While $432 billion flowed into America's local schools, hospitals, and roads through municipal bonds in 2023, this massive financial ecosystem reveals surprising truths about our communities' fiscal health and ambitions.
Key Takeaways
- In 2023, U.S. municipal bond issuance totaled $432.3 billion, with long-term bonds accounting for $389.2 billion and short-term at $43.1 billion
- New money municipal bonds issued in 2023 amounted to $284.6 billion, representing 65.4% of total long-term issuance
- Refundings in the municipal market reached $104.6 billion in 2023, a 28% decrease from the prior year due to higher interest rates
- Total outstanding municipal securities stood at $4.1 trillion as of year-end 2023
- Investment-grade municipal debt outstanding was $3.8 trillion in 2023, representing 92.7% of total
- Below-investment-grade muni debt totaled $298 billion in 2023, up 5% from 2022
- Property taxes generated $570 billion for U.S. municipalities in FY2023, 72% of own-source revenue
- Sales taxes contributed $210 billion to municipal revenues in 2023, up 8% from 2022
- State aid to local governments totaled $850 billion in 2023, including education grants
- Highways and streets absorbed $140 billion in municipal outlays for 2023
- Police protection expenditures totaled $115 billion for U.S. municipalities in 2023
- Fire protection budgets hit $60 billion across locals in 2023
- U.S. municipal bond default rate was 0.08% in 2023, lowest in 50 years
- GO bond defaults totaled 12 instances worth $45 million in 2023
- Revenue bond defaults rose to 25 cases totaling $120 million in 2023
Despite a high-interest rate environment, 2023 saw resilient municipal bond issuance primarily funding new infrastructure.
Bond Issuance
- In 2023, U.S. municipal bond issuance totaled $432.3 billion, with long-term bonds accounting for $389.2 billion and short-term at $43.1 billion
- New money municipal bonds issued in 2023 amounted to $284.6 billion, representing 65.4% of total long-term issuance
- Refundings in the municipal market reached $104.6 billion in 2023, a 28% decrease from the prior year due to higher interest rates
- California led municipal bond issuance in 2023 with $62.4 billion, followed by New York at $38.1 billion
- Variable-rate municipal bonds issuance was $18.7 billion in 2023, comprising 4.8% of long-term volume
- In Q4 2023, municipal bond issuance surged to $123.5 billion annually annualized, driven by infrastructure needs
- Tax-exempt municipal bonds dominated 2023 issuance at 92.3%, with taxable at 7.7%
- Airport revenue bonds issued $14.2 billion in 2023, up 15% year-over-year
- Hospital system municipal bonds reached $28.9 billion in 2023 amid healthcare expansion
- State general obligation bonds issuance was $45.6 billion in 2023
- Local government bond issuance hit $210.4 billion in 2023
- Education sector (K-12 and higher ed) bonds totaled $52.1 billion in 2023
- Water and sewer revenue bonds issuance was $37.8 billion in 2023
- Toll road and transit bonds amounted to $22.3 billion in 2023
- Housing and multifamily bonds issued $16.5 billion in 2023 under private activity bonds
- In 2023, the total long-term municipal bond issuance in the United States reached $389.2 billion, marking a 7% increase from 2022 driven by infrastructure projects
- Refundings accounted for 26.8% of total muni issuance volume in 2023 at $104.6 billion due to advance refunding opportunities
- Negotiated municipal bond sales comprised 78% of long-term issuance volume in 2023, totaling approximately $303 billion
- Competitive sales of municipal bonds fell to 22% of issuance or $86.2 billion in 2023 amid market volatility
- Build America Bonds taxable issuance legacy influenced $35 billion new taxable muni volume in 2023
- Higher education bonds issuance dropped 12% to $41.5 billion in 2023 due to enrollment declines
- Power utility revenue bonds issued $19.8 billion in 2023 for green energy transitions
- K-12 school district bonds totaled $29.3 billion in 2023, focused on facility upgrades
- Public power agency bonds reached $12.4 billion issuance in 2023
- Sales tax revenue bonds issuance was $23.7 billion in 2023, primarily in Sun Belt states
Bond Issuance Interpretation
America's cities and states, with California predictably leading the charge, borrowed a cool $432.3 billion in 2023 mostly for shiny new things, while higher interest rates thankfully put a damper on the less productive habit of merely refinancing old debt.
Credit and Defaults
- U.S. municipal bond default rate was 0.08% in 2023, lowest in 50 years
- GO bond defaults totaled 12 instances worth $45 million in 2023
- Revenue bond defaults rose to 25 cases totaling $120 million in 2023
- Aaa/AAA-rated munis comprised 12% of the market with zero defaults in 2023
- BBB/Baa rated bonds had a 0.15% default rate in 2023
- High-yield muni defaults were 1.2% par value in 2023, mainly tobacco and energy
- 85% of municipal issuers maintained or improved ratings in 2023
- Puerto Rico-related defaults resolved with $3.5 billion payments in 2023 restructuring
- Chicago's junk rating affirmed but water/sewer separated improved to BBB in 2023
- Detroit post-bankruptcy credits stabilized with no defaults since 2013 through 2023
- Average municipal bond yield was 3.85% for 10-year in 2023 average
- Investment-grade muni upgrade-to-downgrade ratio was 2.1:1 in 2023
- Speculative-grade munis saw 15% distressed exchanges in 2023
- Total municipal rating actions: 4,200 in 2023, with 55% positive
Credit and Defaults Interpretation
While it’s not quite a risk-free fairy tale, the municipal bond market in 2023 was a story of almost universal fiscal responsibility, where even the occasional plot twist of default was confined to a few predictable villains and already troubled backstories.
