Water systems and roads top the infrastructure priority list for U.S. cities, while municipal bonds are among the most popular financing tool and rising project costs remain a leading concern.
Those are among the findings from the National League of Cities "2025 Municipal Infrastructure Conditions Report" released Tuesday. The annual survey provides a snapshot of the quality and priority of local government infrastructure across the country.
"Local leaders are on the frontlines of keeping water systems safe, roads and bridges functional and communities connected," said Clarence Anthony, NLC's CEO and executive director. "The Municipal Infrastructure Report shows how cities, towns and villages of all sizes are innovating in the face of rising costs and complex permitting processes to deliver the infrastructure residents depend on for a thriving community."
More than 71% of municipalities who responded identified water systems as the top infrastructure priority, the NLC said. Roads and bridges received 63% of responses followed by sidewalks, trails and bike infrastructure at 46%. Energy projects were identified by 28% of cities as priorities, and transit by 15%.
When asked why the cities prioritized certain projects, most named the need to modernize aging and deteriorating systems.
On the financing side, municipal bonds are a top tool, used by 76% of local governments to finance infrastructure, followed closely by municipal capital budgets at 74% and loans.
The NLC weighed in on the importance of tax-exempt bonds in the report, warning that if the tax exemption was lost, "municipalities would face significantly higher borrowing costs, potentially delaying or reducing the scope of infrastructure projects." The move "could strain municipal budgets, reduce public investment and hinder long-term economic growth, or even potentially force their hands to raise taxes," the group said.
The most widely used funding tools are grants and capital budgets, used by 58% and 65% of respondents, respectively. The needs come as the Infrastructure Investment and Jobs Act, which provided an influx of federal support for local needs, will expire in September 2026, and as Trump administration's commitment to federal grants for local and state governments remains in flux.
Ninety percent of cities cited rising costs of project materials and labor as a financial obstacle, while 84% cited insufficient capital budgets. Another 65% cited inadequate grant or loan availability as a top challenge.
"Non-financial obstacles also play a prominent role in shaping the difficulties that municipalities encounter in managing their infrastructure," the report said.
Regulatory compliance and permitting was named by 46% of respondents as the most significant non-financial challenge. Environmental impact assessments and mitigation were named as a barrier by 34% of respondents.
Last year's report
The NLC's 2022 infrastructure report also found that water/sewer/stormwater systems topped the priority lists for surveyed municipal governments.
