MuniLand

The New York State Comptroller, Tom DeNapoli, issued a new report this month that discusses public private partnerships (P3s) and makes recommendations for municipal entities that are considering P3s for infrastructure projects. The report seems to be directed at the New York State Assembly, which had legislation that would have authorized P3s in the state without any limit on size or requirement for oversight. From the report:

Since that time, [New York] has authorized a number of agencies and public authorities to use a simple form of public-private partnership known as design-build contracting. The Thruway Authority’s procurement of the new Tappan Zee Bridge is being undertaken using design-build methods, with the expectation that this approach will streamline the project, shift some financial risk to private contractors rather than the Thruway and its users, and result in savings for the Authority.

Policy makers in New York are now considering whether to authorize more sophisticated types of P3s that depend on private financial investments. The State Fiscal Year (SFY) 2013-14 Executive Budget included a proposal for “design-build finance” P3s that would for the first time have given private firms the authority to finance public infrastructure projects.

This provision, which was not contained in the Enacted Budget, would have permitted any State agency, public authority, commission, council, or other State entity to turn to private investors for the financing of public infrastructure projects. These P3 agreements would have been authorized throughout the State, without limits on the size or cost of the project and with no requirement for independent oversight.

States and counties have often had to backstop failed P3s, and there are many other instances where cities have not collected adequate revenue for the assets they had given up. DiNapoli suggests getting ahead of the issue by requiring independent financial reviews and other measures before any project bidding is initiated or finalized. The report also laid out the many variations of P3s:

Washington state DOT spox says shutdown “is not going to be years, but it could be weeks.” Bridge obsolete, but not structurally deficient.

— danvock (@danvock) May 24, 2013

This week a semi truck plowed into the I-5 bridge crossing the Skagit River in the State of Washington, causing part of the bridge to collapse. The incident echoes the failure of the Minneapolis bridge in 2007. These are serious but rare occurrences in the U.S. Even so, the nation’s infrastructure needs more attention.

Here is the estimate of necessary infrastructure spending for the next seven years by the American Society of Civil Engineers:

New York’s mayor Michael Bloomberg has a reputation as a data junkie who uses statistics to manage the city more efficiently. I think I found his doppelganger in Michigan’s governor Rick Snyder. Fitch recently bumped Michigan’s rating to AA from AA-, where it had been since 2007. Bloomberg and Snyder may be national models for the effective use of data at the local, state and federal levels.

I learned about Snyder’s efforts while watching a Council of State Government’s webinar about the American Society of Civil Engineer’s 2013 report on the condition of America’s infrastructure. The report has been panned by many, including Reuters’ Jack Shafer, who says that the proposed spending is just an enormous meal ticket for the nation’s civil engineers and construction firms. The Director of Michigan’s Department of Transportation, Kirk Steudle, used two arguments to rebut Shafer:

1) Most civil engineers are public employees who don’t benefit from an increase in infrastructure spending. In fact, they would be paid the same if they managed three or six projects.

The need for more infrastructure must be brought back to center stage. Creating middle-class jobs “must be the North Star that guides our efforts,” President Obama said in his State of the Union address on Tuesday. More improved bridges, tunnels, ports and other shared infrastructure would be a great way to boost the economy, create jobs and improve the hard assets that support business and public activities.

Many infrastructure projects are taking place under the radar, guided and funded by state governments. These projects are usually designed and driven by states with some funding from the federal government as well as municipal bonds and toll or user fees. The bridge that carries I-75 and I-71 traffic over the Ohio River between Ohio and Kentucky is a perfect example of a joint project. This is a bridge in Senate Minority Leader Mitch McConnell and House Leader John Boehner’s districts that President Obama stood in front of last year to sell his $467 billion jobs bill. The bill was never approved by Congress. The bridge highlights the difference between the two parties on funding infrastructure. Bluegrass Politics blog covered the story:

Obama joked that it was “just coincidental” that he came to the bridge in the backyards of McConnell and Boehner.

Members of Congress approved spending $198 billion during fiscal years 2012 and 2013 on the war in Afghanistan, according to the Center for Strategic and International Studies. In contrast, in fiscal year 2012, Congress allocated only $37 billion to the Federal Highway Administration for transportation infrastructure. About $23 billion of this spending on highways, bridges and mass transit comes from the 18.4 cents of federal tax Americans pay on a gallon of gasoline. This tax – instituted in 1993 – has not been adjusted (even for inflation) since it was put in place. From McClatchy:

It’s been 20 years since Congress raised the gasoline tax. The 18.4-cents-a-gallon tax has lost a third of its buying power to inflation and rising construction costs.

The tax feeds the federal Highway Trust Fund, which long has paid for a portion of highway construction and repairs in all 50 states.

