Municipal Default Patterns: An Historical Study

The incidence of municipal default is closely related to the business cycles in this country. During national depressions nearly all sectors and regions experience defaults, although not with equal severity. Regional borrowing behavior during the boom years preceding depression determines which regions will be most severely affected by national depression. The history of state and local borrowing is briefly surveyed with attention to four major periods of economic expansion and the national depressions that followed. Regional development cycles are then reviewed with a focus on several cases: special district defaults both at the turn of the century and today; Detroit at the beginning of the automobile industry; and Florida in the 1920s. New York City and Cleveland are analyzed in the context of urban crises. Revenue bond defaults, including toll roads and the Washington Public Power and Supply System (WPPSS) are analyzed for special recurring patterns.