A Fiscal Comparison of Bond Ratings for Black and White Majority Municipalities in the United States

Abstract

This research explores the fiscal disparities across majority Black and majority White municipalities in the United States. To assess whether racial differences exist in municipal fiscal conditions, this research compares the municipal bond ratings of large Black and White municipalities. Consistent with prior research, findings reveal significant funding and economic inequities across municipalities. Black majority municipalities face economic inequities, particularly bond rating discrimination, and expected relationships across traditional indicators of creditworthiness prove insignificant, all of which affect the financial capacity of Black majority municipalities. Rating inequities exacerbate existing economic challenges by limiting access to affordable capital and perpetuating fiscal disadvantage within Black-majority communities. As the nation moves toward majority-minority status, these results underscore the need for reforms to bond rating practices and municipal finance policies to ensure equitable treatment across all municipalities.