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Smaller Cities, Poorer Regions Could Be Infrastructure Losers

Over a third of the new money for transit and other infrastructure needs will be awarded in the form of competitive grants. That means cities with the capacity to draft eye-catching proposals will get the most attention.

Construction workers laying pavers on a city street.
(Michael Leslie/Shutterstock)
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Experts like Bruce Katz of Drexel University, with a long experience in observing and participating in local policymaking, fear that many of the fruits of the recently passed infrastructure bill will be unevenly distributed.

“There’s a complete mismatch between the capacity that the federal government assumes and what actually exists,” says Katz, co-founder of Drexel’s Nowak Metro Finance Lab. “They’ve legislated for a country that doesn’t quite have the muscle memory or bandwidth to do what they’re asking for.”

Katz is concerned about the myriad competitive pots of funds in the bipartisan infrastructure law, which contained $550 billion in new spending. Of that, $210 billion is in competitive and discretionary grants, the Washington Post reports, which will give D.C. policymakers like Transportation Secretary Pete Buttigieg unprecedented influence over how funds are allocated.

But to get the attention of Buttigieg, and less well-known figures in the federal bureaucracy, localities need to be able to craft a winning proposal.

There are regions where this will not be a heavy lift. Metro areas like Boston have a deep bench of experienced planners, a rich network of foundations and community development corporations, and organized business groups that push for transit and housing reform. But what about rural areas, deindustrialized Midwestern regions, or traditionally low tax and low service corners of the country like much of the American South?

Capacity isn’t the only necessary component that a local jurisdiction will have to drum up. Most competitive grants will also require a 20 percent non-federal match, which smaller cities and communities may struggle to produce.

“We’re going to have a few places that really get their act together,” says Katz, “the places that really have the business and political leadership to make these kinds of decisions. I’m worried about the rest of the country and how this coheres there.”

In recent decades, as federal resources for local and state aid have shrunk, many governments and local civic networks have simply not had extensive experience winning the limited pots of money that have existed. Within that emaciated framework, however, the logic of competitive funding had made sense as a means to distribute limited resources to those best able to use them. Innovative and compelling efforts give jurisdictions an edge, while those who propose pie-in-the-sky endeavors or half-baked ideas won’t have money wasted on them.

But some in academia have raised concerns about the role this mode of funding plays in aggravating inequities within regions and between them. Federal transit grants under Barack Obama’s administration were more likely to go to regions with a greater density of nonprofit institutions and those with a larger population. Federal grants for rail projects were most likely to go to those with the greatest “local financial commitment.”

If federal agencies judge applicants by their capacity to draft and execute complex and resource-intensive projects, areas with smaller populations and smaller tax bases may suffer. Those with larger budgets, more public employees, and richer civic networks receive more and larger federal grants. (“We find that local administrative capacity is a key to access, indicating that some localities most in need are least equipped to capture grants,” as a 2006 study puts it.)

University of Michigan professor Jeremy Levine told Governing about a colleague who is studying a declining suburban community in Pennsylvania. The local government only employs a handful of people; there are two local nonprofits of note, and grant writing for services like affordable housing and sidewalk repair is done on a volunteer basis.

“They have a structural disadvantage, no matter how smart they are, how much they need it, how much they would benefit,” says Levine.

Levine frets about language in the new infrastructure law that will privilege an “applicant [that] has, or will have, sufficient legal, financial, and technical capacity to carry out the project.” The reasoning for this is clear: the feds don’t want to throw good money after bad.

“Consider the converse: selecting a project you don’t think can be completed,” says Levine in an email message. “However, an unintended consequence is that low-capacity jurisdictions … won’t be competitive, won’t get selected, and will fall further behind.”

Levine says that the federal government does offer technical assistance grants to help low-capacity jurisdictions, but that these are usually insufficient to meet the need. Instead of providing enough for small governments to staff up and seriously build capacity, they are (in his experience) often largely spent on time-limited consultants.

Much of the spending the federal government has undertaken in the last two years — an unprecedented amount in peace time — came in the form of direct aid to businesses, households, and public agencies like transit operators. (“The welfare state without the state,” as historian Adam Tooze put it.) But there are now an unprecedented amount of funds, largely in the infrastructure act but also a few in the American Rescue Plan Act, that are competitive.

It isn’t just transit funds that jurisdictions will be scrapping over. Brownfield remediation and climate resilience programs are competitive too, as are grants for electric vehicle charging infrastructure and a highway teardown program.

For Katz, the answer to the capacity building question could lie with philanthropic groups, but he acknowledges that access to such institutions is also highly inequitable. Perhaps a greater federal emphasis on capacity building grants could help, while leaders like Buttigieg who have worked in local government may have a keener eye for these problems than their predecessors.

At the state level, bureaucracies will be the critical place to corral dozens if not hundreds of separate municipalities and counties, he says. But the public sector at the state level is atrophied too.

“There’s this threshold question of how, 40 years after Reagan, when the public sector is radically degraded at all levels — how do you make intelligent decisions about the allocation of funds,” says Katz. “It’s great to have all this money, but how it ultimately gets implemented and executed is what matters.”
Jake Blumgart is a senior writer for Governing and covers transportation and infrastructure. He lives in Philadelphia. Follow him on Twitter at @jblumgart.
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