User‐Pay Funding and Creative Capital Financing

Abstract

Heightened activity in creative capital financing is an outward sign of drastic alterations taking place in public capital markets. Spurred by the property tax limitation movement, two trends in the structure of state and municipal finance are observable: Increased use of user fees and charges as a source of revenue and a drastic change in the ratio of revenue to general obligation debt. Both trends, coupled with a reawakening of the theoretical foundations of user fee economics, make for enhanced prospects for user‐pay funding in infrastructure revitalization. User‐pay systems may be a means by which to create more stability and predictability in an otherwise volatile capital finance market. Along with dedicated funds and various forms of public enterprise (utilities, autonomous authorities, special districts), user‐pay practices could be used to improve public works organization and management.