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==History== Municipal debt predates corporate debt by several centuries—the early Renaissance Italian city-states borrowed money from major banking families. Borrowing by American cities dates to the nineteenth century, and records of U.S. municipal bonds indicate use around the early 1800s. Officially the first recorded municipal bond was a general obligation bond issued by the City of New York for a canal in 1812. During the 1840s, many U.S. cities were in debt, and by 1843 cities had roughly $25 million in outstanding debt. In the ensuing decades, rapid urban development demonstrated a correspondingly explosive growth in municipal debt. The debt was used to finance both urban improvements and a growing system of public education. Years after the American Civil War, significant local debt was issued to build railroads. Railroads were private corporations, and these bonds were very similar to today's [[industrial revenue bond]]s. Construction costs in 1873 for one of the largest transcontinental railroads, the [[Northern Pacific Railway|Northern Pacific]], closed down access to new capital.<ref>{{cite book|last=Ripley|first=William|title=Railroads: Finance & Organization|url=https://archive.org/details/cu31924019289648|year=1915|publisher=Longmans, Green, & Co.|location=New York|isbn=1-58798-074-6|pages=[https://archive.org/details/cu31924019289648/page/n129 106]–107}}</ref> Around the same time, the largest bank of the country of the time, which was owned by the same investor as that of Northern Pacific, collapsed. Smaller firms followed suit as well as the stock market. The 1873 panic and years of depression that followed put an abrupt but temporary halt to the rapid growth of municipal debt.<ref>{{cite book|last=O'Hara|first=Neil|title=The Fundamentals of Municipal Bonds|year=2012|publisher=John Wiley & Sons, Inc|location=Hoboken, NJ|isbn=978-1-118-16682-6|pages=55}}</ref> Responding to widespread defaults that jolted the municipal bond market of the day, new state statutes were passed that restricted the issuance of local debt. Several states wrote these restrictions into their constitutions. Railroad bonds and their legality were widely challenged, and this gave rise to the market-wide demand that an opinion of qualified bond counsel accompany each new issue. When the U.S. economy began to move forward once again, municipal debt continued its momentum, which was maintained well into the early part of the twentieth century. The Great Depression of the 1930s halted growth, although defaults were not as severe as in the 1870s.<ref>{{cite web|last=Joffee|first=Marc|title=The Safety of State Bonds|date=16 February 2012|url=http://www.learnbonds.com/state-bond-defaults/|access-date=13 November 2012}}</ref> Leading up to World War II, many American resources were devoted to the military, and prewar municipal debt burst into a new period of rapid growth for an ever-increasing variety of uses. Today, in addition to the 50 states and their local governments (including cities, counties, villages and school districts), the District of Columbia and U.S. territories and possessions (American Samoa, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands) can and do issue municipal bonds. Another important category of municipal bond issuers which includes authorities and special districts has also grown in number and variety in recent years. The two most prominent early authorities were the Port of New York Authority, formed in 1921 and renamed Port Authority of New York and New Jersey in 1972, and the Triborough Bridge Authority (now the Triborough Bridge and Tunnel Authority), formed in 1933. The debt issues of these two authorities are exempt from federal, state and local governments taxes.<ref>{{Cite book|title=The Fundamentals of Municipal Bonds: The Bond Market Association|first=Judy Wesalo|last=Temal|publisher=John Wiley and Sons, Inc.|year=2001|page=[https://archive.org/details/fundamentalsofmu00wesa/page/49 49]|isbn=0-471-39365-7|url-access=registration|url=https://archive.org/details/fundamentalsofmu00wesa/page/49}}</ref>
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