Tuesday, May 15, 2007

Infrastructure Investment and Lack Thereof

The Urban Land Institute and Ernest & Young, LLP have released a study entitled "Infrastructure 2007: A Global Perspective." It is available for free here or you can pay $39.95 here.

The report is another sobering study of the failure of the United States to adequately invest in its infrastructure. Note on page 20 of 69 of the report there is a comparison of the 2005 annual operating budgets for the public transit systems in three world cities of similar populations and gross domestic product (in millions):

London: $7,804

Paris: $4,986

Chicago: $1,685

Let's see. If the City of Chicago and Cook County double their operating subsidies for public transit the operating budget for the Chicago system will go all the way up to $1,690!

The report takes a jaundiced view of the suburban sprawl development model and argues that cities that have embraced such a model (e.g., Atlanta) are likely to fare relatively poorly in the global economy. The report argues that regions that lack centralized land-use and transportation planning are likely to succumb to such sprawl and find themselves at a competitive disadvantage.

Too bad Representative Hamos has failed to include in her RTA reform bill any requirement that public transit investment be tied to aggressive transit-oriented land-use polices. Her bill's failure to do so condemns us to yet more rounds of suburban demands for more and very expensive transit service in areas that the suburbs themselves have allowed to develop in a manner that is inhospitable to public transit. It is a shame that she and her RTA workgroup apparently lacked the political will to confront the forces--local governments and developers--who are all to willing to let the Chicago region sprawl from Kankakee to Rockford.

Here's a summary of the report from the Wall Street Journal:

The Property Report: U.S. Infrastructure Found to Be in Disrepair—Higher Taxes Are Forecast To Meet Investment Need; Reconsidering Cities
The Wall Street Journal
May 9, 2007
Thaddeus Herrick

Airports, roads, rail, bridges and other transit infrastructure are deteriorating across the U.S. because of insufficient investment, according to a report.

Chicago needs $6 billion to bring its subways into good repair, says the report to be released today by the Urban Land Institute and Ernst & Young LLP. Rehabilitation or replacement of the Tappan Zee Bridge north of New York City could cost as much as $14.5 billion. And in Atlanta, current rush-hour trips by car could take 75% longer by 2030.

The report, entitled "Infrastructure 2007: A Global Perspective," says the failure to address what the co-authors call an emerging crisis in mobility will undermine the ability of the U.S. to compete internationally. "At some point, the system is going to grind to a halt," says Dale Ann Reiss, global director of real estate at the New York-based Ernst & Young accounting firm and vice chairman of the Urban Land Institute, a land-use think tank in Washington.

More foreboding, the report warns that further inaction will lead to disasters on the magnitude of the levee failures in Hurricane Katrina.

The report underscores the broader disrepair of transit, power and water systems in the U.S. In 2005, the American Society of Civil Engineers graded as "poor" the condition of the nation's transit infrastructure as well as power grids, dams and systems for drinking water and wastewater. The U.S. faces a $1.6 trillion deficit in needed infrastructure spending through 2010 for repairs and maintenance, today's report says.

A lack of political will because of fear of raising taxes is mainly responsible for the shortfall, the report says. It predicts an array of higher taxes but also says help is needed from the private sector and public-private partnerships, which it predicts will help fund, construct, operate and manage transit projects. Investment funds sponsored by global investment banks, private-equity firms and institutional money managers are becoming a rapidly expanding source of capital for everything from toll roads to bridges to tunnels, especially in Europe and the United Kingdom, the report says.

"We have a lot to learn from other parts of the world," says Ms. Reiss, who is to present the study at an Urban Land Institute meeting in Chicago. The U.S. encourages automobile dependency, according to the report, while a number of other countries are pursuing transportation alternatives. The report says there were more than 750 cars per 1,000 people in the U.S. as of 2000, while the number was just over 500 cars per 1,000 in the U.K. No amount of investment will be adequate if driving continues to be the only practical transportation option in the U.S., the report says.

Meanwhile, Japan has 2,000 kilometers (1,240 miles) of high-speed rail and is building 300 additional kilometers by 2020, the study says. China is building more than 2,500 kilometers. The U.S. has only 300 kilometers of high-speed rail and none under construction. The cost for the U.S. to catch up: at least $250 billion over the next 20 years.

