It’s more than just money: Five keys to fixing America’s infrastructure

With the new tax bill in place, the Trump administration is turning to infrastructure reform, and the House Problem Solvers Caucus has just released a report on infrastructure priorities.

From deteriorating subway systems in Washington and New York to structurally deficient bridges in Michigan, to at-risk dams in California, there is clearly a need to reinvest. An important and potentially divisive question is how to finance these vital projects, through taxpayer dollars or private investors? 

There is a push to make greater use of private funds to restore public infrastructure. This is timely, for there is a vast amount of private money around the world chasing the profits promised by infrastructure investments, from sovereign wealth funds (Saudi Arabia, most recently), private banks, and investment funds. These investors are smart, well informed, and persistent in seeking out financially profitable opportunities and avoiding risky or less rewarding investments. It is for this reason that not all public infrastructure needs will be met by private investors. For those that do meet private financing criteria, the payback and profits will still come from us as users, through taxes, tolls, and user fees.

{mosads}In addition to financing, private enterprises can be engaged to design, build, operate and maintain bridges, water treatment plants, commuter rail lines, and other public infrastructure elements. When private ventures are given the right profit-linked performance incentives, they can deliver quality infrastructure projects on time and on- or under-budget. The 23 mile University of Colorado A Line rail service to Denver International Airport is a good example.

As we remake American infrastructure, five key principles should guide the investment decisions to get maximum value while protecting the public interest.

First, we need to assure that each project produces benefits commensurate with its costs. This seems obvious but it is not always followed. This calls for us to be realistic in expectations and forecasts of both utilization-driven benefits and delivery costs to avoid getting stuck with under-performing facilities that would drag the economy down.

Rail transit investments in Honolulu, where cost estimates have nearly tripled as the project has proceeded, and Norfolk, Virginia where ridership on the new light rail line seems to be going down rather than up, are among projects whose benefits may not justify their costs. Grand plans for high-speed rail service to Chicago’s O’Hare Airport may come next on the list.

The importance of distinguishing between do-good and feel-good projects puts the spotlight on design and forecasting processes— and on rationality and honesty in public decision making. Sometimes it is useful to look at experiences in other places where similar projects have been deployed and to ask, “How well has this concept worked in similar settings? Why will it work here?” 

Second, we need to be smart buyers in the infrastructure market by attaching strong performance requirements to all projects no matter who pays the initial costs. This means insisting on designs that are durable, reliable, sustainable in their demands on future resources, and resilient in the face of natural assaults and man-made changes. To do this we can extract warrantees from private providers to assure long-term performance, a practice that is used in Europe, backed with insurance or performance bonds.

This leads to the third principle: don’t select the lowest bidder unless the bid includes the life cycle costs to build or buy, operate, and maintain the facility over the decades.

A cheap bridge that needs costly, ongoing maintenance or early replacement isn’t really cheap. Government has a long-established pattern of selecting the lowest bidder on a first-cost basis as a way to guard against corruption and gold-plating. But buying a pavement that needs resurfacing every ten years is very expensive, not just for labor and materials but also because of the inconvenience reconstruction brings to users.

Worse yet, once government buys a facility that “eats money,” it can be politically impossible to junk it and buy something better.

Fourth, public infrastructure should serve all of the public. Private investors will be drawn to investments that are the most financially productive — that can sell the most water at a strong market price, or where tolls provide ample funds for maintenance and profit. But those who can’t pay top prices may be forced to settle for poorer service, less service, or no service at all.

Public infrastructure projects, especially those that rely on private financing, must assure fair access at affordable costs. In some cases user fees will need to be supplemented with, or replaced by, broader public revenues sources to assure inclusive access.

Fifth and finally, all infrastructure projects must be part of a well-conceived plan. While infrastructure is built and restored one project or facility at a time — particularly when the job is turned over to a private entity— it is essential we plan the entire infrastructure system as an integrated whole. This requires making sure that components function effectively together at every point in their life cycles, delivering a livable, sustainable environment to the community. A city, large or small, is not just a single highway, transit network, or new recreation center; it is the entire collection of facilities and systems that work together to support the economy, the society, and the environment of that place. This demands systems thinking.

Whether a project is fully funded by tax dollars or financed up front with private funds, let’s think big and wisely about the restoration of the American infrastructure system. It’s more than just the money.

Joseph L. Schofer is a professor of civil and environmental engineering at Northwestern University. He is also the host of The Infrastructure Show, a podcast that explores many aspects of the nation’s infrastructure system and the threats it faces.