The Perfect Storm: Public Infrastructure Expert Outlines Consequences of Aging Network

The Los Angeles Division of the League of California Cities was pleased recently to welcome guest speaker Richard Little, the Director of the Keston Institute for Public Finance and Infrastructure Policy at USC. Little informed attendees that when it comes to infrastructure finance, reinvestment is badly needed and the nation is on the verge of a perfect storm in funding civil infrastructure.

The Keston Institute actively addresses the economic policy, financial, demographic and other dimensions of public infrastructure development in California, in addition to undertaking research, outreach, and education activities to further understanding and awareness of present infrastructure challenges. The word “challenges” is fitting to describe the work and financing that the structures we all rely upon greatly need; in fact; Little argued that if the country is to restore infrastructure back to decent levels, the costs are in the trillions.

When it comes to actually paying for infrastructure, Little pointed out that we need to think about how we actually view it’s role; to be specific, is it a public good, a market commodity, or something in between? If taxes are chosen as the means to fund infrastructure, we can conclude it is seen as a public good, and if fees are used for funding, then it is seen as a commodity. In California, Little believes that ongoing projects relying on bond funds won’t be able to continue because current patterns are unsustainable barring tax increases or spending cuts, as he noted that we can’t bond our way out of our predicament.

While voters may understand that without tax increases services will be limited, there are undoubtedly plenty of stakeholders to satisfy when it comes to infrastructure projects, such as environmental concerns, and it is no easy feat to deal with conflicting demands. In detailing where financing can come from, Little listed options such as taxes (general or targeted), user fees, non-enterprise revenue streams, revenue from asset monetization, and leveraging public money with private capital for a public/private partnership (PPP). Little also mentioned the ample capital in pension fund investments as a way to finance revenue-backed projects, among other financing methods.

Little pointed out that it’s important to realize that public/private partnerships are merely a delivery method and that while entering into such an agreement can be advantageous, it’s vital to set clear goals and establish trust between entities. Also, transparency, fair competition, and appropriate value for the cost are among the concerns that PPPs raise. A lack of accountability and poor organizational culture can lead to great deficiencies in project management, resulting in inflated budgets if either public or private leadership is not held responsible.

Staying economically competitive depends on an efficient and functional infrastructure, but as it stands, our nation’s bridges, highways, and other systems are in steep decline—despite their maintenance being in our great interest. According to Little, the country’s avoidance of taxes and fees for infrastructure has created a lack of adequate revenue streams to renew our critical systems, and furthermore, how such revenues are created is not as important as just having revenues to begin with. However, the focus on having funds solely from a policy perspective does not seem to take into account the political capital required to raise such revenues, especially at a time of great fiscal hardship. Simply put, it’s easier said than done when anti-tax movements are increasingly vocal and voters don’t want to see their wallets get hit. It seems in the end that if paying to address our infrastructure problems is avoided, the nation will pay in other ways, namely greater economic decline, among the other consequences of an aging infrastructure network.