Seth Perlman/Associated Press

Rebuilding America's Infrastructure

 

robert puentes is president and CEO of the Eno Center for Transportation, an independent Washington-based nonprofit think tank focused on transportation policy and work force development.

Published January 22, 2018

 

Each time a bridge collapses, a pipeline explodes or a train crashes, the word “infrastructure” temporarily ceases to be snooze-inducing. TV news offers frequent updates on the body count; talking heads emerge from think tanks and government offices to stress the importance of infrastructure for everything from safety to convenience to global competitiveness. Studies appear, reminding all with gloomy fanfare that when it comes to public infrastructure, the United States is most decidedly not No 1.

And then nothing seems to happen.

There is no question that infrastructure matters a whole lot. It is (literally) the backbone of the economy, necessary to sustain growth and the quality of life. It supports the development of advanced industries that increasingly depend on supply chains to efficiently move goods across continents and oceans. It opens the door to better jobs, timely health care and specialized education. And it ought to have a powerful political constituency in the 14 million Americans whose livelihoods depend on its construction, maintenance and use – not to mention the myriad industries ranging from steel to construction to electronic systems controls with bottom lines closely tied to infrastructure. Why, then, is there this disconnect between the wide support for improving infrastructure and the lack of corresponding investment?

I believe that much of the blame lies in our crisis-driven approach that neglects the nuts and bolts – the divisions between federal and regional responsibility, between public and private purpose, between taxpayer- and user-financed approaches. Here, I lay out a big-picture perspective that, I hope, cuts through the rhetoric and casual thinking about infrastructure development and – again, I hope – suggests the right questions for policymakers.

The View from 40,000 Feet

For many Americans, infrastructure failure is about potholes on the street, commuter trains that crawl along at 15 miles per hour, and water pipes that burst at inopportune times. But in broad strokes, the evidence of decline needs to be measured in the increasingly evident drag on productivity growth, the growing risks to safety and the nagging impact on social equity.

Underinvested and unrepaired. According to the Congressional Budget Office, governments under pressure to pare spending have slashed infrastructure investment by one-third over the past few decades, leaving behind trillions of dollars worth of deferred maintenance and high-return projects waiting to be completed. The international comparisons are telling: by the World Economic Forum’s reckoning, U.S. infrastructure quality has fallen from the best in the world to 9th in a span of 15 years.

Outdated and outmoded. Besides its fraying condition, the very design of our nation’s infrastructure is becoming obsolete. Take air traffic control. While the United States was the pioneer in aviation technology, we have lost our edge because we continue to rely on ground-based radar rather than global positioning satellites. Or consider that urban public transit is failing to take the load off roads, in part because the systems lack the digital controls to maximize capacity and passenger convenience. Moreover, neglecting to read the writing on the wall, metros are failing to plan for the integration of public transit with automated personal vehicles.

Disconnected from social equity. Infrastructure should be an important part of a broader strategy to expand educational and employment opportunities, reduce poverty and foster a strong and diverse middle class. Transportation and telecommunications networks can and should be designed to help link low-income workers to jobs across metros and to increase training opportunities and adult education.

The nonprofit Equality of Opportunity Project found that reducing commuting times and creating access to jobs represent the single largest factor allowing households to escape poverty. All too often, though, infrastructure has a perverse impact on access, serving as a physical barrier between neighborhoods and reinforcing the isolation of the poor.

Vulnerable to natural disaster. Inadequate infrastructure leaves communities, especially those in flood plains, at greater risk of catastrophe. The overwhelmed stormwater systems, washed out roads, flooded transit stations and collapsed electricity grids that followed Superstorm Sandy in 2012 and Hurricane Harvey in 2017 made this all too clear.

Crowded off government budgets. Accumulated debt – in particular unfunded pension obligations – is limiting the availability of public funds to pay for high-priority infrastructure maintenance and investment. And though interest rates are historically low, the ability of many governments to borrow is limited by constitutional debt caps and weak credit ratings.

On the federal level, pressure to fund health care, Social Security and a defense build-up (not to mention a likely increase in interest costs as rates go up) is squeezing out infrastructure. Non-defense discretionary spending is projected to decline from 4.4 percent of GDP to 2.8 percent by 2027 – and that assumes tax cuts won’t further reduce Congress’ will to spend on non-mandatory projects ranging from education to transportation.

