A strong bond rating can tell investors that a city is likely to repay its debt. It says much less about whether that city can afford to replace the roads, pipes, and other infrastructure its residents depend on. Richard Ciccarone, president emeritus of Merit Research Services, developed a new metric using financial statements from nearly 2,000 cities to estimate that burden. When he compared the infrastructure burden with government bond ratings, the correlation was surprisingly weak. Cities can remain attractive to creditors while aging assets accumulate replacement costs that no bondholder can force them to address.
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