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

local resolutions, may create the same problems with debt issuance, purchasing, contacts, and
revenue collection that have been discussed from the state level. Local governments often adopt
fiscal policy documents and resolutions that restrict successor governments from efficiently
meeting infrastructure needs. As an example, in the early 1980s,..for purposes of maintaining
credit quality, many localities adopted debt policies that stipulated that the ratio of debt per capita
would not rise above $1,000. This level, while appropriate for the time, is too rigid a benchmark,
and adherence to that level has inhibited some governments from financing needed projects,
although that financing would have no negative impact on the localities' creditworthiness.
Economic and Financial Market ImDediments
Current economic conditions have placed severe barriers in the way of governments
attempting to meet their infrastructure requirements. Governments are facing great reductions
in revenues from a variety of sources. Rising unemployment has slowed income and sales tax
receipts for many jurisdictions. Negative trends in real estate values, weak new home
constru'ýtln, and large regional pockets of overbuilt commercial property have limited property
tax collect,-, witi, sharp repercussions for local governments, and especially for special
assessment districts.C. Oe of the few bright spots for governments has been the decline in interest
rates, yet this has an ad 'erse impact on revenues in view of the resulting declines in interest
earnings for local governments. When the reductions of intergovernmental aid discussed
earlier are factored in to the picture, the stagnation or outright decline of local governments'
revenue bases is evident.
Governments are under increasing expenditure pressures as well. The current
recession has added to the demand for social services, even as governments, especially at the
state level, are reeling under the effects of over a decade of rapid growth in health and retirement
expenses. The increasing costs associated with unfunded federal and state mandates have
added significantly to fiscal stress. With both rising expenditure requirements and declining
revenues, local governments are hard-pressed to meet current operating requirements, and have
little flexibility left for financing infrastructure, even when some systems are in dire need.
Political Impediments
The final set of barriers to state and local infrastructure financing are the practical,
political ones. Political pressures often result in short-term solutions to long-term structural
problems. There is simply very little incentive for political leaders to take a pro-active approach
to infrastructure. As an example, an East Coast resort city has had a history of very high
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