Engineers and public finance experts generally agree that Northeast infrastructure is rotting.
What to do about it and how to pay for it, though, is another question.
Events such as Hurricane Sandy 18 months ago, an especially harsh 2013-14 winter and last month's building explosion and collapse in New York City's East Harlem, killing eight people, have brought a infrastructure, a back-burner subject, to the forefront.
The think tank Center for an Urban Future says $47 billion is necessary over five years to pay for New York City's infrastructure - just for maintenance and repairs.
Deficient roads and bridges alone cost New York State motorists $20.3 billion annually, according to national transportation research group Trip. Extra costs in New York City and Newark, N.J., combined total an extra $2,282 per driver, Trip said.
"I'm 51 and I've lived in the New York City area my whole life and I've never seen anything new. No new bridges. They're working with the same system in place for 55 years," said Jonathan Peters, a finance professor at the College of Staten Island and a research fellow at the University Transportation Research Center at City College of New York.
"There was a time when we were 40 to 50 years ahead of the curve. Now we're 30 years behind the curve. Unfortunately, we've been playing some kind of marginal game where we're fixing things bit by bit. The lead blanket we're throwing on repairs is getting heavier and heavier."
The New York City Independent Budget Office said that despite $5 billion of capital spending to fix city-managed bridges from 2000 to 2012, more is needed simply for basic maintenance.
The problem is national. The American Society of Civil Engineers last year rated overall infrastructure D-plus, and called for $3.6 trillion in investment by 2020.
Identifying the problem is one thing. Paying to fix it is another.
Outside-the-box remedies include increasing public-private partnerships, although P3 supporters suffered a setback in New York State this week when the final Albany budget failed to reauthorize design-build procurement beyond a three-year pilot set to expire in December. Legislation reauthorizing the Infrastructure Investment Act of 2011 still could pass by June.
Under design-build, a tool used to revive the Tappan Zee Bridge replacement project, a government entity awards one contract for both design and construction. New York State DOT officials have estimated a 25% reduction in procurement costs over three years for the Tappan Zee and smaller projects.
Meanwhile, Gov. Andrew Cuomo's proposal for a design-build-finance-operate-maintain P3 contract - a purer form of P3 -- for the new $600 million public health laboratory on the Harriman state office campus missed the cutoff for final budget legislation.
"The need is certainly there in the infrastructure space," Roddy Devlin, a P3 expert at law firm Squire Sanders, said in a recent Bond Buyer video.
Referencing the
Philadelphia intends to exit the gas business through its pending $1.9 billion sale of Philadelphia Gas Works, which the City Council is vetting and Pennsylvania's Public Utility Commission must approve. Mayor Michael Nutter announced the transaction last month.
Capital markets observers say the city will minimize pension liability and enterprise risk through the deal.
Smaller states and cities say they need solutions, too.
Rhode Island General Treasurer Gina Raimondo has proposed an infrastructure bank, referencing an American Society of Civil Engineers report that said 70% of Rhode Island's roads are of poor or mediocre quality.
Even among smaller issuers, P3 projects can work, said Adam Cloud, the Hartford, Conn., city treasurer whose private sector background includes financial advisory and bond underwriting roles for Advest Inc. and Loop Capital Markets.
"We can't raise revenue consistently with the same ideas. We have to think outside the box and we might have to kill some sacred cows," said Cloud. "In my city there are empty school buildings. Why not turn them into senior housing or apartments?"
Municipalities, though, can be their own worst enemies, according to Cloud.
"I see a lot of opportunity, but politicians have to get out of their own way. Sometimes the politics gets in the way of the benefit. Say you have a strong mayor who wants to move forward with a project but he doesn't want to bring in the other legislators. Then they slap him and say: 'Who are you kidding?'"
Peters advises issuers to negotiate P3 contracts carefully.
"The people negotiating these deals have very knowledgeable teams who are looking to get the best possible contract for their side," he said.
Philadelphia's City Council just hired Concentric Energy Advisors of Marlborough, Mass., to examine the potential sale of Philadelphia Gas Works to UIL Holdings Corp. of New Haven, Conn.
Critics of deals with the private sector point to Chicago's 75-year lease of its parking assets as an example of the municipality coming up short. In 2008, then-Mayor Richard Daley agreed to a deal for $1.15 billion upfront. Parking rates quickly quadrupled. Much of the money went to balance budgets, leaving little remaining to show for the deal.
Spain, according to Peters, caps brownfield P3 projects at 20 years, new building projects at 40 years. Brownfield is a real-property site whose contaminant presence or potential could complicate development.
"That's royal Spanish law. There, they don't have a quasi-public entity such as Port Authority. It's either the real government or totally private," said Peters. "Europeans are very, very knowledgeable about these projects. We can learn from them."
The New York region doesn't lack for infrastructure financing proposals.
Engineer "Gridlock Sam"
In Albany, Cuomo announced a $5 billion initiative, which he planned to submit to the Federal Transit Administration, to bolster Metropolitan Transportation Authority, Port Authority of New York and New Jersey, and Moynihan Station Development Corp. projects.
Tolling proposals such as Schwartz's and the ongoing fight about whether to impose tolls on the Sakonnet River Bridge across Rhode Island's East Bay generate debate over whether to user fees or a general fund should provide the revenue stream.
That can get sticky, according to Peters.
"Who's going to pay? Traditionally, we used the gas tax and some user taxes. But exactly who is the user is a big question," said Peters, who referenced the Bayonne Bridge, which connects Staten Island, N.Y., and Bayonne, N.J.
"The Port Authority is raising the Bayonne Bridge to accommodate more modern maritime ships," he said. The project benefits ships going under the bridge, not the cars, trucks and buses driving over it.
"Well, the Bayonne Bridge for a driver is quite fine," Peters said. "OK, who should pay and should it be appropriated by a general fund?
"The same with bike-sharing [in New York City]. It's a great idea, wonderful, but it's losing money, $14 million," he said. "Do you pay for it by user fee or out of the general fund? I would guess that bike-sharing does not serve many commuters in eastern Queens."
Tolls have an impact on the overall economy, he said.
Tolling practices place "non-trivial costs" on truck trips to and from major regional freight centers, according to a report Peters authored with professors David King and Cameron Gordon of Columbia University and Australia's University of Canberra, respectively.
Peters and his colleagues examined two maritime terminals in the Port of New York and New Jersey: Global Marine and New York Container.
The report said that while the New York posts serve 19 states and Canada, the "vast bulk" of cargo moves are short-haul trips of less than 50 miles one way from the port facility. "We also find that toll charges in the New York City metropolitan region may represent over 50% of the total costs for a short-haul trip into or out of a maritime port, depending upon the location of the port facility.
"In particular, roads in the area are heavily and highly priced: roughly one-quarter of U.S. road toll revenue is raised in the New York City region," the report said.
