Popular, … But More Influential? A Test of Whether Special Purpose Governments Affect Federal Transit Financing

Olga Smirnova, Suzanne Leland and Gary A. Johnson

Municipal Finance Journal, 2008, vol. 28, issue 4, 43 - 61

Abstract: Much has been written about the creation and proliferation of special purpose governments that circumvent the traditional limitations imposed on general purpose governments to issue bonds and nonguaranteed debt. However, little research has been conducted on whether the federal government favors one form of government over another when local governments embark on similar projects and seek federal funds. This study tests this question by examining the most recent five years of transit agency data released from the 2001–2005 National Transit Database. After controlling for the factors that affect national formula funding, such as population size, population density, and mode, the study finds a significant positive relationship between special purpose governments and the allocation of federal funds. The implications of the research are that the federal government favors special purpose governments over the more conventional general purpose governments when both forms of government seek to obtain funds for similar projects. Although this policy may be indirect and may be a function of the structure, it does lend itself to less accountability in transit governance in terms of debt and tax limitations, and it encourages the proliferation of special purpose governments.

Date: 2008
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