. And we get a relationship of a 26 decline in Housing Prices not averaged in a sample of cities, from 2007 to 2011 was the trough. And i will help to remind you the property tax revenues were 8 down. There is another big chunk of that affected. And it is counter factual. Why could it not raise the rates to limit declines . Falling incomes, rising unemployment made that unfeasible, they were not going to do that. In new york city, my city is a counterexample where there was a sharp increase in property tax rates pushed through by a are bloomberg which went through, some people said it would be a disaster, there would be some reserve fiscal capacity and willingness to pay that was not present in other cities because new york resisted the recession as well to get a sense of the magnitude of why rates cannot be raised enough to prevent that sharp decline, the estimate in california, florida and 25 increase in the property tax rate which was not going to happen would still have been associated with sharp declines in revenue. These tax expenditure limitations for local governments freedom to maneuver, they vary a lot across states. Another way of saying it is if you couldnt raise the rates, why the property tax is not at the same rate as the housing bust. It is constrained somewhat, the ability to cities, the drop in the rates and secondly nonResidential Property makes a big share, maybe 40 to 50 of the base in cities. Second major find is the impact of foreclosure rates on property tax, it contributes substantially to two poster child, so the property tax and solids, solids are the foreclosure rates, outpaces california, a huge increase of foreclosure rates, a big increase compared to florida and a very sharp drop in tax revenue, much more so than in california. Florida is different from california in that respect. What about other ways to replace the property tax, state aid doesnt do much replacement, federalaid looks higher rather than lower, user fees appear to supplement. That is property tax. What about all revenues, the housing stress could because by the third of the decline of revenues, state aid is a bigger effect, they had the cities very hard, to close up some policy recommendations or thoughts we had our to try to prepare for the next downturn which might be soon, increasing fund balance on rainy days, Housing Prices begin to go unusually, cities could build up reserves. And does develop policy, to limit foreclosures. And thank you very much. [applause] great. Welcome. We are pleased to have such a fantastic range of viewpoints, this interesting research. We couldnt be more pleased to have a panel that we could have when it begins. Let me introduce our panel and get right to the discussion. To my left, a senior economist at the Housing Finance agency, and and working in property appraisal and valuation, and to his left is andrew klein, and the office of management and budget. To andrews left is ashley nelson, associate professor of the school of public and environmental affairs, her research examines, consequences of inequality, with the Public Education sectors and other things. To enable us, to look in an aggravated way, the effect of the housing crisis, to give your perspectives. We will invite you to respond to that. You pulled apart different states so let me start with you first. Think about florida, what you bring to this, reflecting on your own experience in florida and the linkages you see reflecting on the research that was just shared. Thank you for inviting us and putting together this presentation. Six years ago i was sitting up here doing the same thing. My dissertation was how to effectively revenues and expenditures so i have a lot of data and it helped me bring together this idea. My views here, the us government, lawyers get on to me. I want to give you an example with howard and andy, why are revenues not as responsive to the house decline. Imagine you are in florida, get a peek of the housing boom, 200,000 and 25 decline, 150,000, when it is 200,000, 10 mils. On fat, when you get to that 150,000 point you think your property tax debate increased going up 3000. That didnt happen. Why didnt that happen in florida, it is different from other states around the country. One, we have annual reassessments of property taxes so every single year the appraisers get together depending on how you are used to the nomenclature, get together and reappraise every house and the other thing, different property assessments are capped underway, we have cities, counties and School Districts for weather overlays. 10 millage points to increase property taxes so they are not merely responsive in that way. The other side, why the individual himself increase, because we have assessment for individual homeowners so what ends up happening, if i bought a house for 140,000 going up to 200,000, that person has developed a tax tap that has gone up over time, it increased the 3. Taxes cannot change or go down until it comes down to the market value where the house price is priced down. You have the gap that prevents local governments from having a response from the Residential Property tax base. We also have exemptions homeowners climb up to 50,000 in florida and all of these combine together mend the responsiveness of the local tax base on residential side, 30 of residential homeowners get the property tax from homestead exemption and the local politicians dont remove that. You cant do a whole lot. You have counties get the residential side of the tax base they dont feel a lot of tax collection. One thing that happens is you have Property Values going down the rollback rate. You can rollback or change, deceptive in the name itself, and the same Tax Collections as before. What you end up doing is jack up the millage rate on properties and none of the Residential Property owners that are homes that it will be affected because their rates are tapped and taxes are tapped but what will end up happening is in place to the commercial