infrastructure and water conundrums. As nations such as China and Australia are outstripping the US in terms of water waste management and infrastructure funding, there needs to be a social, financial and political reformation to move forward quickly to make up lost ground and, eventually, keep pace with the rest of the world and our country's structural demands. GlobeSt.com caught up with Ernst & Young's Global Real Estate Leader Howard Roth at ULI's Spring Session 2010 to discuss what the US has to do to pull itself back from the brink.
GlobeSt.com: So the US has fallen behind the rest of the world in infrastructure. What should we be doing? What can we be doing?
Howard Roth: Well, there's a number of things laid out in the report, but I think there are two main things. The establishment of a National Infrastructure bank. Right now everything is being funded state by state. We need a mechanism to set policy, prioritize projects and find ways to attract private capital. There are public-private partnerships, but very little. There are mechanisms in Europe which aligns capital, services government investors, policy, but that's just not the case in the US.
The other piece is conservation and monitoring and paying for the cost of infrastructure. The US is [not accustomed] to paying for infrastructure, the cost has been [generally] free. [The US has to start considering] toll roads, monitoring usage, etc., for fairly valued payment. Infrastructure costs more than Americans have ever paid, but that's not the way everywhere else. The US has to come to grips with paying fees and costs.
[Right now] we have deficient roadways, levees, bridges, you name it, and there is a huge investment needed for infrastructure and there has been a lack of private capital to invest in infrastructure.
GlobeSt.com: So, there should be a public infrastructure for prioritizing projects, but privatized funding.
Roth: Australia and Europe has this defined model. There has been some push and an impetus for that here, but it hasn't taken off, partly because of the recession and debt capital. In certain cases there has been social push back [on the idea of privately-owned infrastructure]. [Most Americans] don't want their bridge to be owned by a private equity fund. There are psychological hurdles the US needs to get over.
GlobeSt.com: There is some trepidation with sustainable retrofits because there aren't a lot of solid numbers regarding savings. How do you convince owners and landlords that they need to be making these changes?
Roth: There's a real paradigm of green and how do you commercialize it. I think that about 80% of green means energy savings, so that makes the investment commercially viable. Efficient lights, windows that keep in heat, etc., you really can evaluate and talk about savings versus existing infrastructure and I'm seeing some of that now. I think of the Empire State building and clearly they thought it was worth it [to retrofit] and that cost/benefit analysis applies. You have to ask yourself, does the value of the building go up?
GlobeSt.com: How do you clean up the water? Subsidies to farmers for more natural farming practices? Smaller communities?
Roth: It's a combination of things. The measures laid out in the report: storm water reusage, gray water, desalination, etc. Australia already has some tried and true mechanisms, we can learn from or look to as examples. It's a different mindset.
GlobeSt.com: Right, but in a country that has a seeming fetish for red tape, how do you get these changes enacted?
Roth: It's a challenge. Infrastructure is no different than anything else in our political process today and unless it's absolutely essential, it becomes a stale mate. The National Infrastructure Bank would be a very good idea. It will bring a national focus, a method to prioritize projects and through the process of bringing a way to integrate the solutions for urban planning and commercial development. We're not integrating infrastructure needs across state lines, right now.
Holistically, that's how it comes about. I'm not sure the federal government is in a better position than the local and state governments, but the Infrastructure Bank can attract capital and do public-private partnerships and get them to the highest priority projects.
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