Future Infrastructure budget cuts are inevitable – We must locate other means of investment to rebuild and innovate

CBA Good

Squo = No CBA

Status quo infrastructure investment fails to use CBA

Yes, the good thing about doing this work on infrastructure is that this isn’t just something that we’ve cooked up, you know, here at Brookings. We’ve been working with this informal network of scholars and practitioners all across the country. And the reports we released today, led by Emilia Istrate of our shop, kind of highlights -- I think there’s three big issues that folks, I think, coalesce around. We may disagree with the answers, but the problems, I think, are generally agreed about.

One is that the federal government does have a flawed kind of selection process. We don’t really use things that many folks in the room have called for -- benefit-cost analyses that have a mix of quantitative and qualitative kind of pieces to them. We just don’t do that when it comes to how we plan out our infrastructure. We heard this from both the speakers here earlier today.

There are legal requirements. There is an Executive Order from 1994 that requires that this be done, not just for things that the federal government owns, but also for infrastructure in which the federal government invests, so, like transportation. So things they don’t actually own, but do invest. But this is -- the implementation is not so great. It kind of varies across the country. So the flawed selection process is certainly, I think, a big one.

And there is this bias against maintenance. And, again, the Congressman talked about this earlier. We see mundane reminders of this, and we see kind of tragic reminders of this. But the way the system is set up, we don’t really prioritize the maintenance of what we have on the ground. We have incentives, we have formulas that are designed to build more -- the more stuff you have, the more money you get. But we don’t do a good job at fixing the stuff we already have and taking care of the things that are on the ground.

So those are really about implementation, that the federal government sets up the rules, and the implementation is where we have some problems.

But the problem, I think, on the federal level is this issue of long-term planning. And I think a lot of folks are starting to kind of galvanize around that particular problem--that we don’t, because we don’t have this far-reaching vision for infrastructure, and we’re kind of lurching from appropriations to appropriations, even when we do have multi-year authorizations -- they’ve got some problems which we can get into at some point -- but that there’s an inability for the federal government to think long term has really hampered us, from a competitive standpoint, nationally. We don’t make these investments that really do matter to the national government. So what we talk about in the report, we try to hit on some things that have been talked about. There’s a lot of discussion -- for 50 years, I guess, now 60 years -- about this issue of a national capital budget. We think that that’s the right idea. It makes sense. In real simplistic terms, it’s separating capital from the other parts of the budget.

But it probably doesn’t get to those things that we’ve talked about that are problems. It really doesn’t get you better maintenance, better project selection. And it’s really a very, very small part of the overall federal budget. Just about 2 percent of federal spending goes for infrastructure.

So, again, maybe the right idea, but it’s a real heavy lift, and probably not the right thing to get to what we want.

But this issue of a national infrastructure bank does kind of get that. It is kind of like the national- capital-budget-light, in some ways. It doesn’t solve all of our problems, but it does get to this issue of targeting federal resources to projects that really do matter to the national government. We don’t have this mechanism now. We have the states, the metros and locals in charge, but no ability to make investments in these things that really matter to the national government.

CBA is key to real econ growth and equality

David Lewis, HDR, May 17 2010 “Employment, Productivity, and Real Estate Value in Benefit/Cost Analysis” http://tti.tamu.edu/group/tec/files/2011/09/benefit-cost10-proceedings.pdf NCHO

The effects of transportation investments on labor markets can be examined in four different ways – short-term jobs due to project construction, long-term jobs due to project operations and maintenance, productivity benefits from business reorganization, and other productivity effects due to agglomeration and diversion to more productive modes. Productivity growth in the economy is a principal means of generating real growth in incomes. It is one thing to grow jobs, but it is another thing to grow real incomes and the standard of living. The source of real standard of living improvements in our economy is productivity growth. Examining how jobs manifest themselves in productivity growth is thus important.

CBA is good; spills over to the broader economy

David Lewis, HDR, May 17 2010 “Employment, Productivity, and Real Estate Value in Benefit/Cost Analysis” http://tti.tamu.edu/group/tec/files/2011/09/benefit-cost10-proceedings.pdf NCHO

Productivity benefits from business reorganization represent the third way to examine the possible effects of transportation investments on labor markets. Firms can take advantage of improved transportation services by reorganizing logistics. More reliable transportation, especially more reliable networks, permit just-in-time delivery, thus reducing inventories. Firms may substitute transportation for warehousing and inventory. Shippers can serve a larger market area with existing facilities at lower costs. Lower transportation costs allow reduced prices and increased output and employment. The benefits of improved freight transportation can have cascading benefits. First-order benefits focus on cost reductions on current freight miles, reduced transit times, and increased reliability. Second-order benefits result from firms improving logistics and serving larger markets, with increases in output and freight miles. Third-order benefits focus on the development and production of improved products and new products.

