FederalDollars.com is proudly brought to you by Anser Advisory + Government Services Group (GSG) + Markon Solutions

When it comes to your Federal Dollars

Our mission is to: share information improve practices minimize waste maximize reach stretch impact

federaldollars.com logo_Chris.rev2
federaldollars.com

Here’s why more dollars alone wont fix the USA’s crumbling infra.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email
Share on print
PDF

President Joe Biden has proposed a plan to improve the United States infrastructure by funding transit projects, electric vehicles, manufacturing, broadband, water systems and much more.

 

The nation’s infrastructure has long been an important debate. The U.S. economy and its people rely on an immense network of infrastructure. Infrastructure projects are important to the U.S. economy because they strengthen communities, create jobs, and expand opportunity. Well-planned projects stimulate the economy’s ability to function and grow and can dramatically improve our quality of life. However, infrastructure investment will only spur economic growth if the projects are high-value and built in a cost-efficient manner. Poorly planned infrastructure projects can be unproductive, waste funds and resources, and damage the environment. A carefully considered program is just as important as funding.

"Infrastructure projects are important to the U.S. economy because they strengthen communities, create jobs, and expand opportunity."

One of the issues that needs to be addressed is the disconnect between federal and state infrastructure demands. An example of this is when President Obama signed the American Recovery and Reinvestment Act (“ARRA”) in 2009 intending to create new jobs and recover jobs lost in the recession of 2008. The ARRA consisted of $787 billion in spending, including $1.3 billion for Amtrak to make capital improvements to its system and $8 billion for intercity passenger rail projects including priority for the development of high-speed rail service. Thirty-Nine states submitted nearly 500 applications, requesting almost $75 billion worth of projects, far exceeding the $10.1 billion available (1). The Department of Transportation identified some of the recipients of the money in 2010, however three significant projects were then cancelled by some of the states that received the most funds: Ohio, Wisconsin, and Florida. The 2010 midterm elections brought new governors into office that did not support the projects and rejected the federal funding, reasoning that state taxpayers would have to make up for the excess of cost for projects that would unlikely be useful to travelers. The high-speed rail projects that did proceed such as the Central valley segment in California had scheduling issues and cost overruns due to lack of planning and will cost taxpayers much more than estimated. Many states did succeed in improving service on their existing rail lines by increasing capacity, speed and frequency and the ARRA had many other successful projects but nearly none of them were high speed rail. High speed rail is extremely expensive, and these projects did not have the sufficient funding or political support they needed to succeed. Another assessment is that the Federal Railroad Association (“FRA”) tried to do too much with too little by spreading the money thinly across the nation rather than focusing on the best possible projects (2).

 

The state and local governments own over 90 percent of the non-defense public infrastructure assets (3) yet the federal government administers extensive control over state, local, and private infrastructure through spending, regulations and taxes. The states can fund their own infrastructure through taxes and user charges, but the possibility of federal funding encourages state and local governments to postpone increasing infrastructure investment in the hope the projects will receive federal funds. Also, receiving “free” federal investments can cause states to be wasteful and have unrealistic expectations that federal funds can be spent on infrastructure without burdening state and local taxpayers (4).

 

When the federal government first became seriously involved with infrastructure investment in the 1950’s, the infrastructure needs were more clearly defined and provided a national benefit. The current infrastructure needs are much more diverse and are mostly local demands. Since most infrastructure is owned at the state and local level, the infrastructure requirements will be growingly defined by the local governments. Bidens infrastructure proposal is focused on fixing existing infrastructure and rehabilitation while most states have been spending money on expanding the road network rather than the backlog of rehabilitation projects. States are focused on new roads to connect growing communities and ease traffic which is conflicting with the priorities of Bidens proposal that want to fix existing highways and promote other means of transportation. There is a push to accommodate growth especially in areas seeing an influx of new residents which is exacerbated more recently from the covid pandemic that caused people to move away from larger cities and into suburbs and previously less populated regions. Existing infrastructure needs to be taken care of to remain in good condition and prevent costly deterioration and new roads should not be built if the local regions cannot afford to maintain them, however states should still not be restricted if that is what they need.

 

Historic issues with previous projects and misaligned priorities between the federal government and the local governments are causing hesitation for many to support Biden’s infrastructure plan. Many policymakers believe that the solution is not increased federal aid involvement but greater involvement of the private sector. Federal aid for infrastructure is mainly based on formulas and political factors, not marketplace demands. A lot of aid does not favor the fastest growing cities that need it the most. The future management of facilities is not considered with traditional government contracting because there is little incentive for contractors to build projects that minimize long term costs. Public-private partnerships (P3s) solve this because the company both builds and operates the new facilities. However, P3s have their own set of issues such as resources being devoted to a project because it benefits a certain interest group rather than benefiting the public. P3s are a popular mode of financing but funding still must be found for the projects and the public usually ends up paying costs through taxes or user fees.*

 

The American Planning Association (“APA”) discusses the principles needed to shape the infrastructure policy (5). A main point the APA states is that the nation’s infrastructure needs are as diverse as its communities and regions and it is essential that investment occur in a wide array of projects. An additional statement is that infrastructure projects should include and expand opportunities for private investment that benefits communities and regions economically, but it must genuinely advance the right projects and the public interest. Policy should ensure that projects without a steady or obvious revenue stream get support, full public transparency is provided, and new tools expand the pool for investment without shifting costs to local communities. An effective infrastructure plan has the opportunity and the obligation to support social equity goals and advance economic and social opportunity for all.

 

There are multiple modes of financing infrastructure projects and each includes its own set of issues as well as benefits. Regardless of the type of financing used, there should be mutual agreement between the parties to properly invest in the nation’s infrastructure. It is important for everyone to work as a team and have a well-planed infrastructure program to ensure successful projects that improve the nation’s economy while also benefiting communities and its people.

 

* Funding is how resources will be collected to pay for construction, operations and maintenance, and repairs. Financing generally concerns how to raise the large upfront costs needed to build the infrastructure.

[1] U.S. Department of Transportation “Lagging behind: The state of high speed rail in the U.S.”

[2] “What happened to High Speed Rail in America” by Thomas Hart, Jr HHRG-114-GO29-Wstate-HartT-20160714.pdf (house.gov)

[3] Center on Budget and Policy Priorities – “It’s Time for States to Invest in Infrastructure” https://www.cbpp.org/research/state-budget-and-tax/its-time-for-states-to-invest-in-infrastructure#_ftn9

[4] “Why is federal infrastructure policy so difficult?” by DJ Gribbin Why is federal infrastructure policy so difficult? (brookings.edu)

[5] Principles for New Federal Infrastructure Investment Policy (planning.org)