base and Industrial Base in the county so that is a way of offsetting these increases and causes commercial when that happens. When these things go on, innercity Public Finance perspective the balance these roles. The other thing is cities, counties and School Districts repeat on the millage rate. So in florida, all of the Public Finances and one entity in leon county, city, county and School Districts at the same time, it wanders fast in the other part as well, School Districts move a lot more quickly in the upturn and because the millage rates are lower, they fall again for tax rates. The local government competition is kind of cool to see happening but not so cool with these debates. To let the others talk as well, the things that happen the foreclosure that make florida different as we are a judicial state. The foreclosure rate, a longer timeline for housing to be foreclosed on. A bank or Mortgage Loan owner to get the money back, to go through the courts. California has the option of being judicial or nonjudicial, typically goes nonjudicial so florida has a timeline of 930 days, it is a full year and the other thing is we have recourse to let the lenders go back to get other access for mortgage asset, for all personal assets. To the florida situation. Thank you for laying that out, really interesting. I noted in opening remarks, this all kinds of cities and older industrial cities, baltimore might be included in that, give us a sense how you managed, how you see the ways in which baltimore can experience the foreclosure crisis, thank you. I arrived in baltimore in the spring of 2008. My timing was exquisite. Our experience is different from that of the average city based on the research we were just shown. Property taxes are our saving grace during the Great Recession and aftermath and that is because of the way property tax system is set up in the state of maryland, the same elements we will describe in florida. It is also, based on triennial assessments. Significant increase in Property Value being phasedin. We have a 4 , taxable value in any given year. And homestead tax credit built up that we were working on during the Great Recession. Between fiscal 2008, and 13, property tax revenue increased by 140 million was the rest of the revenue is a difference tory, and a 50 million revenue. And with the revenue package, the general fund revenue, 1. 5 billion general fund would have declined over the 5year period. The property tax policy provided us and nonetheless we have huge fiscal challenges on the spending side, pension cost in the 200813 period, 80 million, most of that for investment returns, and letter crisis go to waste, we performed fire and Police Pension systems, and transformed the budget process, we make a lot of wise decisions to reduce spending, with recreation centers, the tip of the iceberg and things that were unsustainable. And furloughed employees for three years, and capital spending, canceling d for Capital Projects and developing longterm, for later in the panel discussion. It focuses on california, we have an opportunity to see how california compares on this comparison and why foreclosure rates are below average despite having larger than average prices reflections on that. Thank you for hosting this event. What we will describe in terms of property tax revenue in florida makes it sound local Government Units had very little flexibility, and compared to california a lot more revenue flexibility. California is very different in large part to proposition 13, the way in which property taxes are assessed in california, based on the purchase price, reassessed annually in the market value as is the case in florida and even though you have overwhelming levy limitations in florida, incremented annually that either for inflation rate that is lower, much more stable revenue, much lower level. And it is relatively stable, in the case of florida, large numbers of california electorate perceive large amounts of government failure, not collecting enough property taxes according to many people. Everyone hears foreclosure rates were astronomical. And in foreclosure rates, and many people are puzzled by this and subsequent bust. In addition to that is a nonrecourse state. A home that is underwater. The lender did not obtain a Deficiency Judgment against the borrower, with the sale price of the home following foreclosure. Many people assumed this would be a huge incentive for people to walk away from their mortgages, florida by contrast is a resource state. You can still be liable in the difference for your mortgage. People thought people are going to have a huge incentive to walk away in california. What happened is the lender knows that foreclosure they will not see a Deficiency Judgment, makes them far more likely to pursue other avenues to help our stress, short scale volume in california far outpace on a per capita basis short sale volumes in florida during the foreclosure crisis, short sale is a workaround with a borrower that leaves the lender and borrower better off, the lender is far lower cost as a result of property through foreclosure process and another thing is lenders may be more willing to renegotiate in cases where they know they cant share their losses for foreclosure proceedings. So interesting. The contrast, these particular connections at the federal agencies trying to adapt. In a little bit of 20 20 vision, looking backwards, what policies could state governments or City Governments pursue to review the negative . What would have been practical, possible, to mitigate the negative effects of the housing crisis and economic downturn, and starts with a particular question, continuing contrast in california, florida, where there lots of things that they could have learned from other states in shaping some of those responses . From floridas perspective, what would have been helpful is what we have in other areas of the country, reflecting on that. Having public budget set for several years