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.