Hard to believe the Great Recession was a decade ago. It felt catastrophic, one of those few events in life you always remember where you were and what you were doing when it happened.
As with the Great Depression, infrastructure construction was the go-to way to goose a flatlining economy. That was easier in the 1930s, when much of the country had yet to be built. The situation was more complicated in 2009, but the American Recovery and Reinvestment Act (ARRA) managed to find new ways of keeping long-planned, long-term projects from stopping cold. How successful you thought these financing mechanisms were depends on how many projects your agency just happened to have ready to go at that precise moment in time.
Infrastructure’s also one of the few things political parties agree on. In 2016, Democratic presidential candidate Hilary Clinton’s infrastructure plan included resurrecting ARRA instruments like Build America Bonds. Republican candidate Donald Trump promised $1 trillion but provided few implementation details beyond public-private partnerships.
Now we have more details. Tax reform cuts federal revenues by $3 trillion over 10 years. It didn’t kill private-activity bonds or municipal bond tax exemptions (as initially feared), but eliminated advanced refunding – which is like refinancing your mortgage and saved cities and counties $12 billion between 2012 and 2016. The administration’s $1.5-trillion infrastructure plan is paid for partly by an “incentives program” that requires cities and counties to generate new revenue streams via mechanisms many can’t use without state authorization.
Even a child can do this math.
State and local governments own more than 90% of non-defense public infrastructure and pay 75% of the cost to maintain those assets. They always have and they always will. From 2010 to 2016, they issued $3 trillion in municipal bonds to plan, design, build, and improve those assets. The fastest and easiest way to help their public works professionals keep residents safe and healthy is to increase the federal fuel tax. That’s not likely to happen anytime soon, so 26 states and numerous cities and counties have raised fuel and other taxes and fees to fund expansions and improvements.
After several years of post-recession growth, when many localities were beginning to hire again and increase wages, city, county, and state finance managers are less enthusiastic about the future. Studies by the National Conference of State Legislatures, National Association of Counties, and National League of Cities reveal revenue funds are slowing, property tax revenue growth is budgeted lower, and sales and income tax revenues are expected to decline.
Against this gloom-and-doom background we share our data, provided by you — city, county, special district, township, and state infrastructure managers — in our annual budget outlook.