in advance, anticipating potential property declines and tax declined is extremely helpful. Florida was in a boom period where we thought everything was going great, lots of speculative buildings and investment that came from the outside. Entire subdivisions, planning and development came out and built 300 homes and vacancy rates were astronomical. We started to see 30 to 30 prince decline on those properties, extremely distressed in the community. And looking at the academic standpoint, from the agency perspective, a little bit controversial. The market, things that this is not at all popular. The homestead exemption is extremely hard to gauge out and be responsive when Property Values are going down. To rely on Revenue Sources with the tax base on sales back on popular for spring break and tourism. The reliance on the property tax, looking at different instruments, getting rid of the military tax and the homes, in california where 3 inflation rate, getting rid of these things interferes with Market Mechanisms would be great. We have to step back from the reassessment. I worked as a consultant in a state agency that does it end an assessors office. I have a dual idea how this works. This is a black box. Link back to properties physically every three years or so, all these characteristics, the automated system, out of value every single year. Local governments are relying on that with Bad Influence down the road. Having Something Like maryland, three years and an increase in property tax rates gets to stagger up and over time you got to go into the tax bill and see it very, very salient lee and you can adjust your recording to that. An account you can draw from when things get bad or you have programs that are not blind items and you can transfer those funds over. Thats a really bad financial perspective. Thats exactly what caused the financial crisis in the mortgage industry when bank started doing that. With, what cities should perhaps think about is not as a rainy day flash fun but as a capital reserve. So you have this increase when Property Values to increase rapidly and then your times were like have this high volatility, because in a longterm perspective this might be mad. They were probably come down and then when times are fayed you are below the trend you can go into that fund and allocate it differently. You need to have capital reserve for when everything hits the really bad place that you can adjust and having the Funds Available to deal with the problems there. I totally agree with that last recommendation. I think the use of Rainy Day Funds would be a fabulous way to sort of manage financial crises from any sort of fluctuations in the tax base. One of the problems is that theres a lot of variability and policies governing the use of Rainy Day Funds. Governments are often under austerity measures required to spend down rainy day balances to a certain level, and those types of things can inhibit local governments ability to use those funds as a source of insurance basically. So i think in california we have this protective power of levy limits, and i was enhanced by not attaching markets to the market value. That insight homebuyers from liquidity constraints that wouldve been induced by changes in the property tax assessments, had they been tied to the markets. I think in california actually weather the storms fairly well in comparison to other places like california because of that. But that said they can resolve this issue of very low spending overall processing in california and really no spending, really large decline in spending on k12 Public Education. So if we can sort of take a middle path and do Something Like may be raised slightly the levy limit while also allowing City Governments to hold some sort of rainy fund balance as an insurance policy, using the increase in increment, that would be wonderful i think. Andrew, coming to you again, you came in 2008, looking back in retrospect, would you pursue different revenue or spending policies as a means of better dealing with the crisis wax are you pretty satisfied with what you guys did . Im happy with how we managed it. A lot of talk about Rainy Day Funds. Im proud we didnt touch ours throughout those years of extremely painful budgets. That was partly because we had very strict policies around what we call Budget Stabilization reserve. It could only be used during a fiscal year when you have unexpected loss of revenue or emergency expenditures. And we did in fiscal 2010 in particular, we had to midyear rounds of budget cuts because of some state actions. But we stayed away from tapping the reserve. We made the difficult choices. We knew that would be helpful to us in the long term. So looking back i think under the circumstances we did the best we could. What im particularly proud of is we, in 2011, we started work on a tenure Financial Plan. The goal wasnt just keep our heads above water, and one of the cornerstones was we wanted to structural budget balance. Also wanted to improve our tax competitiveness, our property tax rates are double any other jurisdiction in the state of maryland. Also wanted to increase our Infrastructure Investment and we wanted to have a stronger balance sheet. As i look back, so we went to all this difficulty, we come out on the other end. We are on the course toward structural balance. We reduce our longterm spending by 1 billion over ten years we lowered our property tax rate for homeowners by almost 8 . Weve increased Infrastructure Investment by 130 million. We have reduced our unfunded pension and Retiree Health liabilities by 25 , grown our range defined by 33 . And we got a bump in our bond rating to aa. For those of you, bond ratings, think of baltimore, you dont think of aa. Thats what we are, because of strong fiscal management. Very interesting. Im going to pursue one last set of questioning, so this is your invitation to start thinking about your questions both in the room and online. Again you can email your