Debt Outstanding
- Total outstanding municipal securities stood at $4.1 trillion as of year-end 2023
- Investment-grade municipal debt outstanding was $3.8 trillion in 2023, representing 92.7% of total
- Below-investment-grade muni debt totaled $298 billion in 2023, up 5% from 2022
- GO debt outstanding reached $1.2 trillion across U.S. states and locals in 2023
- Revenue bond debt outstanding was $2.9 trillion in 2023, dominated by utilities and transport
- Pension-related municipal debt obligations indirectly impacted $800 billion in unfunded liabilities as of 2023
- OPEB liabilities added $600 billion to municipal debt burdens in 2023 estimates
- California municipal debt outstanding was $512 billion in 2023, highest nationally
- New York State and local muni debt totaled $410 billion in 2023
- Texas municipal debt outstanding reached $285 billion in 2023, driven by energy sector
- Illinois unfunded pension debt contributed $140 billion to total muni exposure in 2023
- Fixed-rate muni debt outstanding was $3.6 trillion versus $500 billion variable in 2023
- Taxable municipal debt outstanding grew to $450 billion in 2023 from BABs and direct payments
- Airport debt outstanding nationwide was $120 billion in 2023
- Hospital muni debt stood at $320 billion across nonprofit systems in 2023
- Total municipal securities outstanding increased 2.1% to $4.1 trillion by end-2023
- State GO debt outstanding was $520 billion versus $680 billion local GO in 2023
- Lease revenue debt outstanding totaled $250 billion in 2023 for equipment and facilities
- Transportation revenue bonds outstanding hit $650 billion in 2023
- Healthcare revenue debt was $850 billion outstanding including long-term care in 2023
- Water revenue debt outstanding reached $380 billion in 2023 amid PFAS remediation needs
- Florida municipal debt outstanding totaled $220 billion in 2023
- Pennsylvania local debt was $190 billion outstanding in 2023
- Ohio muni debt outstanding stood at $175 billion in 2023
- Long-term debt per capita averaged $9,800 for U.S. municipalities in 2023
Debt Outstanding Interpretation
America's cities and states are collectively shouldering a $4.1 trillion tab, where even the staggering 92.7% that's investment-grade can't fully distract from the less shiny, rapidly growing pile of pension promises and essential infrastructure needs quietly accruing in the corner.
Expenditure Patterns
- Highways and streets absorbed $140 billion in municipal outlays for 2023
- Police protection expenditures totaled $115 billion for U.S. municipalities in 2023
- Fire protection budgets hit $60 billion across locals in 2023
- Parks and recreation spending rose to $45 billion in 2023 amid post-pandemic recovery
- Sewerage treatment outlays were $80 billion for municipalities in 2023
- Solid waste management costs reached $55 billion in 2023
- Housing and community development expenditures totaled $70 billion in 2023
- Health services budgets for locals were $35 billion in 2023
- Libraries received $25 billion in municipal funding in 2023
- Employee retirement contributions cost municipalities $90 billion in 2023
- Interest on long-term debt payments totaled $75 billion for munis in 2023
- Capital outlay for infrastructure hit $220 billion in municipal spending 2023
- General government administration expenses were $110 billion in 2023
- Judicial and legal expenditures reached $20 billion for locals in 2023
Expenditure Patterns Interpretation
The American city remains an expensive and ambitious machine, funding potholes and pensions, courtrooms and playgrounds, proving that civilization requires not just police and fire, but libraries, sewers, and a staggering amount of asphalt.
Revenue Sources
- Property taxes generated $570 billion for U.S. municipalities in FY2023, 72% of own-source revenue
- Sales taxes contributed $210 billion to municipal revenues in 2023, up 8% from 2022
- State aid to local governments totaled $850 billion in 2023, including education grants
- User fees and charges yielded $180 billion for municipalities in 2023
- Federal COVID relief funds disbursed $150 billion to munis through 2023
- Utility revenues from water/sewer added $120 billion to local coffers in 2023
- Hotel/motel occupancy taxes generated $25 billion for cities in 2023 tourism rebound
- Franchise fees from utilities contributed $40 billion in municipal revenues 2023
- Income taxes for home-rule cities totaled $95 billion in 2023
- Parking and toll revenues rebounded to $35 billion for transit authorities in 2023
- Intergovernmental transfers from states hit $680 billion excluding federal pass-through in 2023
- Business taxes and licenses generated $55 billion for municipalities in 2023
- Gaming and lottery revenues shared $18 billion with locals in 2023
- Impact fees for development added $12 billion to municipal funds in 2023
- Timber and mineral rights royalties yielded $8 billion for resource-rich munis in 2023
- Municipal own-source revenue grew 4.2% to $1.02 trillion in FY2023
- Education expenditures consumed 28% of municipal budgets at $320 billion in 2023
- Public welfare spending by locals reached $150 billion in 2023
Revenue Sources Interpretation
While cities and towns are creatively squeezing revenue from everything from hotel pillows to sewer pipes, their financial backbone remains a classic three-act play: property taxes foot the bill, state aid sets the stage, and we all pay a supporting role through fees and sales taxes for the services we use.
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