Is a More Transparent, Connected, and Engaged City a Smarter Investment? A Study of the Relationship Between 311 Systems and Credit Ratings in American Cities

Abstract

It has been noted that “the impact of technologies to foster public value creation using open data and transparency websites, crowdsourcing and participation platforms, smart city sensors, or social media technologies, among others, remains broadly unexplored from the perspective of public sector management” (Criado & Gil-Garcia, 2019). The public value of having a higher municipal credit rating reduces borrowing costs and consequently lowers the cost to manage government programs. In this article, the relationship between credit ratings and local governments’ decisions to utilize one of the first sets of information and communications technology (ICT) innovations is investigated—the 311 system (non-emergency versions of 911 that use phone, web, and mobile application interfaces)—the analysis pairs longitudinal financial data with information on the implementation of 311 systems. The results of our analysis demonstrate that access to 311 systems, particularly web/mobile-based 311, can positively influence a city’s credit rating. Additionally, we find that the length of time since 311 was adopted is positively related to credit ratings. The effect is visible with phone-based and web/mobile-based 311. These results suggest that cities with 311 systems and those with 311 in place longer have higher credit ratings. These results could indicate that cities with 311 are better managed or simply more transparent to investors, thus posing lower risks.

Keywords: 311 systems, smart cities, credit ratings, public finance

JEL Classification: H41, R51, R53