Financing infrastructure using operating revenues and borrowing as well as charges on developers and public-private partnerships addresses issues around expenditures at the local level and the accountability for expenditure and revenue decisions, including the municipal budgetary process and financial management.

Local governments make expenditures on a variety of services including transportation, policing, fire protection, water and sewers, garbage collection and disposal, housing, health, recreation and culture, education, and social expenditures. They fund these services and the infrastructure associated with them from a variety of sources.

From a municipal finance perspective, the unique characteristics of large cities and metropolitan areas are reflected in the magnitude and complexity of the expenditures that local governments in those areas are required to make on municipal services. These characteristics are also reflected in their ability to pay for services. Large cities and metropolitan areas have greater fiscal capacity than smaller municipalities and rural areas, both in terms of greater responsibility for local services and greater ability to levy their own taxes and collect their own revenues. Rarely are large cities treated differently, however, in terms of their taxing authority or the intergovernmental transfers they receive.

In short, revenues at the municipal level have not kept pace with the increased expenditure requirements. Not only do local governments depend heavily on intergovernmental transfers, but their own revenue sources are also inadequate. In most cases, municipal own-source revenues are based on property taxes and user fees and not the more lucrative taxes such as income, sales, and fuel taxes.