There is a widespread conviction that the United States should be doing more to repair and improve its roads. The other papers in this session examine investment choices affecting the interstate highway system. In this paper, I look at the opposite extreme of the nation's road network: the local road system under urban government administration. The deterioration of city streets probably is linked as closely with a general undermaintenance of urban capital facilities, and postponement by cities of capital reinvestment decisions of all kinds, as it is to characteristics of the transportation sector. Cities with backlogs of street repairs are likely to confront backlogs for water pipe replacement, separation of combined sewer systems and sewer pipe replacement, and bridge and building repairs, as well. In 1982 when it passed the Surface Transportation Assistance Act, Congress recognized the special problems of city road repairs. It preserved the Federal Aid-Urban Program, which the administration had sought to eliminate, and for the first time required that 40 percent of the monies be used for rehabilitation, resurfacing, repair, or reconstruction, starting in 1984. A handful of states have also created special grant programs to assist cities in resurfacing city streets. In addition, capital repairs have acquired local political impetus in some cities. A favorite device has been the establishment of community reinvestment efforts, that bring together business leaders and political leaders to form infrastructure commissions of several years' duration, whose purpose is to win local public support for higher capital investment and maintenance levels. Have these efforts succeeded in reversing the trend toward postponement of urban road maintenance and repair? If so, which instruments of support have been most successful and hold most promise for the future?

The condition of America's roads, bridges, mass transit systems, and water and sewer facilities has become an issue of increasing controversy. One view holds that deterioration of this infrastructure has reached alarming proportions, and that a significant fraction of future national savings will be needed to reverse the damage of past neglect. Another view argues that there has been no sudden acceleration of decay in capital stock performance, that better facility management can often substitute for capital investment, and that attempts to greatly increase the size and condition of the public capital stock would place unsustainable pressure on financial markets, state and local government budgets, and the federal system of grants-in-aid. How extensive is the capital infrastructure problem? How did it arise, given the many federal government subsidies available for state-local capital expenditure? How much of the national capacity for capital formation should be allocated to solving the problem? If there is a divergence between actual and desired infrastructure capital, can the gap be closed without disrupting the growth of other sectors and governmental objectives? These questions are, unfortunately, much easier to pose than to answer. There is only limited information about the size and condition of the stock of public infrastructure capital, and much of the available information has been assembled from the perspective of engineering or planning standards. Needs assessments typically indicate the fraction of the infrastructure stock that falls below a specified (and somewhat arbitrary) level of performance, or indicate how much spending would be required to bring the existing stock up to the specified standard. While sometimes appropriate as a management tool, infrastructure needs estimates are formulated in isolation from other public and private capital needs and are thus ill-suited to the policy debate over national priorities. Despite significant data problems, some general conclusions about the infrastructure dilemma are possible. As a backdrop for these conclusions, the first section of this paper presents an overview of the historical trends in public sector capital formation and infrastructure condition. The following section discusses the factors shaping these trends, with particular attention to the supply and demand components of the capital spending decision. We then consider the question of whether existing trends will insure an adequate supply of public capital, and address the issue of whether a reduced quantity and quality of infrastructure capital may be expected to reduce private sector productivity growth.