Public Participation

Multiple checks guarantee public involvement in CBA

Anastasia Christman AND Christine Riordan; National Employment Law Project; 2011

“State Infrastructure Banks: Old Idea Yields New Opportunities for Job Creation” http://www.nelp .org/page/-/Job_Creation/State_Infrastructure_Banks.pdf?nocdn=1 NCHO

As of 2002, two-thirds of SIBs had a board or advisory committee to help guide the selection process and provide some oversight. In most cases, personnel from the state department of transportation sit on these boards, but in some cases, governors or legislators appoint members to the board as well. Depending on the structure of the decision-making body, members of the general public may or may not have a direct ability to influence the projects their SIB prioritizes. In Arizona, for example, half-a-dozen advisory board members are members of the general public appointed by various government bodies, and the meetings of the board are explicitly required to be open to the public. Conversely, in South Carolina, the seven-member board includes four members appointed by the legislature, including two lawmakers. With little staff to advise the board, advocates allege this makes the SIB effectively an extension of the political process. In Maine, a December 2009 law created a coalition of stakeholders to explore transportation issues, including whether the state’s SIB should be considered to fund regional highway improvements. While the coalition itself specified the groups to be included, the process includes a “Sounding Board” which is open to “any interested party” to give feedback on findings and recommendations at “key junctures during the study.” Community advocates may want to explore the possibility of amending their state’s SIB legislation to provide for adequate public participation in the allocation of these resources. Advocates should also be aware that SAFETEA-LU itself includes provisions that call for a planning process that protects and enhances the environment, promotes energy conservation, improves the quality of life, and promotes consistency between state and local economic development plans. Additionally, it requires that metropolitan planning organizations (MPOs) develop a plan to ensure that all interested parties “have reasonable opportunities to comment on the contents of the transportation plan.” All urbanized areas with a population of more than 50,000 are required to have an MPO, one of the core functions of which is to engage the general public and other affected constituencies in developing an overall transportation plan. Furthermore, federal law states that funds allocated to provide assistance to a project in an urbanized area of the state (with more than 200,000) can be used “only if the metropolitan planning organization designed for such area concurs, in writing, with the provision of such assistance.” Thus, at least in urbanized areas, community advocates may be able to participate in developing plans through the MPO and thus ensure that SIB funds are only used to advance projects that conform to those plans.

Environment

CBA solves the environment, EIB proves

Rosa DeLauro; Congresswoman; 2009 “What could a U.S. National Infrastructure Bank provide?”

http://www.uli.org/sitecore/content/ULI2Home/ResearchAndPublications/PolicyPracticePriorityAreas/Infrastructure/Infrastructure%20Bank.aspx NCHO

The bank favors projects which will take pressure off constricted road systems and limit greenhouse gases—passenger and freight railways, inland waterways, maritime projects, urban transit, and intermodal hubs. Road projects can get support if they have “high economic value” for reducing severe congestion and link into other transport modes. EIB also focuses on water supply and sewage treatment, championing EU goals of ensuring “good status” water quality by 2015 in rivers and along coasts. The bank also promotes and supports a recent EU initiative to encourage city living and discourage suburbanization by helping create vibrant infill neighborhoods out of former industrial sites and redevelopment areas under public ownership.

CBA is key to solving congestion, excess spending, and maintenance

Barry Bosworth and Sveta Milusheva; The Brookings Institution; 2011 “Innovations in U.S. Infrastructure Financing: An Evaluation” http://www.brookings.edu/~/media/research/files/papers/2011/10/20%20infrastructure%20financing%20bosworth%20milusheva/1020_infrastructure_financing_bosworth_milusheva.pdf NCHO
On balance, there is significant evidence of inadequate levels of infrastructure in the United States, but the studies have also demonstrated that much of the problem lies with the process by which the United States makes decisions on funding and system management: its failures to use cost-benefit analysis to assign funds to those projects with the highest returns, a bias against funding of maintenance for existing systems, a political process that spreads the expenditures across jurisdictions regardless of needs, and an unwillingness to charge users in line with the benefits that they receive (Winston, 2010). The condition of the transportation system has deteriorated somewhat, but the most costly aspects are linked with increased congestion; and repeated experience has shown that those problems cannot be resolved by spending more money. Changes should be made in the management of the systems–specifically in the setting of prices 6 for use of the infrastructure and the allocation of investment funds–that would increase the benefits of the current system with little added overall spending. In addition, despite their professed support for improvements in the infrastructure, American voters and their representatives stand out for their unwillingness to pay and the constant efforts to shift the costs to others. Given these evident inefficiencies, it is difficult to favor large increases without reforms to the funding process.