questions to events at urban. Org and we also hope you are following on twitter hashtag live at urban. The twitter handles are in your agenda. One of the things howard put upon his last slide about what policy recommendations to pursue was how to get ahead of this criticism in the first place so as to prevent foreclosures from happening so cities cannot face the decline in revenues that happened. What brought back for me was coming to the city of chicago in the late 1990s, the chart of 2000. I think mac was at fort at that particular time. One of the things i was charged of doing was to come up with a plan to mitigate the foreclosure crisis that was then happening because of predatory lending, sort of a precursor to the subprime mortgage crisis but all the elements were there. So i learned firsthand what tools do and do not exist for localities trying to intervene in a virtually unregulated mortgage market, and had to come up with those kinds of tools and strategies to prevent foreclosures. And it was a great learning experience for me. We began to institute some of those kinds of changes, in one in particular mayor daley introduced an ordinance that said the city would not do business with predatory lenders, thereby defining what he meant by that in ordinance, and that got a lot of angst who it purchased Mortgage Companies unnerved by that. Im just curious now looking forward, we obviously have more federal regulation now in the markets so cities of have to do this on their own. But what do you see as the kind of policies that cities or states could put into place to promote healthier Housing Markets . What role do they play in relationship to promoting housing policy that is healthier . Let me start with you. Ill say from the federal standpoint, so i work for an agency that is in charge of the regulation of the secondary mortgage market. At the federal level weve made a lot of efforts recently over the past few years to really increase the quality of the loans that are coming through and that are getting securitized and purchase in the secondary markets. We made a lot of effort for that. Weve also changed and then react at reaching out, either mortgage modifications or refinance programs. Weve been going into neighborhoods and trying to stabilize them, and now we are also looking to do sort of a streamlined function that if you go delinquent on loans come on your loan and you have been delinquent for 90 days or even earlier in some cases that were looking at, that will get you really quickly into a modification if you go to enter your are having a hardship. At the federal level we are already looking at that. At a city or a local level, soe other things you can do our lookout for the borrowers are the people you have neighborhoods that are starting a foreclosures. Go into those places and start to offer subsidy programs where theres upkeep of the lawns or of the units or a different places that might have taxes against them and are vacant. Those are effective ways of reducing the foreclosures from spreading around to other areas of the city. Another thinking ahead in terms of like we are not at foreclosure ship a thinking ahead do we prevent tax base loss and diesel closure strap and is dont build just these sprawling suburban neighborhoods. So we need to have a very centered development, change the way of looking at it. Im not concerned about foreclosures. We will always have foreclosure rates. Like unemployment there will always be some rate of foreclosure and we will not eliminate them. What im concerned about is the severity and thats what we got killed in florida. The severity of foreclosures means if youre from a mortgage perspective you have a look and somebody forecloses and theyre not paying on it, whether or not you lose 10 on that loan or 80 and everything dries up. To reduce that volatility, a city standpoint, if you have mixed use development were yet townhomes, have multifamily buildings that are apartment buildings, you have commercial space all in a single development, that is what reduces the volatility of your property tax base. Is also way too great a sense of place in the community and thats whats becoming a popular thing among developers right now. Developers can i work on the planning board. When youre coming, often at these projects even for ones that already been approved in the 20072008. Come that they had the right to build out two, 300 units of of Single Family detached homes. They are no longer doing that because that is not allowing them to reduce the volatility in the cities are interested in also having that reduce volatility as well. On a societal standpoint this is exactly what we need to go. We need to have denser communities, place a way different of life where people, different income levels and different demographics can all live within sort of a more approximate location. If you create housing that is no longer affordable, that will push people out of the suburbs who are essential workers at you need inside that city. Thats going to create a very, very that problem for us from a social standpoint down the road. Investment in these Affordable Housing or diverse programs is great. Cities can encourage that. Developers have been coming to us and offering that up for senior age housing for low Income Housing. The federal government has tax credit for that that you can apply to for state programs to the low Income Housing tax credits and other things like that. Look into those because those are a nice with getting diversity in the communities and reducing the volatility of your property tax base. Sounds like you are bullish that market learned its lesson and is designing communities differently in order to mitigate against some of the problems that precedes the foreclosure crisis . In some ways i guess i do think were in a much better state in terms of what we were in 2005. There are places in the country that are starting to heat up. A lot of our research has been digging into within