Infrastructure

In an August 1859, speech on “the issues of the day” in Council Bluff, Iowa, private citizen Abraham Lincoln discussed the need for a transcontinental railroad. Three years later, in July 1862, President Lincoln signed the Pacific Railroad Enabling Act into law, with the hope that the building of railroads would help not only with the war effort and unify the country, but also to facilitate the westward migration of immigrants and commerce.

The specifics of the Pacific Railroad Enabling Act might today be called a “public-private partnership.” In it, the government of the United States provided cash subsidies to the private companies building the railroad. In addition, the government gave the companies grants to federally-owned land with 400 foot right-of-ways, plus ten square miles of land (10 sections) adjacent to the track for each mile built. The land was given in a “checkerboard” fashion in order to leave land available for development by others who might want to buy from the government. The private companies, in turn, used the land they were given to issue bonds to raise additional private funds for railroad construction.

Anyone who has recently driven from Council Bluffs through Lincoln’s Illinois to Indiana knows that our present method of authorizing, paying for and building massive infrastructure projects in the United States is broken and needs to be fixed. It’s not just Interstate 80; the evidence is all around us. From the I-35 bridge that collapsed in Minnesota, to a nation-wide 1950s-era air traffic control system, to overloaded electricity grids in California, to subway systems in the Northeast where there are continuous public safety concerns, our country is literally falling apart.

In response to the financial downturn of the past two years, China has not resorted to fiscal stimulus gimmicks that merely push money out to states so that state officials can avoid making tough choices, they have chosen to make significant infrastructure improvements that will enhance their competitiveness in the world market. One example of Chinese foresight is that they are building a network of high-speed passenger and freight railroads to better link production centers, markets and ports. By high-speed, we’re talking about trains that will travel in excess of 200 miles per hour.

This is smart investment and a component of what we in the United States will need to do more of to remain competitive in light of rising China, India and Brazil. At the national level, we need to do away with business-as-usual and authorize infrastructure projects that meet the criteria of making us safer, more resilient, more competitive and future-oriented.

National goals need to be set for projects which are really needed and which serve strategic national interests. These should not be set by Congress but by a public-private commission, of which the 9-11 Commission is an example. The 9-11 Commission’s recommendations were presented to Congress and voted on apart from the usual Congressional committee process.

This will mean doing away with outdated laws that constrict the building of significant national infrastructure. For example, states can presently veto the building of electric transmission lines if they cross from a neighboring state. This serves narrow parochial interests and is absurd when it comes to the goal of providing power to a nation. It burns time, energy and money – ultimately costs consumers more money while providing less power.

Positive change will also mean more transparency and accountability when it comes to funding. In 1981, there were ten Congressional earmarks in the surface transportation bill. In the 2005 authorization there were more than 6,000 Congressional earmarks. We need to get back to a system where these sorts of funding decisions are made on the basis of merit rather than political considerations. All levels of government, federal, state and local, need to take responsibility to ensure that taxpayer dollars are being spent wisely, accountably and transparently. Absent this, political fiefdoms, rather than needed infrastructure, will be built.

Coupled with increased transparency and accountability, we should cut red tape and encourage innovation, flexibility and incentives to get the job done. As an example, a 1994 earthquake in Northridge, CA, demolished the overpass bridges on Interstate 10, one of the most heavily used freeways in the nation. One estimate put the cost of unrealized productivity, gasoline consumption from alternative routes and delays in shipping to be at least $1 million each day. Governor Wilson was told that the repair of the bridges would take two years and two months (26 months) due to legal public hearing requirements.

Fortunately, the California code confers emergency powers to the governor, including the authority to suspend burdensome regulations for the duration of a declared emergency. Governor Wilson promptly suspended the public hearing requirement and cut red tape. He also added a bonus/penalty provision to the bridge reconstruction bid process. For each day in advance of the agreed upon completion date, the winning bidder would receive a bonus of $200,000 (substantially less than the $1 million estimated economic cost suffered for each day I-10 was closed); and for each day that the contractor was late, the contractor would incur a penalty of $200,000. The winning bidder made almost as much on the bonus as on the bid; and I-10 was restored to public use not in two years and two months but in two months and two days. The result was not only a completed project and improved traffic flow, but a reduction in time of approximately 85% from what was initially estimated and an economic savings of roughly $60 million.

Finally, we need to revisit the way in which we finance infrastructure projects. Presently, we do this by way of yearly appropriation, which is an incredibly inefficient way to fund major projects, like roads, ports, dams, airports, etc. A better way is illustrated by the process we use to fund major military platforms. In this instance, we use a single appropriation to fund the entire cost of a multi-year project like an aircraft carrier. In this way, the contractor knows that the entire amount is available and work will not have to start and stop due to the vagaries of the legislative process. In short, we need capital budgets for infrastructure projects rather than the piecemeal funding process presently used by governments.

Public-private partnerships also are an option, with government working hand-in-hand with private industry to develop, build or manage infrastructure projects. This model is increasingly being used in the Northeast. Within the past week, Connecticut reached a 30-year agreement with a private consortium to build, manage, repair and maintain the state’s rest areas. It is a win-win agreement.

Do nothing, and we can wait and watch while our national infrastructure falls around our ears. We need to find the political will to change. Using the four broad criteria outlined above, we will move away from the business-as-usual, overly political process we now have, and get back to strategic infrastructure investments of the kind that Lincoln used to help our country emerge as a world power.