Equality/Favor

CBA solves equality and favoritism

Mallett et al. 11

William J. Mallett Specialist in Transportation Policy Steven Maguire Specialist in Public Finance Kevin R. Kosar Analyst in American National Government; Congressional Research Service; December 14, 2011 “National Infrastructure Bank: Overview and Current Legislation” http://www.fas .org NCHO/sgp/crs/misc/R42115 .pdf NCHO

A frequent criticism of current public infrastructure project selection is that it is often based on factors such as geographic equity and political favoritism instead of the demonstrable merits of the projects themselves. In many cases, funding goes to projects that are presumed to be the most important, without a rigorous study of the costs and benefits. Proponents of an infrastructure bank assert that it would select projects based on economic analyses of all costs and benefits. Furthermore, a consistent comparative analysis across all infrastructure sectors could yield an unbiased list of the best projects.

Ruralism

CBA reform solves rural equality

Mallett et al. 11 William J. Mallett Specialist in Transportation Policy Steven Maguire Specialist in Public Finance Kevin R. Kosar Analyst in American National Government; Congressional Research Service; December 14, 2011 “National Infrastructure Bank: Overview and Current Legislation” http://www.fas.org/sgp/crs/misc/R42115.pdf NCHO

Third, financing projects through an infrastructure bank may serve to exclude small urban and rural areas because large, expensive projects tend to be located in major urban centers. Because of this, an infrastructure bank might be set up to have different rules for supporting projects in rural areas, and possibly also to require a certain amount of funding directed to projects in rural areas. For example, S. 652 proposes a threshold of $25 million for projects in rural areas instead of $100 million in urban areas. Even so, the $25 million threshold could exclude many rural projects.

AT- CBA slows you down

CBA wont slow down investment

Polly Trottenberg 2010, the Assistant Secretary for Transportation Policy at the U.S. Department of Transportation, The Brookings Institution Obama’s Infrastructure Agenda: Understanding The Pillars Washington, D.C. Thursday, September 16, 2010, www.brookings.edu/events/2010/09/16-infrastructure

I think on the -- does doing benefit-cost analysis slow you down a lot? I hope not. I mean, I think it’s incumbent upon us to try and help come up with a standardized way to do it, and we feel pretty strongly that we want to help states and transit agencies do it without having to hire incredibly expensive consultants. You know, it’s better if it’s a simpler process that they can do and own themselves, because part of the point of it is so that they get a flavor as they’re investing not only federal dollars, but their own state dollars, and what are the best things to spend our money on? And, you know, there’s been a trend, this is particularly something that’s happened in the new start side of transit agencies hiring outside consultants for a lot of money to do the complicated things we were making them do, and I think no one thinks that that’s the best solution.

CBA is faster and more effective than the squo

J. Bradford DeLong; economist at UC Berkeley and a badass at the SDI; August 22, 2011“ECONOMIC STIMULUS--THROUGH FIXING THE HOUSING MARKET AND OTHER INITIATIVES” http://delong.typepad .com/sdj/2011/08/economic-stimulus-through-fixing-the-housing-market-and-other-initiatives.html NCHO
The economy needs help. And it needs help now…. But when it comes to putting people back to work right away, infrastructure programs, in particular, can be slow. The whole point of the infrastructure bank, for example, is to subject every proposal to rigorous cost-benefit analysis. That takes time. One way around this problem is to change some of the rules for public works – and, as Gary Burtless of Brookings explains, applying some lessons the federal government learned after the 1994 Northridge earthquake in Southern California:¶ The feds learned a bitter lesson from San Francisco’s very slow spending of federal aid dollars after the World Series earthquake a few years earlier. Wanting to avoid a repetition of that fiasco, the federal gov’t told CA and L.A. that the U.S. earthquake relief dollars had to be spent within a specified period. It worked. L.A. repaired its wrecked freeways much faster than the Bay area fixed its wrecked highways and bridges.

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