For years, public leaders have touted low interest rates as a fantastic opportunity to borrow money to modernize America's aging infrastructure. That opportunity looks to be ending, as rising interest rates batter the municipal bond market.
"States and cities across the nation are starting to learn what Wall Street already knows: the days of easy money are coming to an end," writes Mary Williams Walsh. "Interest rates have been inching up everywhere, sending America’s vast market for municipal bonds, a crucial source of financing for roads, bridges, schools and more, into its steepest decline since the dark days of the financial crisis in 2008."
"For one state, Illinois, the higher interest rates will add up to $130 million over the next 25 years — and that is for just one new borrowing. All told, the interest burden of states and localities is likely to grow by many billions, sapping tax dollars that otherwise might have been spent on public services."
"Much as home mortgage rates are making home buying a bit more costly as they rise, so, too, are the rates at which states and cities borrow money," she explains.
"Public officials — and taxpayers — may feel the effects for years. Perversely, the places with the greatest distress are likely to see their borrowing costs rise most."
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