The study urges leaders and planners to reconsider the way U.S. cities are built, with hub-and-spoke systems to better handle mass transit. It also suggests infill housing and mixed-use development to reduce dependence on cars, especially in Sun Belt cities such as Houston, where the average commuter already drives 39 miles a day.

Some states are taking action. California, for example, passed a $37 billion state public-works bond measure last year, earmarking $20 billion for transport, $10 billion for school construction, $4 billion for levees and $3 billion for affordable housing built near mass transit. As a result, though, about 6% of the state's general-fund tax revenues will be needed to pay debt service, a relatively high level.

Not surprisingly, the greatest action is occurring in emerging economies. Annually, China spends 9% of its gross domestic product on infrastructure, while India spends 3.5%, the report says. While the U.S. doesn't face such massive infrastructure buildup, it still needs to spend more on maintenance. It spends just .93% of its GDP, or $112.9 billion, according to the study.

22 comments:

Justin said...

Hmmm... looks like maybe they included fares?

I think it's good to distinguish between calculating how much money it will take to maintain existing infrastructure, and asking whether we have the right amount of infrastructure in the first place. It seems like this report does a little bit of both, but "it will take $billions" and "otherwise we'll fall behind" are separate (but perhaps equally worthy!) arguments.

There was a lively academic debate in the 90s about the latter, i.e. the link between public capital infrastructure and economic productivity... a (dated) review is here and a British report here. Some light reading? :)

Moderator said...

Thanks Justin. Care to summarize those studies for readers who may not have time to make it through the reports you cite.

Anonymous said...

This is strting to get interesting.

1) No doubt that most everyone agrees that the saga of transit in NE illinois will be resolved only with a substantial investment.

2) There is much discourse yet however on who has yet to pony up for those investments.

3) But most troubling..notwithstanding Rep. Hamos' galiant efforts, her backing band from the RTA..made up mostly of monochromatic syncophants has failed to provide a sustainable back-beat. As Springfield yields to the Hony Tonk that menaces just below the surface, Julie Hamos will have to belt out her version of "Shake Your Money Maker". A performance which may turn out to be very politically costly...indeed.

Moderator said...

Anonymous--

My guess is that Rep. Hamos agreed to take on the "reform" of the RTA at the governance level but was not willing to take a leading role in pushing for increased funding for transit. Given her suburban constituency, probably the most she can do on the funding side is to provide a menu of options and hope the Governor and the legislative leaders come through.

Have you been downstate recently? The condition of the small towns along I-55 is sobering, and they are probably doing better than those communities farther off the interstate. Springfield itself is a poor excuse of a city. It is hard to make the case for taking money from downstate to fund an expansion of the public transit system (e.g., STAR Line) in the relatively wealthy northeastern Illinois region.

I know there are good arguments for why a good public transit system in northeastern Illinois will benefit the entire state, but that trickle down theory is a tough sell to downstaters, especially when they are coping with pretty steep electric rate increases.

Anonymous said...

Amen Brother Moderator/ess

DB said...

In response to the moderator, do we really need the state to provide long-term funding given the way funding in Illinois works? We really should be talking about increasing the regional tax in northeastern Illinois. It's time for the collar counties to get more deeply into the transit game -- a one percent regional sales tax for all counties, not just Cook -- and maybe it's also time for the city of Chicago to get more involved too; how about requiring that the proceeds from the upcoming Midway lease go into transit infrastructure?

Anonymous said...

Why tax people more? Why them. How about getting the land barons--the real beneficiaries to ante up? Their not contributing is a fatal flaw-- a perennially fatal flaw. Get it fixed or stop "advocating" falsehoods.

Moderator said...

db--

I agree that asking the entire State to provide general operating funding for the public transit agencies in this region is a tough sell. (Of course, State funds are used to provide significant operating funding for Downstate transit agencies, but let's not be snippy!)

It seems to me that State funding for transit is very appropriate in two areas: (1) capital funding and (2) subsidizing the extra costs associated with providing public transit service to particularly vulnerable populations such as the disabled and students.

I've suggested in earlier posts using a transit funding referendum to engage the region in a discussion of what sort of transportation system we want follwed by a decision on what sort of system we are willing to pay for. Many areas (e.g., Denver) have had success in securing major increases in transit funding in this fashion.

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