Category Archives: Infrastructure

An Economic Strategy for Investing in America’s Infrastructure

Source: Manasi Deshpande and Douglas W. Elmendorf, Brookings Institution, July 2008

From the abstract:
Infrastructure investment has received more attention in recent years because of increased delays from road and air congestion, high-profile infrastructure failures, and rising concerns about energy security and climate change. The United States now has the opportunity to channel public concern and frustration into a national infrastructure strategy that promotes infrastructure as a central component of long-term, broadly shared growth. While increased spending on infrastructure is likely to be needed, this paper emphasizes the large gains that could be reaped by using existing infrastructure more efficiently and by making better decisions about how to invest in infrastructure.

For physical infrastructure, we recommend establishing pricing mechanisms such as road congestion fees and air traffic control fees to make users bear the costs of their infrastructure use more fully. At least part of the revenues from these fees should be used to offset their potential adverse distributional effects. The federal government can also promote better decisionmaking about new investments by removing distortions in its own policies and providing more flexibility in exchange for accountability by states and localities. For telecommunications infrastructure, we propose that the government make better use of the wireless spectrum by facilitating sales and leases of unused spectrum and by introducing more flexibility in its policy of interference prevention. Further, the government should consider targeted, cost-effective subsidies to encourage private firms to expand high-speed Internet access to unserved rural areas.
See also:
Bringing Broadband to Unserved Communities

Build Infrastructure to Compete

Source: Lael Brainard, Brookings Institution, July 22, 2008

Olympic visitors will see first hand the forward-thinking investments China is making in infrastructure to support its long-term economic growth and expansion. Brookings vice president Lael Brainard argues it’s time to take a page from emerging nations like China, India and Brazil and restore our own crumbling infrastructure to strengthen our global competitiveness.

Clean Energy Strategies for State and Local Governments: Public Infrastructure

Source: Apollo Alliance, 2008

As America faces rising energy and fuel costs, state and local governments lead the way towards energy independence in America, employing strategies ranging from using biofuels in fleet vehicles to retrofitting public buildings to meet minimum energy efficiency standards. In doing so, state and local governments not only help the environment, they help themselves by cutting energy costs, relieving pressure on tight budgets, and demonstrating the essential value of public investment in new energy technologies.

Facility Planning: School Renewals

Source: James E. Rydeen, American School and University, June 1, 2008

1950s-’60s schools: Obsolescence or longevity?

Forty-three percent of existing public schools were built in the 1950s-’60s era. This era seems to have gained the reputation of cheap, energy-inefficient buildings that were not intended to last more than 30 years.

A study at one school district estimated it would cost $2.1 billion to fix its aging buildings. Many buildings were well-kept and clean, but their mechanical, electrical and plumbing systems were old and inefficient; the food-service equipment needed replacing; and the facilities did not comply with the Americans with Disabilities Act. Most of the buildings are only 30 to 50 years old and are showing signs of water damage, and wear and tear.

Experience has proven that public schools must be designed for long-term use — much longer than 30 years.

Many institutions keep up with most of their annual facility maintenance, but not with replacing major systems and equipment because annual budgets cannot cover the costs. Avoiding such dilemmas requires planning, scheduling and budgeting for the eventual upgrades.

Costly Returns: How Corporations Could Profit From Inflating the Already High Cost of Repairing the Nation’s Crumbling Water and Sewer Infrastructure

Source: Food & Water Watch, June 2008

From the press release:
A future favorable to investor owned water utilities will result in higher rates, fewer consumer protections, a limited or non-existent federal safety net for low income communities and large infrastructure investments built to maximize profit, not the interest of the public, according to a Food & Water Watch analysis of investor briefs.

“Corporations have a financial incentive to oppose conservation, protection of drinking water sources and other policies and programs that would save money and help offset the economic burden on communities across the nation,” said Food & Water Watch http://www.foodandwaterwatch.org/ Executive Director Wenonah Hauter. “Wasted water drives up a company’s revenue, which flows from people’s water bills.”

In fact, the investor research firm believes that if “faulty underground infrastructure were to interrupt a major city’s water supply for an extended period,” the public would be less resistant to rate hikes that benefit corporations. The analysis also reveals U.S. states where regulators are especially friendly to private ownership or management of water: Pennsylvania, Delaware, and Connecticut, with a nod to California’s recent about face on strong consumer protections and shift toward encouraging privatization of water service.

