Cost of Too Much Debt Piles Up for States, Local Governments

Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn't resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes.
Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades.
California's redevelopment regime is an object lesson. Starting in the 1950s, the state gave localities the right to create public agencies, funded by increases in property taxes, which can issue debt to finance redevelopment. A whopping 380 such entities now exist. They collect 10% of all property taxes—nearly $6 billion annually—and they have amassed $29 billion in debt never approved by voters for projects ranging from sports facilities to concert venues to retail malls, museums and convention centers.
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