Small Cities Struggling to Pay for Infrastructure Projects

Towns with shrinking or stagnant tax bases can't keep up with the costs of aging infrastructure without state and federal support.

2 minute read

July 6, 2021, 7:00 AM PDT

By Diana Ionescu @aworkoffiction

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Nataliya Hora / Shutterstock

Small cities around the country are struggling to pay for infrastructure projects, and as Jake Blumgart writes in Governing, many of them have "staggering" needs that they can't tackle without state and federal support, which lags far behind other countries–"only 2.4 percent American gross domestic product is applied to infrastructure, in comparison with 5 percent in the European Union and 9 percent in China."

"Advocates of increased infrastructure spending also note that before the 1980s there were greater federal commitments to at least some local projects. In the 1970s, the federal government paid to update many drinking and wastewater systems to bring them up to newly instituted environmental standards. But federal investments in water infrastructure fell during the 1980s." Today, cities with stagnant tax bases "can't [keep up with infrastructure needs] without vastly increasing their property tax revenues. If older cities just keep jacking the property tax rate up, that creates a vicious downward cycle where more population leaves," says Bill Fulton, director of the Kinder Institute for Urban Research at Rice University. 

It isn't just Rust Belt cities feeling the pinch. "In many cases, more recently developed regions have leveraged population growth to get developers to build a lot of their necessary infrastructure. As a side effect, the consequences of the strict caps that states like California and Washington place on property tax increases were not felt. Today, however, population growth is slowing and developers are not on the hook to patch up the infrastructure they built decades ago. Property taxes revenues are not keeping up with regular expenditures, let alone expensive infrastructure investments." For mayors like Ferndale, Michigan's Melanie Piana, any new federal commitments to local infrastructure funding could inject much-needed capital into city coffers.

Saturday, July 24, 2021 in Governing

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