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Economic Commentary

Debt Management of Ohio's Major Cities

Municipal debt grew dramatically between 1968 and 1978-a period when gross capital formation by state and local governments was ebbing. The relative decline in public capital formation by state and local governments has been attributed to several factors, including lessening need for new capital (particularly with declining school enrollments) and rising interest rates. Furthermore, cutbacks in capital spending have been steepest among older cities suffering from long-run decl ine in economic activity, especially in the industrial Northeast. Despite the decline in investment, however, debt has risen rapidly, as a larger share of capital formation has been financed through long-term debt. In addition, new financing devices (mostly non-guaranteed revenue bonds) have encouraged state and local governments to use the municipal bond market to attract industry. Because the new financing devices often have been backed only by the “moral obligation” of the governmental unit, their increased use has been a matter of growing concern in municipal bond markets.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Schnorbus, Robert. 1981. “Debt Management of Ohio's Major Cities.” Federal Reserve Bank of Cleveland, Economic Commentary 3/23/1981.

This work by Federal Reserve Bank of Cleveland is licensed under Creative Commons Attribution-NonCommercial 4.0 International