Much automobile travel was evident in the 1930’s despite the Depression, thus, the need for new autos to replace old ones.
In 1931, the States faced difficulty in matching their Federal-aid apportionments. To ease the effects of the Depression, annual Federal highway authorizations were increased to $205 million in 1931, reduced somewhat to $125 million in 1932, and increased again to $229 million in 1933. But the lack of matching funds was only partly the result of these large increases above the $75 million a year previously authorized. Nor did it arise from declining State revenues from motor vehicle imposts, since these revenues declined very little at any time during the Depression. Rather, it stemmed from the large sums used by the States to replace local revenues from property taxes in financing local roads and city and village streets. Moreover, substantial amounts were diverted from highways to meet the rising demand for expenditures for other purposes.
Many States took action to provide tax relief by reducing or eliminating property taxes as a source of revenue for highways. In four States (Delaware, North Carolina, Virginia, and West Virginia), responsibility for administering and financing all county and local rural roads was transferred to the States, except that in Virginia the counties were allowed the option of retaining control of their highways. Following the transfers, local property taxes for highways were customarily reserved for servicing debt already outstanding and sometimes for bridge construction.
Indiana was representative of States that left secondary and local roads under local control but provided for the transfer of State motor-vehicle user taxes to the local jurisdictions for the support of roads. In these States, imposition of property taxes for highways was usually forbidden except for bond service. Most of the remaining States adopted a middle course, transferring some roads from local to State responsibility or providing increased State aid for secondary or local roads.
Emergency Federal Aid
In an act passed on December 30, 1930, Congress advanced $80 million to the States for matching regular Federal-aid apportionments. As conditions worsened, the Emergency Relief and Construction Act of 1932 made a further advance of $120 million. It also provided for 1-percent additions to the Federal-aid highway systems that were originally limited by the Federal Highway Act of 1921 to 7 percent of total State highway mileage, as these systems were completed according to standards acceptable to the Bureau of Public Roads.
Unemployment grew to crisis proportions, and Congress was forced to turn from the regular Federal-aid program to other types of financing, emphasizing projects that would provide for as much direct labor as possible. Thus, the regular Federal-aid authorizations were replaced with emergency appropriations. The Federal Government made available a total of $1 billion of such funds for the fiscal years 1934–1936, far more than ever before for a like period of time.
The National Industrial Recovery Act of 1933, while not primarily a highway bill, included several provisions affecting the financing of highways. The President was authorized to make grants of not less than $400 million to State highway departments to provide for the emergency construction of highways. The use of these funds did not carry with it the customary restrictions on the use of Federal-aid highway funds. The funds were to be available without matching by the States. They could be used for projects on the urban extensions of Federal-aid system routes; for paying as much as 100 percent of the costs of preliminary engineering; for projects associated with highway safety, such as building footpaths or eliminating highway-railroad grade crossings; and for construction on secondary and feeder roads off the Federal-aid system.
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