Financial District: Slow motion meltdown

| June 1, 2010

Infrastructure is an investment – treat it that way, says new report.

By John Latta

Another new report argues the only way to create and carry out long-term infrastructure policies and practices is to address America’s infrastructure as an investment, something that we do not do now.

The report, Infrastructure 2010: Investment Imperative, from the Urban land Institute and Ernst & Young, offers a simple thesis: “We must start treating infrastructure like investment.

“Too often we treat it as anything but, funneling spending through siloed formulas and sidestepping critical questions about the country’s longer-term infrastructure strategy and vision,” says the report, the fourth in an annual series. “The nation’s vast infrastructure needs offer opportunity to create much-needed jobs while making the lasting, integrated infrastructure investments that will lay the foundation for future prosperity.”

When it comes to roads, the report says: “Either local, state, or federal taxes must increase to meet the burden or older streets will fill with potholes, raising safety concerns and threatening property values.”

The report recognizes “signs of renewed commitment to infrastructure” at state and local government levels with initiatives to build and fund new projects and in creative partnerships between agencies at a federal level. “These are promising moves, but more needs to be done.”

When it comes to infrastructure, the United States finds itself between a rock and a hard place, says the report.

“Economic fallout, competing priorities and sticker shock prevent the country from aggressively addressing a slow-motion meltdown – the consequence of underinvesting in transport, water, and other networks for the past 30 years.”

U.S. leaders and policy makers must help Americans recognize the nation’s relatively affluent standard of living cannot be sustained on infrastructure systems planned and built during the mid–20th century, when the country had only half its current population, says the report.

“Most highway and road building was heavily funded by federal and state dollars decades ago, when the country’s economy operated on a high-octane growth curve, and now the bills come due with mounting repairs and resurfacing requirements on countless miles of serpentine asphalt.”

Recession-busted government budgets, entitlement and defense expenditures, and ballooning health care costs push infrastructure down most political priority lists. “Leaders continue to procrastinate when it comes to new investment as stressed taxpayers balk at more spending,” says the report.

Infrastructure 2010 recommends that government officials and policy experts take effective action, including the following:

Level with the American people about how the country is falling behind other economies as a result of underinvesting in infrastructure, and explain the true costs of making required upgrades and building new systems.

Determine a national vision for infrastructure improvements that supports the viability of the nation’s key metropolitan areas and national gateways – the places that increasingly concentrate economic activity and propel growth.

Move toward merit rather than formulas in allocating federal funding to state and local governments for infrastructure, and encourage integrated infrastructure, environment and land use planning.

Establish a national infrastructure bank modeled on Europe’s success, which can help promote more investment-grade decision-making and attract more private capital into infrastructure investments.

Raise revenues through user fees not only to pay for improvements and upgrades, but also to help gain economic efficiencies and environmental benefits through encouraging changed behaviors – less driving, greater water conservation, and reduced per-capita energy consumption.

The report, noting that “decades of underfunding now force a massive catch-up effort by deficit-constrained federal, state and local governments,” sees problems in a short supply of political will to tackle problems as households and businesses are in no position to face higher taxes and in the fact temporary job-based stimulus injections are inadequate.

“The likely future funding course involves raising revenues from more and higher user fees tied directly to providing necessary investment capital for infrastructure systems, rather than reliance on general taxes, which distort and hide costs from the public,” says the report. “More public/private partnerships can help finance infrastructure development and operate systems. A national infrastructure bank could also help align government and private investor interests, and attract greater private capital. Innovative tolling technologies and smart meters can help users gauge and manage expenses directly related to transportation, water, and energy, encouraging more efficient and less costly lifestyle and business decisions. In turn, enhanced revenue sources should help ensure that Americans have safe, vanguard systems to promote commercial growth and meet quality-of-life expectations.” v

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