Capital finance.

• Position: From the Library

"Municipal Capital Spending during the 'Boom'"

Michael Pagano

Public Budgeting & Finance, Summer 2002, pp. 1-20.

In this article, the author examines capital spending behavior of municipal governments from 1993-2000, a period of strong economic growth. In all but 10 states, revenue collection either met or surpassed expectations. Pagano finds that many cities used the larger than expected revenues to include capital projects in their budgets that had previously only been included in their capital improvement plans. In fact, the author shows that many municipalities used own-source revenue and intergovernmental aid to finance capital projects rather than debt. The author's analysis shows that cities with more diverse tax bases (municipalities authorized to collect income and sales taxes in addition to the property tax) increased their capital spending more than those that rely entirely on the property tax. Likewise, cities postpone capital projects during a period of economic contraction in order to divert money to operating purposes. Cities with more diverse tax bases...