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Wanted: A Reasoned Approach to Dealing with America’s Infrastructure Needs

Posted by Ken Orski on Thursday, March 21st, 2013

Innovation NewsBriefs
Vol. 24, No. 4

It seems like not a week goes by without fresh warnings about the nation’s  “crumbling infrastructure” and renewed appeals to rebuild our aging highways and bridges.  President Obama reinvigorated the campaign with his State-of-the-Union proposal for a $50 billion program of infrastructure investments, $40 billion of which would be devoted to a “fix-it-first” program targeted at urgent improvements such as “structurally deficient” bridges. The latest manifestation of the “fix-it” campaign has been the highly publicized release on March 19 of  the American Society of Civil Engineers’  (ASCE)  new “Report Card for America’s Infrastructure.”

Since the President’s State-of-the Union address there have been three other infrastructure-related events.  The House Committee on Transportation and Infrastructure held a hearing on February 13 on “The Federal Role in America’s Infrastructure,” focusing on the importance of infrastructure for the U.S. economy and the federal role in its preservation and expansion. The same day, the  U.S. Chamber sponsored a “Transportation Infrastructure Summit,” a day-long gathering to explore “transportation infrastructure challenges and promising solutions” with prominent industry representatives. And on March 18, Rep. Rosa DeLauro (D-CT), a longtime proponent of a National Infrastructure Bank, convened a forum on Capitol Hill to explore innovative strategies for financing  infrastructure. The discussion there focused largely on how to encourage more public-private parnerships.

Four reports have added fuel to the debate about  the state of America’s infrastructure. The Building America’s Future coalition published a report, Falling Apart and Falling Behind (August 2011), urging development of a long-term national infrastructure strategy, establishing a National Infrastructure Bank and lifting restrictions on tolling. The American Society of Civil Engineers (ASCE) issued a report, Failure to Act: The Impact of Current Infrastructure Investment on America’s Future (January 2013), warning that if the investment gap is not addressed,  the economy is likely to suffer $1 trillion in lost business and a loss of 3.5 million jobs.  

ASCE’ s latest Report Card for America’s Infrastructure is a somewhat more upbeat assessment. The report shows progress in two areas of surface transportation, raising its grade for bridges and railroads from D in the 2009 report card, to C+ (the latter as a result of aggressive investment by the private railroads) but retaining a grade of D for roads (raised from a D- in 2009).  The report estimates the total investment needs in surface transportation to the year 2020  of $1.723 trillion and estimated funding of $877 billion, leaving an astronomical funding gap of $846 billion— more than $100 billion per year!

A fourth report,  “Are Highways Crumbling?” by Reason Foundation, evaluates highway performance trends. The Reason analysis was based on a variety of sources, primarily from the states themselves as reported to the federal government from 1989 through 2008.  (State and U.S. Highway Performance Trends, 1989-2008,  Reason Policy Study 407, February 2013).

What kind of impact this flood of  warnings, alarming forecasts and advocacy pleadings will have on public opinion and on congressional attitudes and fiscal decisions remains to be seen. They come at a time of severe budget pressures and intense Republican efforts to curb excessive discretionary spending. To be successful, the pro-infrastructure campaign must persuade fiscally conservative lawmakers that there are urgent and compeling reasons to boost spending on public works that override the imperative to reduce the deficit and get the nation’s fiscal house in order.

Further, infrastructure advocates must convince  the nation’s  taxpayers that spending more on transportation will make the transportation system perform better and that the money will not be wasted on questionable projects that do little to reduce congestion or improve the lives of commuters.

Infrastructure alarmists also must contend with the upbeat conclusions of the Reason Foundation study. That study has found that  America’s highways and bridges are in a far better condition today than they were 20 years ago. “There are still plenty of problems to fix, but our roads and bridges aren’t crumbling,” said David Hartgen, lead author of the Reason study. “The overall condition of the public road system is getting better and you can actually make the case that it has never been in better shape.”   The study affirms what the traveling public sees with their own eyes every day — that  the nation’s highways and bridges not only are not “crumbling” but, by and large and in most places,  are holding up pretty well.

