Public budgets and public capital in boom towns

Abstract

Local governments are subject to severe stress in periods of rapid change such as boom town growth - a common problem of both rural and urban towns in the sunbelt. We quantify this stress by measuring, with an econometric model, the budget deficits and the inadequacy of public facilities resulting from growth. The model emphasizes capital adjustment costs and bureaucratic inertia which slow the response of government budgets to the changing demands of their citizens. The efficacy of existing intergovernmental aid programs and other policies in mitigating growth-related problems is evaluated.