 
Jim Mone/Associated Press
 
Devils and Details

Just when we should be having a serious fact-based debate about infrastructure priorities, at the federal level we seem to be doing little more than repeating mistakes of the past. Although many advocates welcomed the enthusiasm for a new federal commitment on the part of both presidential candidates, the debate must get beyond sound bites. For starters, we need to be more specific about what we mean when we talk about “infrastructure.” This is especially relevant today because various sorts are governed, financed and delivered very differently.

For example, public agencies provide drinking water to nearly 90 percent of American households, usually delivered by a city or a county. By the same token, wastewater transport and treatment is generally a public monopoly. However, water infrastructure also includes dams, nearly two-thirds of which are owned privately. On the other side, private investment is responsible for essentially all the telecommunications and freight rail infrastructure in the United States.

There is nothing inherently wrong with this diversity of ownership models, but it does mean that discussions of “infrastructure” tend to mix apples and oranges. The American Society of Civil Engineers’ Infrastructure Report Card does a good job of spotlighting the challenges for a range of public infrastructure sectors, but leaves out infrastructure that is largely private.

One consequence is that the devil is often in the details of broad-stroke fixes from Washington. During the campaign, Trump famously proposed a $1 trillion investment in infrastructure. He later clarified that he would commit $200 billion in taxpayer dollars to leverage a total investment of around $1 trillion through partnerships between the public and private sectors. But, a year after the election, there was still no detailed plan and hopes for a massive federal investment were fading. For their part, Democrats in the Senate offered their own trillion-dollar package almost a year ago, while the Congressional Progressive Caucus upped the ante to $2 trillion.

 
Although many advocates welcomed the enthusiasm for a new federal commitment on the part of both presidential candidates, the debate must get beyond sound bites.
 

It should not be surprising that there has been little movement on these proposals. While Washington can outline ambitious plans, infrastructure at this level of abstraction does not seem to stir the blood of the public. Incidentally, America is not the only country that has this difficulty. In a 1985 speech to the Conservative Women’s Conference, Margaret Thatcher quipped that “you and I come by road or rail. But economists travel on infrastructure.”

This is not to say, though, the public does not care about the pipes that provide their clean water, the rails they ride on or the air traffic control system that keeps the skies both safe and friendly. In fact, they care a great deal about infrastructure close to them and are generally willing to pay for it.

On Election Day 2016, voters considered 436 state and local ballot measures related to transportation infrastructure – in particular, whether they were willing to pay for it. Over 70 percent of these measures passed, authorizing the raising of over $200 billion. In 2017, the approval rate of ballot measures has been even higher.

The national infrastructure discussion was also given a nudge forward in the past year by two executive branch publications: one at the tail end of the Obama administration, the other during the presidential transition. The first is a report commissioned by the Treasury Department that assessed the impact of several dozen major infrastructure projects. The report was largely optimistic, finding that, together, these projects would generate a net $800 billion return. But its real value was in the approach of examining specific projects, making the analysis tangible to both the public and to policymakers. The projects, by the way, included a new bridge in Hampton Roads, Virginia, to relieve traffic congestion and a levee in southeastern Louisiana to bolster flood control. The other document was a wish list of some 50 projects prepared by President Trump’s transition team, presumably with the goal of building local support.

 
Alex Scott/Bloomberg via Getty Images
 
Getting to Yes

Despite the obstacles, states and localities really are making headway on infrastructure, increasingly working with diverse stakeholders in defining priorities and finding the money to make projects happen. There is evidence in freight movement projects in Los Angeles and Miami; major public transit investments in Denver and Seattle; wastewater treatment upgrades in Washington and Akron; and improvements in border crossings in San Diego and Detroit. Progress has been accelerated because states and metros are learning from one another – not to mention the growing realization that big-ticket largesse is not coming from Washington anytime soon.

The impasse on approving 12-figure sums in aid does not mean Washington couldn’t play a more constructive role in advancing the infrastructure effort. Norman Anderson, named the administration’s “infrastructure czar” last March, could serve as facilitator and champion of new ideas. This could build on the current drive to expedite project delivery by better coordinating action on the federal level – which, by the way, remains a significant source of funds for public works under a variety of programs. The czar could also direct research into practical ways to mobilize support for projects using a variety of partners.

 
While establishing public-private partnerships is important to regional development, it still takes a predictable deal flow to ensure ongoing private-sector engagement. This is why innovative multistate partnerships like the West Coast Infrastructure Exchange hold much promise.
 

I think the nation could also benefit from the creation of a standing commission on infrastructure, a body distanced from (if not immune to) partisanship. It could facilitate joint planning and exchange of information for federal, state and local officials. Such a formal structure where such officials could meet on a routine basis would help tackle practical issues of mutual concern.

