New E&Y and Urban Land Institute Study Paints Sad Picture of US Infrastructure

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Earlier this week, E&Y in conjunction with the Urban Land Institute published the results of a global infrastructure study examining the US against other economies including China, India, Brazil, the UK, Canada, Australia, as well as the EU and the Middle East, etc. The results won’t surprise MetalMiner readers, but the solutions tried in other countries might. First, the main findings according to the study, the US is “lurching along a problematic course-potentially losing additional ground, due to a 30-year period of consistent underfunding of infrastructure initiatives. Second, a partisan government has failed to create a national infrastructure plan resulting in the numerous extensions of legislation that does not include long-term plans such as SAFETEA-LU, 2005 transportation authorization legislation. Moreover, President Obama has stated that “infrastructure is part of his administration’s “top three Ëœwin the future’ initiatives, but without even having introduced a plan, we can’t see how the administration will accomplish this goal.

To summarize the problem, according to this story in the Washington Post, the US needs to “invest $2 trillion to rebuild roads, bridges, water lines, sewage systems and dams that are reaching the end of their planned life cycles.

The study points to two key success strategies. The first involves developing “forward-looking plans that tie infrastructure needs directly to securing future economic advantages, giving them the ability to direct funding more strategically and efficiently. Wow, call me crazy, but are we talking about an ROI analysis or a cost-benefit analysis? Surely our policy makers can put some smart guys (and gals) in a room and brainstorm a plan outlining various policy options with outcomes? The second success strategy involves examining what some states or metropolitan areas have done specifically (those with “effective procurement policies and programs) to engage in what the study refers to as PPP (public/private partnerships). I suppose my state probably lacks the credentials to try that innovation.

Perhaps some of the lack of success in furthering a national agenda or consensus on infrastructure involves the eternal “how do we pay for it conundrum. Raising gasoline taxes, increasing other taxes or charging user fees, tolls on interstate highways, etc., remain unpopular according to the study. However, other nations have shown an ability to both implement austerity programs (UK) while at the same time earmark funds toward infrastructure projects. Specifically, the UK has allocated over $326 billion over five years toward a range of projects to include the expansion of broadband access to energy production. And unlike the US, where folks tend to [negatively] view infrastructure projects as somehow pandering to the manufacturing lobby, the EU views these expenditures as “dual wins for helping stimulate slowly resuscitating economies and modernizing systems to ensure long-term commercial growth.

Not surprisingly, all of the emerging markets have massive infrastructure investments under way, from Brazil’s road, transit and water projects to China’s high-speed rail network to India’s efforts toward attracting private financing.

The study also points out certain US cities that have made headway, including Denver, Seattle, Minneapolis and Salt Lake City, primarily via collaborative efforts across city agencies to jump-start new initiatives. PPP models also help particularly in generating necessary funding. The study reports to projects in Virginia and Florida as examples.

Unfortunately, it will likely take a few accidents or wicked acts of Mother Nature to sound the alarm bells on funding infrastructure initiatives. Over the coming weeks, we’ll explore some thinking around some policy initiatives currently making their way to Washington.

–Lisa Reisman

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