Lastly, the advocacy campaign must overcome a cynical perception that pressures to increase funding for transportation are nothing more than special interest pleadings of interest groups that stand to profit from higher levels of public spending (this includes ASCE, “an engineers’ lobby,”  as several observers have noted).  As one transportation advocate at a recent conference observed, “there is an enormous disconnect between us and the American public” — a disconnect that may not be easy to overcome.

Significantly, improving the nation’s infrastructure was not a topic of discussion at the President’s meeting with Senate Republicans,  as reported in POLITICO.  The President must have come to a conclusion that it was pointless to lobby for his $50 billion infrastructure plan which has no credible funding source and which stands no chance of winning a favorable vote in the Senate  —not to mention being an anathema with House Republicans.

A Reasoned Approach

No one disputes the infrastructure advocates’ claim that some of America’s transportation facilities are reaching the limit of their useful life and need replacing. Nor does any one disagree about the need to expand infrastructure to meet the needs of a growing population. But fiscal conservatives among these advocates (and we count ourselves among them) contend that this does not rise to the level of a national crisis requiring a massive $50 billion federal crash program as proposed by the President or the expenditure of more than $100 billion per year as recommended by ASCE.

Instead, they suggest that each state should do its part  to maintain its transportation system in a state of good repair and rebuild aging facilities as needed. As the ASCE report and numerous news dispatches note, this is indeed  what’s happening.  A growing number of states are not waiting for the federal government to come to the rescue but are using their own resources to keep their transportation facilities in good working order. Some, such as Virginia,  Maryland, Maine, California, Oregon and Washington State (the latter three working through the West Coast Infrastructure Exchange) are raising supplementary revenue, some by raising the gas tax, and exploring new funding sources and project delivery approaches for infrastructure.

“The mechanisms of federal and transit spending have become distorted, leading to imprudent, irresponsible and often downright wasteful spending,” said Rep. Paul Ryan (R-WI)  in unveiling the proposed House budget. Rather than launching a massive new federal program of public works in the name of “fix-it-first,”  Congress and federal policy should encourage and reward state-level initiatives to modernize  transportation infrastructure and keep it in a state of good repair.

What about large-scale multi-year megaprojects demanding billions of dollars that are beyond the states’  fiscal capacity to fund on a pay-as-you-go basis? Those should —indeed,  will —be financed through public-private partnerships, tolling and credit instruments such as TIFIA and state infrastructure banks. They include the I-495 Beltway Hot lanes project in Virginia, New York’s Tappan Zee Bridge replacement, the San Francisco Bay Bridge Eastern Span replacement, the I-5  Columbia River Crossing, the Highway 520 floating bridge in Seattle, the Miami Port Tunnel, the Midtown Tunnel linking Norfolk and Portsmouth VA, and two Ohio River bridges in Louisville, a joint undertaking of the Indiana and Kentucky DOTs. All of the above projects will be financed with long-term obligations rather than funded on a pay-as-you-go basis through annual congressional appropriations.

A transition from funding to financing of major transportation infrastructure was also the preferred approach of the financial practitioners and analysts assembled at the October 2012 conference on Public-Private Partnerships convened by the American Road and Transportation Builders Association (ARTBA). The most practical  way to build future transportation megaprojects, these experts concluded, will be through project financing and public-private partnerships. There is nothing unorthodox in this approach. States and localities have been using the municipal bond market to finance their infrastructure needs for many decades, one of the experts observed.

In sum, the Highway Trust Fund no longer can serve as a source of capital for new infrastructure, and funding large capital-intensive projects with current user fee revenues no longer is feasible. Instead, we should look to the states to assume full responsibility for remedial “fix-it-first” activities, using their own tax resources and their allocation of Highway Trust fund dollars. Costly multi-year construction projects that are beyond the states’ own capacity to fund on a pay-as-you-go basis will be increasingly financed through long-term obligations and public-private partnerships. Making such a clear distinction between responsibility for keeping the system in a state of good repair and major system expansion not only makes political sense in view of the federal government’s reduced fiscal capacity — it may constitute the only lasting solution to our transportation funding dilemma.

C. Kenneth Orski is a public policy consultant and former principal of the Urban Mobility Corporation. He has worked professionally in the field of transportation for over 30 years, in both the public and private sector. He is editor and publisher of Innovation NewsBriefs, now in its 22nd year of publication.
 

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