cities. So howard and andy were showing it is compared to a custody. We develop a number of house price indices at the zip code to take with it and see what its the best, places or most resilient and what kinds of cities are the most resilient. Were finding center city as have the lowest to client and respond of the quickest and the serving areas. Suburban areas came out fairly rapidly but over the past 25 years the appreciation rates of increasing in a range of zero to five or zero to ten miles up the large cities, its the downtown areas that offer tons of amenities in recent for people to be in there. That flows into the retail space, commercial space and everything goes into the tax base. Sounds like you are agreeing. Are you seeing this in baltimore . Yeah, we have the halfmile around city hall thats been going for years, millennials flowing in. But overall our population, although it a stabilize after half a century of decline, its not growing. Its growing in the center city. Its shrinking elsewhere, but thats where the center of activity is happening in baltimore. Im wondering if part of the challenge is you also have an aging population in some of these cities. You are alluded to this. The Housing Options for them to pursue, the right kinds of Housing Options. Can we help them age in place . As a city budget director, one of the sources of the kinds of income that can do the programs you mention is Community Development block grant program. That is barely on the chopping block in the president budget. Im just curious, federal sources of revenue at the panel sees is being important or that you housing policy and what the implications are at any changes. Baltimore relies on the federal government for 230 million out of 3. 5 billion budget offering at capital. We received 29th in received 29th in committee to block grants so we are very concerned about the threat to that program. Im not housing expert but i do have a lot of advice on how to manage fiscally to the next recession. So if i can turn to that a little bit, thats more my wheelhouse. First is planned longterm. I talked about that. Another is manage your volatile revenues. Our most volatile revenue is transfer taxes on sale of properties for refinancing. It was at 160 million in 2006. Very next year 75, dropped all the way down to 40 million. That was the canary in the coal mine for baltimore. Thats what mr. Do see the effect of the Great Recession. Weve adopted a policy where we base our projection, our budget projections on a fiveyear moving average. Anything in excess of that you want to go toward Capital Projects, onetime expenses or reserves. Thats important. Another is adopt a riskbased reserve policy. Every city has its own unique set of risks that it needs to prepare for. I mention we didnt touch on Rainy Day Fund that we do feel like in the future we would like to have some Revenue Stabilization funds. And so we now are developing a twotiered Rainy Day Fund, one for emergencies and one for recessions. If you tax caps, try to stay below them. That gives you some more flexibility. We dont have a cap on our property tax rate, but we do on her income tax rate and where at that cap that was something we did as part of that 50 million revenue package that i mentioned. Make sure your financial policies are in order. Ill give a plug to the Government Finance officers association. That way youre not fine flying by the seat of your pants and you both the bureaucrats and elected officials in agreement on balanced budget and what to do with onetime revenues, et cetera. Check to see if your tax structure is aligned with your current economy. In baltimore ours is not. We rely 50 of her general fund revenue is for property tax, another 20 from income tax on residents. Our economy is based on socalled, commuters coming into the city, on entertainment, tourism. Its not an industrial economy anymore, and, but we dont have a local sales tax or a commuters tax. Our nonprofits pay just a little bit to us in payments that we squeeze out of them, and so those i think sources of revenue that would really help us be more selfsufficient going forward, rely less on the state and federal government here and then from the state perspective i would advise any state to take a look at marilyns property tax system. It has a lot of features that will help to stabilize revenue for local government. Great, thank you. Ashland, lets wrap up with you and your reflections on what we can do better looking forward, what Lessons Learned from the Great Recession and what changes would you recommend to california, i made it across the u. S. . I will touch of some i think at the federal level that can exacerbate what happens at the lowlevel. One of the areas that are think is right for reform is the committee reinvestment act, which gives credit for federally regulated lenders for lending activities in low to moderate income census tracts or loans made to low to moderate income borrowers. I have done some research in this area in california specifically for a federally regulated lender with a committee reinvestment act assessment area in southern california. And what i found was a large number of delinquencies were really driven by loans that were considered cra eligible, for which a lender got credit but they were made to high income borrowers purchasing homes on a speculative basis in low to moderate income census tracts. But delinquencies runup was not being driven low to moderate income borrowers purchasing in any sort of census tract. And so i think when we are federal policies that actually print these types of incentive structures, they can will exacerbate Housing Price fluctuations because they provide explicit lender incentives to increase the amount of speculative borrowing that occurs. So thats something that perhaps the cra is famous for being regulated from below, by different, by the popular press and other agencies, but this is an area i think even local actors, local Government