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California collected about $80 billion in taxes in the fiscal year (ended June 30), compared with $3.6 billion in revenue for Houston-based Diamond. California has never defaulted on its debt. The state paid 1.5 percentage point more in interest, about $785 million in additional cost for taxpayers over the 30-year life of $1.75 billion in Build America Bonds.
California and many other states are not requiring municipalities to file timely financial information. The disclosure that state and local governments provide to investors is in the “dark ages,” said Gary Pollack, of Deutsche Bank AG’s Private Wealth Management unit in New York.
“The municipal bond market is the last bastion of hidden information,” said Timothy Koch, chairman of the finance department at the Moore School of Business at the University of South Carolina in Columbia, South Carolina.
U.S. taxpayers are paying as much as $6 billion a year because public officials’ financing is in the dark in the $2.8 trillion tax-exempt bond market, according to data and interviews from more than a dozen states. However, the recession is forcing municipal governments to cut spending or raise taxes.[1]
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