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America’s Infrastructure: Ways to Finally Get Rolling?

Neal Peirce / Sep 07 2013

For Release Sunday, September 8, 2013
© 2013 Washington Post Writers Group

Neal PeirceThere’s never been a better time to build the highways, rail lines, bridges, fiber-optic networks and other varieties of infrastructure we need for a successful America.

Interest rates for long-term borrowing are at record lows, meaning the future payback costs for borrowing will be millions or billions of dollars less than they might be otherwise.

Contracting firms are hurting for business and can often offer their services at the best rates in decades. Costs for steel and concrete are down too, at least compared to what they’d be in a stronger economy.

That’s the argument my journalist colleague Alex Marshall makes in a Governing magazine analysis – supportive of many other calls from the Obama administration and others for a national infrastructure bank and companion capital-opening steps.

The case is backed up by the points that infrastructure projects put thousands of people to work and create the basic facilities for the long-term health and prosperity of any city or state.

The quickest but unlikeliest cure is for Congress to wake up and enact a new transportation bill raising the current federal gas tax – stuck, notwithstanding significant inflation, at 18.3 cents a gallon for 20 years. But that’s unlikely now. As James Oberstar, former House Transportation and Infrastructure Committee chairman notes, politicos of all stripes (even President Obama) have flinched at the idea of proposing an increase.

The impasse is sad. Presidents from Dwight Eisenhower to Bill Clinton favored appropriate gas tax increases, as did Congress – often by voice votes. Even a 5-cent increase now, Oberstar argues, would raise more than $8 billion in revenue and create 600,000 construction jobs.

Could the 50 states correct the gap, from their own resources? Theoretically, yes – though their legislatures generally match Congress’ cowardice on the issue.

Yet there are current signs of state-level change, heralded by experts ranging from transportation analyst Ken Orski and former Pennsylvania Gov. Edward Rendell to President Obama’s new transportation secretary, Anthony Foxx.

State gas taxes are going up in Maryland, Vermont and Wyoming; Virginia is raising added revenue with a switch to sales taxes on the wholesale price of fuel, intended to raise revenues. Arkansas is dedicating a half-cent sales tax increase to transportation.

Most of today’s state infrastructure advances, though, are based on public-private partnerships, inducing private investors to ante up the lion’s share of costs for new projects.

Theoretically, that’s a great idea. As Fawn Johnson writes for National Journal:
“If market-based motives operate as capitalism dictates, the private sector should be able to come up with new and innovative ways to solve complex traffic problems at a lower cost for a city or state.”

But she notes that’s not guaranteed. Private investors, unlike government, are looking to reap a profit. Texas Gov. Rick Perry faced withering criticism for terms of a deal he made with a Spanish infrastructure firm to build a 4,000-mile network of tolled highways. The federal Transportation Department refused to sanction the project and the state legislature then actually outlawed it.

Former Indiana Gov. Mitch Daniels successfully completed a public-private deal to finance the 157-mile Indiana Toll Road, but critics allege that truck tolls could increase more than 3,000 percent over the 75-year deal. On any privately financed roadway, increases in toll charges by a private firm can trigger driver or citizen complaints. The private firm building a new Hampton Roads tunnel connecting Portsmouth and Norfolk, Va., has legal rights to hike tolls as much as 3.5 percent a year for 56 years.

That said, the reality of the times is a switch – as Emil Frankel of the Bipartisan Policy Center sums it up – from federal funding to federal financing. A prime example: the federal credit and credit enhancement program called TIFIA – The Transportation Infrastructure Finance and Innovation Act, which provides federal credit assistance (loans or standby lines of credit) to finance nationally significant highway transit, railway or port projects. The most recent federal transportation authorization bill increased the dollars available for TIFIA loans eight-fold.

Then there’s President Obama’s continued call for a national infrastructure bank. Congress won’t act on the idea, but there does seem to be bipartisan support for a Brookings Institution proposal to let corporations and individuals repatriate overseas profits now sheltering in such tax havens as the Cayman Islands – just as long as they agree to put their gains into an infrastructure bank.

At roughly $1.5 trillion dollars, the repatriated funds would be enough, Brookings claims, to deliver job-creating and economy-building projects for decades to come. The bottom line is clear: The dollars must be found. But if we don’t apply them soon, the United States will fall more and more behind today’s global infrastructure and competitiveness standards.


Neal Peirce’s e-mail is npeirce@citistates.com.

For reprints of Neal Peirce’s column, please contact Washington Post Permissions, c/o PARS International Corp., WPPermissions@parsintl.com, fax 212-221-9195. For newspaper syndication sales, Washington Post Writers Group, 202-334-5375, wpwgsales@washpost.com. (c) 2013, The Washington Post Writers Group

3 Comments

  1. Bert Berkley
    Posted September 7, 2013 at 2:07 pm | Permalink

    Neal, once again you are right on the money. My problem, like yours, is that I have no confidence in Congress, and things are worse in the legislatures of Kansas and Missouri. If it were not for Governor Nixon of Mo. the state would be following the lead of Governor Brownback who is on the verge of ruining the state of Kansas because of his tax cutting policies which lead to a serious lack of services to, yes, those most in need.

    Keep on spelling out what needs to be done. Your voice continues to be needed to put this country on the right path.

    Warmest regards,

    Bert Berkley

  2. Posted September 7, 2013 at 6:10 pm | Permalink

    Infrastructure is essential. But, it can also be a double-edged sword.

    If infrastructure is well-designed and well-executed, it can inflate land prices. At some point, higher land prices drive developers to seek cheaper, but more remote sites. Once these remote sites get developed, residents and businesses demand infrastructure. And when it is provided, the cycle begins again. Thus, the infrastructure that we create to facilitate development can end up chasing it away. The resulting sprawl destroys both our environment and our municipal budgets, because we end up with much more infrastructure per capita than would be required if development were more compact.

    Fortunately, some jurisdictions are rectifying this situation by using “value capture” to transform their property tax into a public services access fee. This is accomplished by reducing the tax rate applied to privately-created building values and increasing the tax rate applied to publicly-created land values.

    The lower tax rate on building values makes buildings cheaper to construct, improve and maintain. Surprisingly, the higher rate on land values helps keep land prices more affordable. This is because the supply of land does not shrink as a result of the tax and also because the tax reduces the profits from land speculation. By reducing the speculative demand for land, the higher tax rate on land values helps keep land prices down.

    For more information, see “Using Value Capture to Finance Infrastructure and Encourage Compact Development” at https://www.mwcog.org/uploads/committee-documents/k15fVl1f20080424150651.pdf

  3. Michael Godfried
    Posted September 9, 2013 at 10:02 pm | Permalink

    I continue to be flabbergasted that embracing infrastructure investment has still not taken root. It is in the best American tradition from Washington and Jefferson to Lincoln, both Roosevelts and FDR.

    I applaud Neal for so consistently keeping infrastructure and city design in the public eye and doing so in a compelling way.

    I wonder why the broader infrastructure movement has not had more success in engaging the public imagination?