Transportation in Trouble

WASHINGTON - Without significant federal funding and private investments, the nation's crumbling transportation infrastructure will continue to deteriorate, both Pennsylvania Gov. Ed Rendell and a new report on infrastructure investments stated yesterday.

Speaking at the Economic Policy Institute's forum on "Investing in U.S. Infrastructure" here, Rendell pointed to the need for an increase of public-private partnerships and federal funding for transportation infrastructure, which he said would boost the economy by providing more jobs.

"We have waited so long that we can barely fix up what we have," Rendell said. "We need to do this now. I suggest the first place to look would be to the federal government."

State and local governments account for 75% of infrastructure spending, he said. In contrast, the federal government only contributes 2.5% of its nondefense spending toward funding infrastructure. The amount seems small in that $225 billion a year is needed for upkeep of national infrastructure, including schools, according to the National Surface Transportation Policy and Revenue Study Commission.

Rendell called the funding needs an "incredible challenge" for the country.

"Public investments in the nation's infrastructure, which lay the foundation for long-term growth, have been insufficient in recent years," the EPI said in a statement. "Visible catastrophic failures are evident in the breach of the levies in New Orleans, the collapse of a major bridge in Minneapolis, and power blackouts that flowed from the Midwest to New York City. In a time of economic weakness, public investments in the nation's infrastructure can provide short-term stimulus and build the foundation for long-term economic growth. Federal investments in infrastructure, including transportation, school buildings, and information networks, are required to address critical national needs and to create jobs and spur the economy."

Federal, state, and local governments have some options for coming up with that funding, said Rendell, who leads Building America's Future, a bipartisan coalition of public officials pushing for increased federal funding of the nation's infrastructure.

A nonpartisan infrastructure bank like the one proposed by Sens. Christopher Dodd, D-Conn.and Chuck Hagel, R-Neb.would be one remedy, he argued. The bank would be able to issue up to $60 billion of taxable tax-credit bonds to help states and their public authorities to finance the construction or upgrading of mass transit networks, housing properties, roads, bridges, or drinking and wastewater systems.

"If we want to have a nation that stagnates ... then we should keep to what we're doing," because the transportation systems in the country are flailing, Rendell warned.

"We have no high-speed rail. We should not be flying to cities that are less than 500 miles apart," he said. "I would love to build a high-speed rail from Philadelphia to Pittsburgh." Rendell said if light-rail projects are developed, regional rails would be next.

But these projects, Rendell noted, will need private investments as well. He pointed to the Chicago Skyway P3 project, which was leased for 99 years to a foreign consortium of Cintra Concesiones de Infraestructuras de Transporte SA and Macquarie Infrastructure Group for $1.8 billion. Rendell also touted the Indiana Toll Road, which took in $3.8 billion when the state last year closed on a 75-year lease agreement, as a successful P3 that lacks public support.

"P3s are not popular, but I think there is a place for them," Rendell said. He said looking to the private sector will still make state and local governments money. The governor is currently exploring a long-term lease deal with a private group for the Pennsylvania Turnpike. He said he expects to announce bidders soon.

Meanwhile, the Urban Land Institute and Ernst & Young released a report yesterday that said the country's transportation infrastructure investments lag far behind countries across the globe. The report mirrored Rendell's comments on P3s and federal investment dollars, stating that federal money and public trust in P3s are severely needed for infrastructure projects to progress.

According to the report, vehicle miles traveled in the U.S. have increased 95% since 1980, but road capacity has increased only 3%. At the same time, traffic congestion has increased dramatically. Washington, D.C., for example, experienced an increase in annual delays from 10 hours to 60 hours between 1982 and 2005.

The report also warned that about 24% of the country's roads are in poor to mediocre condition, and that more than 25% of bridges are "structurally deficient" or "functionally obsolete."

ULI officials suggest consolidating funding programs under highway trust fund legislation, and to "rethink" regional metropolitan planning organizations. They also support the idea of a national infrastructure bank.

"We need to have a whole national discussion" about the lack of transportation infrastructure funding, ULI president Richard Rosen said in a statement. "If we continue to minimize transportation infrastructure as a federal priority, we are setting our urban areas up for decline, rather than prosperity. This country simply cannot afford to keep treating infrastructure as an afterthought."

Maureen McAvey, a ULI executive vice president, agreed, saying that the yearly shortfall for funding transportation needs is around $170 billion - less than the figure Rendell gave, but still substantial.

McAvey noted that with an expected 90 million more people in the country in the next 35 years, the issue needs to be addressed now. "We need substantial additional funding," she said, adding that it needs to come from numerous sources, such as user fees, gas taxes, more P3s, and federal funds.

The report said that land use and transportation planning must be coordinated at state and regional levels and transit authorities need to operate with a common purpose. Then regional planning needs to align with national priorities.

Also, Ernst & Young'sTransaction Advisory Servicesalso announced that it has named Anne Rabin to lead its U.S. infrastructure services, which provides advisory services for projects in water desalination, roads, stadiums, waste and energy facilities, and privately developed government buildings, according to a release. Rabin previously was managing director of Financial Guaranty Insurance Co., where she led that firm's entry into the P3s and project finance markets.


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