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What is the impact of capital spending for buildings, equipment, and other facilities on future operating expenditures of municipal governments? Because capital spending decisions are made independent of operating decisions in many larger municipalities, managers make long‐term capital commitments without fully understanding the repercussions for operations. This implies the need for research that examines more closely the linkages between these budget cycles. This article develops a theory of the relationship between capital and operating expenditures, then uses data from the fortyeight largest U.S. cities to estimate both the magnitude of capital's impact and the time it takes for operating budgets to adjust. The study finds that five of six commonly provided municipal services were affected to varying degrees by past years' capital expenditures. Especially notable is the finding that the operating budgets of labor‐intensive services, such as police and fire protection, are most sensitive to capital spending. For public managers, the findings point to the need for closer coordination between the capital and operating budget cycles, especially in those cases where capital outlays have clear, unambiguous positive implications for future operations.

Previous studies of privatization have considered the cost‐effectiveness of privatizing more labor‐intensive services. This study examines the effectiveness of public and private delivery of a more capital‐intensive service: insuring municipal bonds against default. Credit enhancement for local government bonds is available from private insurance companies and from some state governments. Because of their reduced default risk, bonds backed by a third party should incur lower interest rates. This research considers two questions. Does a third party guarantee lower interest rates? Is private bond insurance more cost‐effective than the credit enhancement programs of state governments in lowering interest rates?

Local government investment pools (LGIP's) provide the political subdivisions of a state with a cost-effective option for investing their daily cash balances in an incomeproducing fund.LGIP's have grown into a $250 billion dollar industry in 44 states. This study reports on the factors that affect demand by depositors using time series data from TexPool. The results show that the yield spread of LGIP's has a nonlinear relationship with demand, the pool's liquidity was inversely related to demand, and TexPool's average monthly yield levels had no effect on demand. This study supports the normative values expected of local government investors-priority on safety and liquidity of principal. Outsourcing of the fund's management and aligning the pool's average maturity to the purpose of the pool brought a high level of confidence in the fund as seen by the substantial growth in both the average balance of investments and the number of depositors.

Partnerships that bring together public, private, and nonprofit organizations have become widely used by local governments. But we lack knowledge about the distinct contributions of collaborators to the partnership. This study uses tax increment financing (TIF) in Dallas, Texas, to assess the distinctive roles of public and private partners in achieving mutually beneficial policy outcomes. We find that, while public investment is essential to the partnership’s success, private investment directly increases property values. The city’s greatest contribution is to leverage private investment to create added taxable value in the TIF district. The increased property value provides revenue that is used for public purposes benefiting TIF district occupants. As with other quasi-private institutions that have gained popularity in the new order of governance, the appeal of TIF is its capacity to create public goods with bounded benefits. In addition, both institutional and operational knowledge contribute to the partnership’s success. The city’s experience at establishing new TIF districts and administering existing ones increases taxable value.