Agencies can get involved in advocating for federal reform on the basis of making the claim that this has profound distributional consequences for how we think about Housing Price ups and downs, within states and at the local level. Really glad you raised the point because that is been a hotly debated issue about who caused it and a lot of the blame has been placed on low and moderate income borrowers, but your take away is maybe not so much. We have a very different take away. Great. Were going to turn to you and to our listening audience, and we have a set of mic macs that a roving. If you put your hand up, one mic will find you. When did you direct your question completes an additional self and your affiliation. Picnic at a particular person you are addressing your question to, named after we invite howard and andy can also answer questions at the podium, so please include them also within your question. So yes. [inaudible] my concern is how you pick up revenues specifically dealing with employees. Your solution, being laid off and especially arguably [inaudible] you very may well be enhancing foreclosures and you may very well be losing the revenue. You mentioned the commuter income tax that doesnt exist. Thats a solution, a requirement that City Employees live in the city. But i really dont think, and then you also i would argue have a decline in city services, too, such as perhaps garbage if youre laying off your sanitation workers. I just wanted you to comment on those. Share. We did make a lot of tough choices, but i would say our layoffs, we had i think about 200 total out of a workforce of 13,000. I think we kept those to a minimum. We tried to find efficiencies where we could to avoid layoffs. We froze hiring. We did that. That happened even before i arrived when that revenues started to fall. And that continued for five years. Anakin that was an effort so we wouldnt have to lay out existing employees. I mentioned we increased revenue by 50 million. That was everything but the property tax. Income tax, parking tax, telecommunications tax, energy tax. We made up some new taxes like the beverage container tax. So we were trying to balance our approach to balancing our budget, and revenue efficiencies. And there were some Service Reductions and some layoffs, but again we were trying to rely more on hiring freeze and furloughs, and pay freeze as opposed to layoffs as much as possible. We have a question from our listening audience that i will address to the panel. Its a question about vacant property and what did we learn in terms of best practices in handling vacant property . I know that michael in baltimore is a rock star on this issue, and you deal with that quite a bit. Yeah, thank you for the shout out. One of my favorite people, currently acting director of our Housing Development and which is on a bus tour with him recently of what we call the vacant to Value Program produced develop a market type policy to focus our resources in terms of demolition, relocation, stabilization of neighborhoods, trying to do that in places that do have potential for private funds to come in and invest. I think thats our basic approach, and part of our longterm Financial Plan was to increase our demolition relocation spending from 2. 5 million a year to 10,000,010,000,000 a year. We have done that and we continue that. The state of maryland has also stepped up and provide some significant resources as well. We have 16,000 vacant and abandoned structures, and about another 16,000 vacant properti properties. So the scale of the issue is huge and the current resources are no match for it. But we are starting to make some progress. Theres pretty Compelling Research by John Campbell and others that sort of empirically demonstrate that the primary mechanism through which foreclosures lead to a contagion discount among surrounding properties. The mechanism is their vacant and abandoned properties falling into disrepair and then creating some sort of ice reduction among surrounding property. The price reduction is not gigantic, and so i dont know that there is a great Cost Effective way to address vacant and abandoned properties because that discount has been shown to be Something Like 1 around 1 d surrounding properties. Its large for the property itself, but if youre worried about, we need to address this from a policy perspective because it leads to contagion. I dont think the evidence is there. That contagion discount issues. I think probably what helps is a shorter foreclosure process because then you get the foreclosed home into summary of the fans but then you have to weigh that against the consequences of shortening the due process of borrowers. I mean certainly floridas ten b probably stand to be shortened by an entire year. I will comment alone that, not too too great in arguments on this the discount but ive done some research on the discount affect on a city level on average house prices would you foreclosed properties. Some indices the recent prolongefor longtime had a fixet said its about a 15 discount on a property is going to a distressed sale. What we end up finding out is that goes down to about 30 in some areas in florida and it is time variance to become really bad during crisis and then recently if it is correct its not very large note. Almost all the distress sales that are problematic are off the books now in the discount has come back down to less than 8 , 5 . When a property resales over and over again, when it resales in the second time sometimes are still the stigma. So that is like this time bearing discount on the distressed sale but that does affect city level house price indices but is more particularly concentrated in certain areas. In terms of programs that we tried at a National Level to mitigate foreclosures or the severity of these, theres two different approaches. If youre a big bank or mortgage holder, you just dissolve your assets. You get rid of all the foreclosed properties, go to auction and you