Impact of Intergovernmental Grants on Urban Capital Finance

摘要

Issues in intergovernmental capital grants financing are examined. The report deals with the impact that the Federal grants structure has had on State and local capital spending and examines Federal needs standards and the estimation of investment needs gaps. It also analyzes the States' role in matching Federal capital assistance to local investment projects, thereby giving operational meaning to the capital aid structure. Federal assistance, though still accounting for only two - fifths of State - local capital financing, has been the principal force shaping the direction of public capital investment. Federal aid programs have benefitted some activities (i.e., bridge repair, wastewater treatment) and have ignored others (i.e., highway investment, school investment). The new Administration's recommendations to curtail capital aid should have major impacts on the future capital budgets of State and local governments. The major capital assistance programs are intended to help localities meet the costs of achieving the ''needs'' standards that are built into Federal legislation. However, the Federal Government seems to reward localities for past failure to maintain standards rather than those which have attempted to meet the requirements. The Federal Government also attempts to avoid capital assistance altogether for that are judged to be local responsibilities. Most public investment needs gaps will be closed by reexamining needs standards and lowering them to meet budget constraints, rather than by boosting investment levels to satisfy current standards. The States' discretion as to how strictly to adhere to the Federal needs priorities when allocating funds to capital projects would be enlarged if the Federal aid program was moved towards a block grant structure, as has been proposed for some functional areas. Footnotes and tables are included.