Governor John Kasich of Ohio and Governor Steve Beshear of Kentucky are forming a bi-state team to research funding options to replace the 50 year-old bridge that crosses the Ohio River and connects their states. The Brent Spence Bridge carries about double the volume it was designed for on Interstate 71. It is an example of valuable U.S. infrastructure in need of replacement. The big question is where the funds will come from. AP has the story:

The two governors were joined by U.S. Transportation Secretary Ray LaHood, and all three said that charging tolls would need to be a part of any financing plan.

“Uncle Sam is not coming in on a white horse to pay for all of this. Those days don’t exist anymore,” [Kentucky governor] Beshear said. “We need to find all kinds of sources.”

Estimates for the economic damage resulting from Superstorm Sandy are circulating from $15 to $50 billion in damage. No formal assessments have been completed yet, and it’s likely that these are “repair” estimates that reflect the cost of cleaning up and repairing infrastructure back to its former state. A repair bill is likely to be much lower than the cost of hardening and improving vital transport, energy and communication systems to withstand more storms like Sandy or worse. After Hurricane Katrina, architect Frederic Schwartz wrote:

The planning of cities in the face of disaster (natural and political) must reach beyond the band-aid of short-term recovery. Disaster offers a unique opportunity to rethink the planning and politics of our metro-regional areas…

I’m not advocating centralized economic planning, but instead the concept of having a clean slate to rethink a region’s needs and weaknesses. Much of New York’s infrastructure is over 50 years old and some parts of the subway system are over 100 years old. On top of these old and heavily worn systems have been laid new systems that support the regions modern economy.

The latest item atop Congress’s list of stuff to haggle over is the transportation bill, legislation the Washington Post calls the “best bet for passage of a major jobs bill this year.” The threat of the expiration of authority to spend money from the Highway Trust Fund at the end of the month is motivating House and Senate leaders to reach a compromise in the coming days. Although there are certainly investments to be made in our transportation infrastructure that would contribute to America’s economic competitiveness, it’s a shame that our energy infrastructure has received such scant attention from lawmakers.

The national electrical grid is as important for economic growth, if not more so, than the national highway system or the privately owned router system that supports the Internet. As part of the American Recovery and Reinvestment Act, the Department of Energy funded several demonstration programs for increasing electrical system integration and reducing peak loads on the electrical grid. These efforts are commonly known as the “smart grid,” and this is where Congress needs to turn its attention.

Fort Collins, Colorado was chosen for a public-private smart grid project supported with DOE funding. Called FortZED, the project integrates five public and private institutions into a web that shares excess electrical generation during peak load periods. Some facilities, like the University of Colorado campus, have enormous backup diesel generators that can be powered up to add electricity to the system during times of peak demand. A local brewery and city facility have large solar-cell arrays that can also feed electricity back into the system.

Infrastructure is an important contributor to full employment, and an efficient network of roads, mass transit and water systems is critical for economic vitality. In 2009, the American Society of Civil Engineers issued a report card showing that the U.S. needed to spend $2 trillion over a five-year period for its infrastructure to be upgraded to “good.” That’s about $1.4 trillion more than the U.S. spent on capital improvements to infrastructure over the five-year period from 2003 to 2007. Where could this new funding come from?

According to a 2010 Congressional Budget Office report, state and local governments accounted for about 60 percent of infrastructure spending and 90 percent of the cost of maintaining transportation and water infrastructure nationally. The federal government provided the remaining funds as well as most of the funding for the nation’s air traffic control system. The CBO breaks down how the money was spent:

Spending on highways at all levels of government accounted for 43 percent of expenditures for transportation and water infrastructure in 2007. Expenditures on water supply and wastewater treatment systems accounted for 28 percent of spending; aviation, mass transit and rail made up 23 percent; and the remaining categories of water transportation and water resources accounted for 5 percent.

Is the Ricketts family of Chicago bipolar? The patriarch, billionaire and Chicago Cubs owner Joe Ricketts, blasted onto the national stage yesterday, when the New York Times reported that his super PAC considered running an ad campaign entitled “The Defeat of Barack Hussein Obama: The Ricketts Plan to End His Spending for Good.” His super PAC, the Ending Spending Action Fund, also lobbies against excessive federal spending and special-interest earmarks.

Meanwhile Ricketts’s son Tom, the general chairman of the Cubs, has been lobbying Rahm Emanuel, the mayor of Chicago and President Obama’s former chief of staff, for $150 million in tax revenues to renovate Wrigley Field, the home of his family’s Major League Baseball team. The irony of Joe Ricketts blasting the president for special-interest spending while his son grovels for taxpayer support to renovate his baseball stadium is enormous. The Ricketts family needs to meet around their kitchen table and get this matter worked out, because it makes both the father and son look clueless.

Greg Hinz of Crain’s Chicago Business has the local scoop:

Did the Ricketts family just knee-cap its own plan to rebuild Wrigley Field with a healthy dose of Chicago taxpayer cash?