The infrastructure engine

October 26, 2008|By Mahlon Apgar IV and Stephen M. Sorett

The next president will have a unique opportunity to leave a powerful legacy by fixing the nation's infrastructure.

The perilous state of our transportation, power, water and other basic systems is well documented. Capital investment for transportation alone will require $220 billion annually for the next 30 years. Infrastructure, while basic to our lives and standard of living, has not previously risen to the level of war, jobs and health care in the political psyche. Fortunately, both major presidential candidates have referred to infrastructure as a key element of their economic recovery plans.

Today's financial crisis has opened the way for a commitment by the next administration to rebuild and extend infrastructure, using public and private resources at all levels of government. During the past few years, more than 30 investment funds have been established solely to fund infrastructure, with resources of about $200 billion. While some of these have been reduced by the downturn, the capital markets still view infrastructure as highly attractive because it provides steady returns from essential, tangible public assets.

Much of the responsibility for infrastructure resides at the state level, and more than 20 states permit private participation in projects. Governors, including Martin O'Malley, are pressing for action. Maryland, home to one of the first public-private partnerships for military housing at Fort Meade, will benefit from thousands of new jobs in the base realignment and closure process, and has set up a model structure for regional coordination of infrastructure projects to support this wave of growth. But state and county budgets cannot absorb their costs.

In contrast, the federal government has been slow to address the infrastructure crisis. The chief culprit is a process known as "budget scoring," which charges agencies for the full cost of a project in the year it is committed. The purpose is to provide full transparency in the budget process. Perversely, it deters agencies from making cost-saving, efficient choices because their annual budgets cannot absorb the one-time charge of large capital amounts, and policymakers cannot consider the full benefits of long-term financing in their decisions.

Infrastructure demand is sustained even when consumer markets are weak because people keep using water and roads. But the full costs and benefits of construction, operations and maintenance over projects' lives are fragmented in annual decision-making. Relaxing scoring rules, which could be done with a stroke of the president's pen, would make available billions of private dollars for public needs.

Our next president should launch a four-part "infrastructure initiative." A capital asset management plan would prioritize major publicly owned projects such as mass transit systems, housing, roads and bridges, and water and waste systems according to costs, benefits, impact and risk. A federal infrastructure bank would evaluate and help to finance projects of national and regional importance with public and private resources. A public-private partnership program would join private enterprise with public sponsors and assets to build and manage projects under long-term agreements. And an independent oversight board, with full transparency, would track projects' performance.

This strategy should touch every village, county and state - and every American. It should embrace not only roads and windmills that sustain us and telecommunications grids that connect us but also the simple amenities such as parks and streetscapes that inspire us, especially in difficult times.

Infrastructure can captivate the public's interest. Franklin Roosevelt's Works Progress Administration created thousands of jobs and civil works we still admire. Dwight Eisenhower's interstate highway system opened up the nation to generations of tourists and businesspeople.

The infrastructure initiative may take two presidential terms or more to execute. But it should rank with resolving the Iraq war as the next president's legacy and would stamp his lasting imprint on the homeland. Swiftly started and adroitly managed, infrastructure revitalization offers a path out of panic, into recovery, and toward sustainable growth.

Mahlon Apgar IV of Baltimore is a senior scholar at the Woodrow Wilson International Center for Scholars and convener of the Forum on Privatization and Partnerships. Stephen M. Sorett of Bethesda, a partner in McKenna, Long and Aldridge LLP, co-chairs the American Bar Association's Committee on Privatization, Outsourcing and Financing Transactions.

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