Challenges and Opportunities for Innovation in the Public Works ...

Financial Sources - - The Intergovernmental Dimension
Throughout the 1960s, 1970s and the early 1980s, infrastructure financing had a strong
federal component 4 . During the last decade, however, that federal financing role has
diminished concurrent with a rise in federal mandates for infrastructure facilities. As shown
in Table 1, State and Local Fixed Capital Formation, the nonfederal role in financing
infrastructure has increased dramatically during this period and has shaped the state and local
government quest for alternative financing methods, which will be discussed later in this
presentation. The outlook for the future indicates that some increases in the federal role may
occur, even as state and local government funding sources become increasingly constrained.
The recent history of federal funding for infrastructure can be viewed along three
continuing themes:
* a steep decline in federal grants and subsidies,
* an increasing reliance on federally backed or federally seeded loan programs,
and
steep increases in federal mandates.
The demise of the federal General Revenue Sharing Program, cutbacks for the Urban
Mass Transit Administration (now the Federal Transit Administration) and Community
Development Block Grant programs, the elimination of the EPA construction grants program,
and the financing source restrictions on the Army Corps of Engineers water management and
supply projects have all limited federal involvement in the provision of infrastructure. Budget
constraints have also limited the federal government's willingness to use monies accumulated
in the Highway and Airport Trust Funds.
Through its State Revolving Fund (SRF) program, established in the Water Quality Act
of 1987, the federal government has encouraged the use of state loan programs to replace the EPA
Construction Grants Program. Using federal grants for initial capitalization, these loan
programs have become an important, though limited, source of local funding for wastewater
treatment facilities. Expansion of the revolving loan fund concept to aid in financing other
infrastructure facilities is under discussion. The concept has already been applied in the State
Flexibility Program contained in the recent Intermodal Surface Transportation Efficiency Act
4 GFRC estimates from U.S. Department of Commerce, National Income Product Accounts
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