Local debt

Here’s another reason it is good to be a direct municipality rather than an ordinary city or county.  Direct municipalities can take on more debt.  If I am reading the Public Debt Law 公共債務法 correctly, the current law says that Taipei City can take on up to 3.6% of the national GDP, Kaohsiung City can take on 1.8%, all the cities and counties put together can take on 2.0%, and all the townships put together can take on 0.6%.  Each county has a maximum of 45% of its annual income, and each township has a maximum of 25% of its annual income.  The Finance Ministry has a bill in the legislature that would change this so that direct municipalities and counties/cities could take on 250% and 70% of their annual revenues, respectively.

One might argue the merits of allowing local governments to pile up debt, but it seems to be irresistible to the actual politicians in charge.  I don’t have figures on how much debt each local government has amassed, but I’ve never read a story that didn’t say that the local government was either already maxed out or preparing to float more debt up to the legal limit.  I think it’s a fair bet that the incoming Xinbei City mayor will find it necessary to embark on a huge spending program.

Tags: public debt, revenue