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