Of all the remaining presidential candidates, Barack Obama is the only one who even budgets a number for stepped up infrastructure investment. He calls for a timid $60 billion infusion. The Feds, states and cities combined spent about $140 billion on infrastructure in 2007. But a national commission report released in January states the country really needs to spend $225 billion annually on transport related projects for roads, rails, ports and airports. That doesn't include dealing with the country's aging levees (remember Katrina), crumbling dams, and questionable power grid (Tuesday's Florida blackout). Back in 2005, the American Society of Civil Engineers calculated the country had to spend $1.6 trillion to refurbish its infrastructure in the five years leading to 2010. Any way you look at, the USA isn't spending enough and must find a way to finance, build, and pay for new and improved infrastructure or face greater congestion, more pollution and new tragedy. How soon we all conveniently forget Minneapolis.
Facing recession, higher unemployment rates, increasing gasoline prices, lower home values and rising pricetags for food and clothes, Americans balk at the idea of new user fees, toll hikes, and more taxes. But we continue to want to buy big cars to drive to our big new houses all the way at the suburban fringe if need be. Oh, and don't forget the flat screen TV we need to purchase for that new house.
So politicians avoid facing people with hard facts. Following the example of Chicago (Skyway tolls) and Indiana (turnpike tolls), some governors examine ways to sell toll concessions from existing jewel infrastructure assets (the New Jersey and Pennsylvania Turnpikes) in order to help balance state budgets and keep from raising taxes or cutting too many services. In the meantime, they try to put off all but absolutely necessary capital projects.
At least, some states try to figure out how to tap new billion dollar private infrastructure funds raised by various banks and investment managers to finance projects -- Florida, California, Virginia and Texas take the lead. JP Morgan, Macquarie, ING, Morgan Stanley, the Carlyle Group and Goldman Sachs among others all have funds, hunting for opportunities. But the U.S. lags far behind the U.K, Australia, Canada and other European countries in working out concession protocols and best practices to get deals done. Most of the infrastructure investment funds choose to focus on opportunities outside the U.S. instead of spinning their wheels here in often fruitless and costly negotiations with state officials.
But the big bugaboo remains finding new revenue sources to pay for needed improvements. Another federal commission looks at replacing the nation's meager gas tax (19 cents a gallon) with satellite/transponder user fee technologies which can charge drivers by the mile, adding surcharges on heavier vehicles which spew more harmful emissions and cause more road wear and tear. Can you imagine the hysteria when people start opening monthly vehicle mileage bills and realize that roads aren't "free " anymore?
If we don't get a grip soon and find a way to pay the way, breaking that old SUV axle in some pot hole may be the least of our worries.
© Miller Ryan LLC 2008
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