try to get rid of it as fast as you can and bring in investors who hopefully stabilize the market and take care of those properties in ways that you may not be able to. The other is write it out. In some committees its better because we got properties that were at the bottom of it and when they started to increase, and in florida if it takes three years you probably were back on the upswing and the properties were increasing in some places. As long as you maintain actively the neighborhood you go through and cut the grass, you make sure the neighbors are doing a good job, it costs money that the procedure getting off this webbysome sort of asset standpoint. When you go to the foreclosure process and figure out your actual loss, the losses are lower on some of those areas because of your actively managing these neighborhoods and preventing this contagion effect from spreading. There are different ways of addressing it, to get at the end result. I would sever those are more interested in this, the center for kennedy progress is a terrific resource and does a lot of work in this area. In full disclosure i care the board center for community progress. Other questions . Is a question over here. [inaudible] i was hoping you could tell us about what the politics were in baltimore that make the budget resolution process possible . Well, we were kind of fortunate in baltimore city. We have a very strong executive charter, and so the mayor proposes a budget to the city council and the city council cannot add anything to move money around. It can only cut, and even if it cuts a line item, the mayor can veto it and it takes 12 of the 15 members to override a veto. Sullivan puts the executive in control, and that helps a great deal i feel in terms of putting together and passing a rational budget. You dont have to deal with so many parochial interests competing with each other, and really look out for the best interest of the city as a whole. So that helps us a lot. I think back to when rolled out our tenure Financial Plan, our first step was to roll out our forecast of what the future would look like if we didnt do anything different. It was a dire. There were headlines that has a bankruptcy intent in thin and we did not intend for that to be the take away, but it actually held us to call attention to the serious structural fiscal challenges that we faced. He really got our elected officials, are councilmembers, got their attention. And even our leadership understood that we had a serious problem on our hands and we were transparent with them in terms of what were looking at. So that led to legislation to reform our Pension System and work with our units reform our Health Benefits program and change it to our firefighter schedule and a number of other things that helps to reduce our costs. Other questions . Just a comma any question. In terms of how federal regulations also federal activities rated two fortunes of cities, another issue on the lending side was fueling speculation was extension of credit to fannie and freddie in the old abe markets really getting high income borrowers with high credit scores, no doc loans to buy houses alta, velvety fannie and freddie going into receivership and having a loss in california pics of that was a big problem. Once again not the low income borrowers in this case, high income borrowers with those no doc loans. My question is on the austerity and tax collection side. Because one of the things that weve noticed in some cities have gone through kind of this more austere times like in detroit or stockton or other place is that they cut staff. Some of staff the cut are the staff that actually collect delinquent taxes. And so it got so bad in detroit that the city was three years behind, in really enforcing delinquent tax to link would see and people just stop paying their taxes come to the point where 53 of taxpayers in detroit were delinquent at one time. And im wanting to what extent do the cities actually look at the tax enforcement and the austerity of something that kind of works together to actually whatever, create a vicious cycle as opposed to a Virtuous Cycle to get you out of that kind of problem . What we did in the baltimore was i created a new team in my shop. We called it the building integrity unit. Because we knew, and this is based on, in fact, open data help us. We put all of our property tax data online. We actually had a few enterprising citizens saying hey, the property couple houses down ic is getting a homestead tax credit. Thats not an owneroccupied property. Well, we decide lets take a systematic approach to this and we recovered millions of dollars from erroneous or fraudulent homestead tax credits. So we were investing in tax collection. We even, i guess this is funny, but not really. We found there were several Catholic Schools that had closed, but they were still on the tax exempt roles when actually they should be paying taxes. So we went after the archdiocese for their property tax money. So we were looking under the seat cushions, everywhere we could to find that tax revenue that we were losing. I dont know if you saw, there was an article this past week about a new doctoral student i think from university of michigan who was doing an experiment in detroit, behavioral economics. To tax delinquent payers in terms of understanding which letter got the best response. Others may seem this, too. Turns out the water that resulted in a marginal increase in the bank of taxes was one the reminded people about the legal obligations and the likelihood of landing in jail if you dont pay. But interesting that detroit is taking a serious look at how to reverse that particular trend and remind people of their responsibility. Other questions . Yes, we have a question back at the question appear at the think those would be the last two questions we can take before we go to a short pause. Given what you just said, andrew, and also the ideas you were espousing earlier, just one if