By Henry Cisneros
January 23, 2018
IDEAS
Cisneros was Secretary of the U.S. Department of Housing and Urban Development from 1993–1997 and is a partner at the infrastructure finance firm Siebert Cisneros Shank & Company, LLC.

Now that they have passed and signed tax reform, the Trump Administration will likely propose, and Congress will then deliberate on, a national infrastructure program.

The problem we face is plain: According to the American Society of Civil Engineers, some 9% of the nation’s bridges — over 56,000 in total — are structurally deficient. On the most busily traveled section of passenger rail, the average age of backlogged infrastructure repair projects is 111 years old. Our drinking water systems suffer an estimated 240,000 water main breaks per year, wasting over two trillion gallons.

The list goes on: The Bipartisan Policy Center estimates there is $2 trillion worth of infrastructure needs right now; from airports that need to be modernized, to shipping ports that need to be deepened to accommodate today’s larger ships, to congested roads that cost us in economic productivity to failing technology in power grids, the nature of the problem is varied and vast.

But in order to build the best possible solution for these problems — which can and should be bipartisan — Congress and the Administration must solve several dilemmas.

1. Deciding who will fund it — and how

Preliminary information says the Administration’s will target a trillion dollars in funding, split so that there is about $200 billion in federal spending and $800 billion in matched state, local and private funding. Democrats will argue for more federal dollars. Republicans will be watching the implications for the deficit, after having just created a greater fiscal chasm with tax reform.

This presents a problem. The non-federal $800 billion portion must be generated in one of two ways.

The first would be via state and local governments. But many of them cannot carry such massive debt.

This leaves us with private investment, which must be repaid through income streams from monetized projects. The problem is that some of the most urgent repairs are for facilities that cannot practically be monetized, since not every deteriorated bridge or congested roadway can be tolled.

This also creates inequality: it funnels investment to areas that are more well-off, thus leaving poorer communities behind. In Flint, Michigan, for example, money must be spent on a new water system, but residents are not going to be able to afford to pay high fees for use of that water.

There is a solution to this problem, though: Federal funding should be set aside for areas that have emergency needs and cannot compete by matching with state, local or private funds.

2. Making private investment appealing

Investments by pension funds and insurance companies can be driven towards infrastructure in an effort to produce long-term, bond-like returns, provided there are some safeguards protecting the investor.

Public-private partnerships are frequently mentioned as well. If the federal government and the states better incentivize these partnerships through legislation they could be part of the solution. But private capital cannot be the answer to the highest urgency needs because those tend to be of a purely public nature and do not provide an adequate return on investment.

3. Determining why federal projects get prioritized

Infrastructure projects have immense potential to create jobs in depressed areas, spur long-term regional growth and protect life and safety. If the selection process favors projects that have amassed the highest ratios of either state and local debt or private investment, the results will be skewed toward more prosperous metropolitan areas or high-value industrial projects — meaning the federal funds could run dry before critical needs with less payback get paid for. Therefore, the criteria need to include a project’s contributions to life and safety needs, to job generation and to national or regional economic growth.

4. Making sure rural projects are picked, too

Certain funds should be reserved only for projects in rural areas for many of the same reasons that more economically depressed areas receive priority: Monetization must not be the only criterion.

The traditional criteria go like this: large urban infrastructure inadequacies may create bottlenecks or choke points — which impact national growth. Seaports, airports, railways, power grids and water sources in those metropolitan gateway locations are essential to the entire nation’s economic competitiveness, and therefore are the most important issues to resolve.

But it is also in the nation’s interest to link bicoastal prosperity and the benefits of global growth to rural regions and counties, which may have the least fiscal capacity and have also been hardest hit by the economic changes that have impacted the country these last few decades. Therefore, dedicated set-asides make sense to ensure we do not shortchange less populated rural areas.

The fate of a bipartisan approach rests upon the resolution of choices like these. There are no easy answers; there are many hard choices. There is not enough money; there is provable need in many places. And the clock is ticking toward real emergencies, which will cost further loss of life, injury and economic loss.

Our solutions must be balanced. Our selection procedures must be transparent. And our government must be fair in covering both urban and rural places — because the entire country really needs this.

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