Newswise — AMES, Iowa — While it’s not surprising that growing counties across the U.S. are increasing total spending as well as capital spending, a new Iowa State University study shows shrinking counties are doing the same.

These findings are part of a research paper recently published in the peer-reviewed Journal of Regional Analysis and Policy. It was co-authored by Biswa Das, assistant professor of community and regional planning at Iowa State; and Mark Skidmore, professor of economics at Michigan State University.

The researchers examined municipal spending aggregated to the county level nationwide from 1972 to 2012, analyzing data from the U.S. Census of Governments. The American Society of Civil Engineers’ failing grades for the nation’s built infrastructure was in part why the study used three types of variables: economic (e.g., median household income), demographic (e.g., total population change) and institutional (e.g., state and local tax expenditure limits). They studied the relationship between these variables with total municipal spending, with an emphasis on capital spending.

“One of the things we were curious to see was how counties across the nation grew or shrunk over the last 40 years, and how total municipal expenditures and capital spending were related to that growth or decline,” Das said. “What we found is the asymmetry is clear, but shrinking cities are spending at a high rate, both on the aggregate as well as on capital projects, which is surprising.”

The researchers found aggregate municipal spending is more responsive to population growth than decline, and the effect is most pronounced for capital spending. The findings also show that places that have implemented school finance reform tend to reduce municipal spending, though more so in growing counties than in shrinking counties.

Growing counties saw population increase by 69 percent over the study’s timeframe; municipal spending increased by more than 300 percent. Shrinking counties saw population decrease by 28 percent during this timeframe; municipal spending increased by 200 percent. They also found municipal spending increased at a faster rate than did median household income in both growing and shrinking counties.

While increased spending on new infrastructure in growing places could be attributed to meeting the needs of a burgeoning population, the researchers say increased spending in shrinking counties may be an effort to maintain infrastructure, either because of general degradation or federal mandates. Maintenance can be more expensive than building new infrastructure.

This puts shrinking counties in an “exacerbated” downward cycle, according to the study. Population loss means a municipality has less tax revenue, which makes it more difficult to maintain infrastructure that meets quality of life standards, which in turn triggers further population loss. And tax increases — particularly to develop new or maintain excess infrastructure — are often unpopular with residents.

“These places are forced to take a hard look at existing infrastructure and make strategic decisions about what requires reinvestment and what infrastructure does not yield positive net returns to the community; this infrastructure should be allowed to depreciate,” according to the study.

The study also provides suggestions to growing counties: Plan infrastructure investment carefully to ensure it can be maintained in the long run.

“Sometimes places that are growing invest way more in infrastructure than is necessary,” Das said. “Cities make long-term projections, but sometimes those aren’t realized and they’re left with extra infrastructure.”

While there are “no clear-cut answers” to this issue, Das says, he plans to share this research with communities across Iowa thanks to his joint appointment in ISU Extension and Outreach. Das helps lead Extension’s Iowa Government Finance Initiative, which analyzes trends and the financial health and performance of Iowa cities and counties.

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