Although public utilities provide water to about 86 percent of people on community water systems, a private sector push is on to change this. The report, Costly Returns: How Corporations Could Profit From Inflating the Already High Cost of Repairing the Nation’s Crumbling Water and Sewer Infrastructure, analyzed investor briefs by Boenning & Scattergood and reveals that, thanks to some fancy finance and accounting, private utilities tie higher earnings to increased costs.
Executive Summary

Budgeting for Capital Investment

Source: Rudolph G. Penner, Urban Institute, Testimony Before the U.S. House of Representatives Committee on Transportation and Infrastructure, June 13, 2008

From the abstract:
The unified budget of the U. S. government is, in most respects, a cash budget. It is somewhat biased against public investment, because the benefits of such investments accrue over a period of time whereas the cash outlay is immediate. This testimony looks at options for directing more funds to highways, mass transit, and other public investments. It examines higher fuel taxes, tolls and congestion fees; capital budgeting; infrastructure banks; a capital revolving fund; public-private partnerships; and approaches to improving the efficiency of current grants and subsidies. It concludes that tolls and congestion fees are very promising as are public-private partnerships. A capital revolving fund would be useful for agencies that only invest occasionally. A capital budget and infrastructure banks are less desirable.

Redressing America’s Public Infrastructure Deficit

Source: Bernard L. Schwartz, New America Foundation, Testimony Before the House Committee on Transportation and Infrastructure, June 19, 2008

Over the past several decades, we have accumulated a sizeable public infrastructure deficit. As a result, a variety of infrastructure bottlenecks-traffic congested roads, clogged ports, and an antiquated air traffic system, to mention just a few-have begun to undercut our economy’s efficiency and undermine our quality of life.

One of the reasons for this infrastructure deficit is that our system for financing infrastructure has become increasingly inadequate with the passage of time and has not kept up with the practices of other advanced industrialized economies….

Financing America’s Infrastructure

Source: Douglas Rediker, Heidi Crebo-Rediker, New America Foundation
June 9, 2008

From the summary:
America’s basic infrastructure is outdated, worn, and in some cases, failing. Most experts agree that it is inadequate for meeting the demands of the 21st-century global economy. If we are to remain competitive, we must invest in capital assets like roads, ports, bridges, mass transit, water systems, and broadband infrastructure. Many other countries — both rich and poor — see investing in infrastructure as imperative for economic survival and success in an increasingly competitive economic environment. But the United States has lagged in infrastructure investment, in both relative and absolute terms. We are spending less than 2 percent of GDP on infrastructure, while China and India are spending 9 percent and 5 percent of GDP, respectively.

If the nation’s infrastructure needs are apparent, so too are the limits on available funds in federal, state, and local government coffers. In this presidential election year, we can see these limits clearly, as the nation’s spending priorities are magnified by electoral politics. Although significant government funding will likely continue to play a key role in the development of public infrastructure, the scale of our funding needs increasingly compels us to look beyond government to close the financing gap. It is for this reason that public support for private sector infrastructure investment is essential.

The good news is that while the federal government struggles to find funds to address its spending needs there is abundant private capital for infrastructure investment. An estimated $400 billion in global funds are available for equity investment in infrastructure, and the funds available to support the debt component amount to several trillion dollars if we include global central bank reserves, global pension funds, and sovereign wealth funds. Rather than focus on these large pools of global capital as a threat, we should view them as an opportunity. So, while we have enormous infrastructure financing needs, there are also enormous pools of capital available for investment. The trick is to bring the two together in a commercial, sustainable, and politically acceptable way.

Budgeting for Capital Investment : Testimony Before the U.S. House of Representatives Committee on Transportation and Infrastructure

Source: Rudolph G. Penner, Urban Institute, June 13, 2008

From the abstract:
The unified budget of the U. S. government is, in most respects, a cash budget. It is somewhat biased against public investment, because the benefits of such investments accrue over a period of time whereas the cash outlay is immediate. This testimony looks at options for directing more funds to highways, mass transit, and other public investments. It examines higher fuel taxes, tolls and congestion fees; capital budgeting; infrastructure banks; a capital revolving fund; public-private partnerships; and approaches to improving the efficiency of current grants and subsidies. It concludes that tolls and congestion fees are very promising as are public-private partnerships. A capital revolving fund would be useful for agencies that only invest occasionally. A capital budget and infrastructure banks are less desirable.

Issues and Options in Infrastructure Investment

Source: U.S. Congressional Budget Office

The condition and adequacy of the nation’s physical infrastructure–including its surface, air, and water transportation networks; its energy, water, and telecommunications utilities; and its dams and schools–are important for the vitality of the economy and for public health and safety. Yet calls for increased federal investment in infrastructure must be carefully analyzed and weighed against other spending priorities.

Full report (PDF)