Small town governments are a great place for politicians to cut their teeth on balancing budgets, something that Alaska's governor Sarah Palin brought up repeatedly to cries of ridicule from the press and Mr. Obama. And in this installment of Tales from the Road, we get a glimpse into how a mid-size city on the Gulf Coast of Texas is having to retool its budgetary chest due to a major reality check in the shape of a downgrade of its debt by Fitch's ratings agency.

A busy airport, full highways, and lines at restaurants, are interspersed with two major stories at the City Council level. One is the fact that a proposed expansion of the city's empty Memorial Coliseum, an aging war memorial, closed since 2004, is creating a whole lot of controversy. The other is that another entertainment project, an expansion of the County Fairgrounds has been scrapped in favor of 40 other projects that will spread out the $20 million that were earmarked for the fairgrounds.

In the first story, the city's mayor wanted proof from the contractor that it had financing in place to perform the coliseum project. The contractor says that he can't "provide a letter of credit" until the project's details and contracts are in place. Local bankers say that providing proof of financing for such a project is not usual but that it can be done. Others are alleging political reasons behind the deadline set by the mayor, as there has been talk of turning the coliseum into a swimming venue for competitions.

The fairground story also has an interesting angle, since the County Judge and the County Commissioners decided to spread $20 million around 40 projects, some that include improving infrastructure at the county courthouse, including adding technology to allow jurors to see if they've been chosen for jury duty online, as well as improving air conditioning systems and cleaning up asbestos in public buildings, along with improvements to the local jail.

What is significant, and well may be the place where the two stories intersect, is that the city's debt recently got a downgrade from Fitch's (for whatever it's worth) due to a "downward trend in annual debt service (ADS) coverage, high debt levels, above average rates, and sizeable capital improvement plan (CIP)," according to Fitch's press release.

More than anything, what we need to watch for is a change in the overall money flow pattern in all the markets. If the stock market begins to attract money, what will the effect be on the currencies, bonds, gold, and oil?

At the center of the downgrade is the capital improvement plan, which Fitch expects will continue to drop the city's ability to service its debt, which in and of itself is expected to continue to climb as "rate increases beyond those already anticipated or a reduction in capital spending may be necessary to maintain operations at adequate levels."

The bottom line is that Corpus Christi, like the U.S. government is living beyond its means. This mid-size Texas city is getting a reality check, and seems to be responding to the issues that it faces in what at a rudimentary level seems reasonable, by changing the focus of how it spends money. Instead of throwing money at entertainment projects, as many small and mid-size cities have done in the past two decades, only to end up with empty buildings, they seem to be changing their focus toward more practical ways to spend money, and that at some point may enhance the city's ability to raise its revenues.

Conclusion

It's hard to gauge whether this is the start of a new dynamic in local government. It's certainly not the way things seem to be headed in Washington, as the federal government is throwing money at anything and everything these days, without much thinking about consequences, either in the short or long term. Already China has raised its concerns about its cache of U.S. Treasury investments, with the White House offering words in return. Some deeds, such as maybe trimming the budget and getting rid of some of the earmarks in the so called "stimulus plan," might be of more use than words.

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