you could speak to the wisdom of using the current property tax system versus just moved to a user base system such that you wouldnt care if theres a homestead deduction if you did have a property tax. As a taxpayer i never really quite understand what im getting when a property taxes are up but i dont see an increase the services. Are you at baltimore resident . No. But my taxes are high. [laughing] thats a tough one. I do think, like you said can we rely on property tax for half of our general fund revenue. I think the homestead tax credit is fair, that the state requires there to be a cap of at least 10 on the gross and taxable. We set our set for which is one of the more friendly tax caps. Theres discussion about cuba increase it up to the 10 . We resist that because again that was one of the things that really helped us. We had stored up all this homestead tax credit. We had people, i was asked all the time, why is my property tax bill going up when the value of my house is going down . Thats because the market value, the full cash value of the house was way about the taxable value so they were still going up that 4 a year. Some of them still are. I think we were at 150 million. Now were down to about 30 million homestead tax credit so we have a all of it off. I look at Montgomery County and they have a 10 cap that they worked there is often a couple years. Thats gone. For us, the roller coaster ride was not nearly as steep and theres only one year, physical 13, get our property tax revenue actually dropped and it didnt drop i very much. I feel like that system was put to the greatest test it could have been put to come and it passed. Great. We have time for one more short question. My name is Jared Kirchner and my question, these are my questions, not my organization. [inaudible] my question is sort of like twofold. I really love what you are saying about addressing the risk factor by integrating commercial, housing, mixed income, get them into the city, a very interesting plan to design. When the Clinton Administration did it [inaudible] homeownership zone program. Again it was really laying down when he said [inaudible] thats addressing i think, correct me if im wrong, kind of a risk factor. So the other part of what i want to say is new revenues. It looked towards bernie sanders, the wall street taxes, [inaudible] so a diversity of the ways in which cities can get money. Capital gains anyway, requires legislation and overcoming some of the legal problems. But im talking as an economist and not as a policymaker or a legal person. But conceptually, you know, Capital Gains tax, even transaction tax, you know, trading on wall street taxes and wealth taxes which is limited to how property taxes, take all of them. Anyway, just what is it anybody have any comments on that. Thank you for putting this on the table, quite interesting ideas. Well have to go to a short pause. Does anybody have a Quick Reaction . I think i mentioned earlier that i do think baltimores tax system needs to be modernized. I mentioned things like possibly commuter tax, sales tax. The state doesnt allow us to have a local sales tax for all of these would take actions on the part of the state, but i definitely would like to see us diversify our revenue. With that would you please join me in thanking andy and howard for a great presentation, and our panel. We will take a short pause and then continue the conversation. Thanks so much. [applause] [inaudible conversations] tonight booktv in primetime features books looking at life in the white house and beyond. First, former assistant to president bill clinton Adrian Miller on his book the president s Kitchen Cabinet this morning a look at how Healthcare Providers choose the best treatment for patients and the importance of research in making those decisions. The Bipartisan Policy Center house. Thats live at 10 a. M. Eastern here on cspan two. Some of the featured writers coming to the festival of books this year in los angeles are chock polymer, mystery writer michael connelly, joyce carol oats, Thomas Mcwane was winning our Lifetime Achievement award. I mightve mispronounced his name a little, a kenyan runners often considered a finalist for the nobel prize in literature. Some of our critics at large including marlon james one a price two years ago. Watch our live coverage of the Los Angeles Times festival of books all weekend april 22 and 23rd on booktv on cspan2. In case you missed it on cspan, cia director mike pompeo on National Security and wikileaks. While we do our best to quite a collect information on those who pose a very real threat to our country, individuals such as Julian Assange and Edward Snowden seek to use that information to make a name for themselves. As long as they make a splash, they care nothing about the lives they put at risk or the damage they caused a National Security. Former pakistani president charlotte. I think those who live in pakistan are absolutely wrong. They must understand pakistan the role they played and the sacrifices given fighting terrorism. Nato secretarygeneral jen stoltenberg. We have been loyal to our core. Ever since we were founded in 1949. And that is that we are an alliance where we promise to protect each other. One for all, all for one. Malala addresses a joint session of the canadian parliament. Around the world 130 Million Girls are out of school today. They may not have studies and they may not know the statistics, but they understand that education is the only part to a brighter future. Secretary of state Rex Tillerson on u. S. Russian relations. We frankly discuss the current state of u. S. Russian relations. I expressed the view the current state of u. S. Russian relations is at a low point. There is a low level of trust between our two countries. The world to foremost Nuclear Powers cannot have this kind of relationship. Cspan programs are available at cspan. Org, on our homepage and by searching the video library. Now another panel from the