This technocratic approach would dovetail nicely with the search by ambitious states and metros for ways to bypass traditional municipal debt markets to find lower-cost, lower-risk and higher-impact ways to pay for projects. Renewed interest in revolving funds, trusts and innovative bonding mechanisms is producing a renaissance in the field of infrastructure finance. Increasingly, public infrastructure investment occurs through state revolving-loan funds and so-called infrastructure banks.

Most provide direct loans at low interest rates to public and private entities, while some also offer grants, loan guarantees and other financial facilities that create larger, more efficient markets for infrastructure debt. These institutions finance a broad array of projects ranging from highway construction to essential storm- and drinking-water facilities. Florida's State Infrastructure Bank, New York's Drinking Water and Clean Water State Revolving Funds, and Connecticut's Green Bank exemplify these best-in-class strategies.

The infrastructure bank model has also gained traction at the metro level in Chicago and Los Angeles. New approaches to bond financing are also starting to take root. The Wisconsin Public Finance Authority, for instance, is beginning to adapt its bond issuance practices as projects become more complex and overlap jurisdictions.

At the same time, state officials are working to craft governance tools capable of overcoming the bureaucratic and technical barriers that threaten to overwhelm complex projects that take years to complete. In 2010, Virginia created an Office of Transportation Public-Private Partnerships that coordinates projects across multiple modes of transportation. California, Michigan, Oregon, Colorado, Georgia and Washington are committing to parallel approaches.

While establishing public-private partnerships is important to regional development, it still takes a predictable deal flow to ensure ongoing private-sector engagement. This is why innovative multistate partnerships like the West Coast Infrastructure Exchange hold much promise. WCX brings together stakeholders from California, Oregon, Washington State and British Columbia to establish a common market for projects, coordinating cross-border investment and facilitating procurement. The ambitious goal is to create a robust market for the nearly $1 trillion in high-value projects for the region.

Los Angeles County's Metropolitan Transportation Authority is attempting another fresh approach with its Office of Extraordinary Innovation, which is tasked with developing pilot projects that push the envelope. These include new partnerships between the public, private and nonprofit sectors coupled with technical but highly important reforms to agency procurement.

Los Angeles is also notable for the massive transit package voters approved in 2016. The largest infrastructure project in the country last year is expected to bring in a total of $120 billion over 30 years for a range of bus, rail, highway and bike/pedestrian projects. As mentioned earlier, these ballot measures have proved a surprisingly easy sell to voters frustrated by inadequate infrastructure. While some localities, including Denver, Phoenix and Salt Lake City, have a long history of this sort of self-help, the strategy is proliferating. Metros are taxing themselves to sustain their own development and in the process reducing the burden on the country as a whole.

The federal government needs to encourage such initiative by aligning its resources to help those who help themselves. Washington should provide incentives for localities that secure long-term funds by offering competitive grants and lower bureaucratic hurdles.

 

 
Gabe Souza/Portland Press Herald via Getty Images
 
Back to the Future

America’s infrastructure was once the wonder of the world. Indeed, the sustained economic growth of the past 150 years could not have happened without spectacular infrastructure accomplishments ranging from the Erie Canal to the interstate highway system.

But the mantle of leadership and the fruits of the investments have migrated elsewhere. China is well along in creating the most sophisticated network of ports and freight hubs in the world. The Dutch are global leaders in building the resilient infrastructure needed to manage climate change. Canada’s air traffic control system, privatized two decades ago, is light-years ahead of its American counterpart in technology and efficiency. Germany has completed a widely admired national master plan for transport renewal.

This is not a zero-sum game: their gains are not our losses. But successes elsewhere do provide a benchmark that suggests how the United States is far from meeting its potential as a leader in productivity growth, environmental sustainability and social equity.

There are plainly limits to what can be expected from Washington. At the national level, the budget is increasingly devoted to supporting the elderly, providing health care and maintaining military dominance. Moreover, there is plainly powerful resistance to taxing ourselves back into the game.

But there is plenty to do without a trillion-dollar federal commitment to infrastructure renewal. Leadership on the state and local level can be encouraged and rewarded. Partnerships between the public and private sector can take some of the burden off taxpayers and perhaps serve as a catalyst to the sort of innovation usually driven by private competition. None of this amounts to the sort of grand gesture loved by politicians. But it is the sort of pragmatic adaptation to changing circumstances that has served America well since the beginning.

 
Spencer Weiner/Los Angeles Times via Getty Images
 
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