10/26/24, 10:25 AM Can cities be publicly traded?
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Published on Private Sector Development Blog
Can cities be publicly traded?
RANA AMIRTAHMASEBI | AUGUST 13, 2013
This page in: English
The Charging Bull, a Wall Street symbol (Credit: Epyonmx, Flickr Creative Commons)
Apparently so.
The city of Nashville can now be bought and sold on the New York Stock
Exchange. Well, that is an overstatement. More accurately, as of the opening bell
on August 1st, the Nashville Area ETF (Exchange-Traded Fund) was listed on the
New York Stock Exchange as NASH for about $25 a share. This is the first time that
a city-based ETF has been developed.
But what is an ETF? ETFs are investment funds that can be bought and sold on an
exchange like a stock. Typically these funds are designed to track a particular
market index such as the S&P500. Buying shares of these ETFs is a bit like buying
shares in each of the constituent
securities in order to replicate the performance
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of the index. Traditionally, ETFs have been designed to track a particular industry
sector or commodity, but geographically targeted ETFs such as NASH include a
number of companies that are located in a particular region. State specific ETFs
have been tried before; a few years ago, a pair of ETFs targeting companies in
Oklahoma and Texas respectively were unsuccessful in attracting investors,
despite high expectations and strong performance.
About a year and half ago, a group of local Nashville area companies decided to
establish the Nashville ETF in order to offer a locally focused investment option.
All the 24 companies included in the ETF portfolio have headquarters in and
around Nashville. All the companies have market capitalizations of more than
$100 million and their average daily volume of traded stock exceeds 50,000
shares. This investment option enables the people of Nashville (or anyone else) to
invest in the city’s local economy. The portfolio manager for NASH claims that
Nashville and its companies are “poised to seek long-term prosperity.” The
company also claims that investors will benefit from Nashville’s “dynamic and
diversified base of publicly-traded companies” with just one product. So the city’s
investment climate is good, both for the companies and for the potential
investors.
Now, I put on my urban planner hat: why Nashville? According to the ETF
management website: location, location, location. Twenty-three states are located
within a 500-mile radius of Nashville. In addition, Nashville is connected to three
major interstate highways. Other positives are low tax base, diverse economy,
high quality workers, higher education institutions, and low cost of living.
This may or may not be a very good idea for a city. But it is certainly an American
one. According to one of the CEOs behind the fund, the idea came from the fact
that “every city's economy functions as its own ecosystem with unique resources,
legislation and demographics inextricably interwoven.” The community reacted to
the news differently when the NPR story came out. One reader wrote: “It strikes
me as a pretty bad idea to index your local economy into a fund.” While another
one appreciated the idea that “you can invest locally in a general way. When local
economies are independent and strong, it makes the overall economy more
resilient, investing locally make sense on all levels.” While this idea is just a
geographically targeted investment tool and cannot really be sold as the “local”
agenda, it makes me wonder if it can be used as a municipal finance tool or as an
instrument for Local Economic Development.
Well,the CEO quoted
above is right.
American cities
are run as
independent2
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economic ecosystems (or corporations?); one city can declare bankruptcy while
the other one’s local economy is traded on the stock market. American cities have
long competed to bring large companies in, offering them all sorts of tax-based
and non-tax based incentives, in exchange for potential jobs. In this environment,
does the successful mayor act as a CEO, running the city as a business? How could
the spillover effects be leveraged to strengthen social programs and provide
public services? Just wondering.
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Authors
Rana Amirtahmasebi
Urban Policy Specialist
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SAVE
AUGUST 13, 2013
Investments in infrastructure and education have made Nashville "worth" what it is today. When the
stock price dips, will business leaders call for more of the above or less regulation and taxation?
Unfortunately, it will be the latter. The ETF will become just another indicator to justify a race to the
bottom.
REPLY
David King
AUGUST 19, 2013
It is interesting to look at how the ETF fund will itself invest. Based on the link to the actual
announcement provided above, it appears that the intention is to invest Nashville ETF fund assets
mostly into small-cap companies. In other words, the fund is essentially converting funds targeting the
performance of the largest Middle Tennessee companies into investments in promising smaller ones.
... READ MORE
REPLY
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