Bankruptcies, defaults, and other local government financial emergencies Page: 48
This book is part of the collection entitled: Advisory Commission on Intergovernmental Relations and was provided to Digital Library by the UNT Libraries Government Documents Department.
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the range was only from -8.1% in New York to 11.7% in
Buffalo. In contrast, the range in 1982 is from 11.7% in
Chicago to 27.0% in Detroit.
Further confirming the trend to improved liquidity is
the increase in the average liquidity for all cities from
74.6% in 1976 to 89.8% in 1982, and the fact that 19
cities increased and only ten decreased their liquidity
between the two years (Table 10-information for Houston
was not available on a comparable basis).
Another test of financial condition is whether cities
have short-term debt outstanding at the end of the fiscal
year. While short-term notes are often used by cities to
meet seasonal cash flow needs or for other purposes,
such loans create an element of risk. This risk occurs
because notes usually require payment of a large amount
of cash on a specific date, generally within a year of their
issuance. If, for any reason, the government does not
have available that amount of cash, and cannot renew or
extend the note, it faces default. The importance of
short-term debt as a potential trigger for financial emergencies
is illustrated by the fact that both the New York
and Cleveland emergencies were caused by an inability
to pay short-term notes when they matured.
In the original 1973 ACIR report, the concern over
issuance of short-term notes was limited to those whose
proceeds were used for operating purposes. Operating
loans, particularly when outstanding at the end of the
year, were considered a basic sign of trouble because
they indicated the accumulated operating deficit was
creating liquidity problems. Notes issued in anticipation
of bond sales were excluded because, historically,
they had not created many problems and it was assumed
30 Selected Major Cities'
Total Fund Cash and Investments,
As a Percent of
General Fund Expenditures
Total Fund Cash and
Investments As a Percent
of General Fund Expenditures
NA = not available.
Five Cities With Lowest Liquidity,
As a Percent of
General Fund Expenditures,
1976 and 1982
New York -8.1%
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United States. Advisory Commission on Intergovernmental Relations. Bankruptcies, defaults, and other local government financial emergencies, book, March 1985; Washington, D.C.. (digital.library.unt.edu/ark:/67531/metadc1317/m1/58/: accessed January 16, 2019), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.