Panel: Failing infrastructure needs neutral evaluator, long-term debt
The responsibility for dealing with the looming transportation infrastructure crisis in the United States needs to be taken out of the hands of politicians and given to panel of experts who can prioritize projects and help set up long-term borrowing mechanisms to pay for them, according to an independent commission that studied the matter.
The group, sponsored by the Center for Strategic and International Studies in Washington, called on Congress to create a National Investment Corporation that would work with states, local governments and private investors to evaluate and help finance projects that have national significance. It recommended financing projects with 50-year special purpose bonds guaranteed by the federal government.
The American Society of Civil Engineers estimates that the United States needs to spend $1.6 trillion in the next five years just to maintain and renovate existing infrastructure.
Bridges, highways, locks, ports, dams, waste water facilities and schools are crumbling or too congested to meet the needs of the economy because the federal government has underinvested in infrastructure and spread money to the wrong projects, the Commission on Public Infrastructure said.
“You can’t have private wealth without public investment,” said Felix Rohatyn, a prominent investment banker, pointing to the Tennessee Valley Authority for creating dams for energy production and the Eisenhower administration’s investment in the interstate highway system 50 years ago.
“It does us no good if we can make goods and they are stuck at the loading dock or stuck at the ports,” said John Castellani, president of the Business Roundtable, at a press conference.
The group said a large part of the blame goes to members of Congress who weigh down spending bills with earmarks that siphon money to specific local projects. The multiyear surface transport spending bill passed by Congress last year had more than 6,300 earmarks including $750,000 to construct horse riding trails in Virginia and $1.5 million for a Henry Ford museum in Dearborn, Mich.
Many local projects have merit, but they are not connected to a broader regional or national system in any coherent way, said Sen. Christopher Dodd, D-Conn.
The problem is compounded by the fact that the government doesn’t make a distinction between buying something now or something that will deliver benefits in the future.
“We have a malfunctioning budget system” that doesn’t separate operating and capital budgets the way most businesses do, said Bernard Schwartz, chairman and chief executive officer of Loral Space and Communications.
Congress is motivated to use money from the highway and aviation trust funds to build new infrastructure when the primary need is to maintain, upgrade and replace existing infrastructure so it functions efficiently, commissioners said.
“We are good at building things, but not at fixing them,” said Everett Ehrlich, executive director of the commission and a former under secretary of Commerce in the Clinton administration. “Right now the system is a hammer looking for a nail.”
The National Investment Corp. (NIC) is being proposed as a mechanism to depoliticize infrastructure investment, much the way Congress set up a neutral Base Realignment and Closure Commission to select military bases that could be shut down or converted to civilian uses. It would be modeled on independent agencies with expert staff such as the Federal Reserve or the Public Company Accounting Oversight Board that oversees the auditors of public companies.
The NIC would appraise a broad range of infrastructure projects using standard criteria, similar to the way the World Bank evaluates development projects, Ehrlich said. Projects would be selected based on their investment returns, which would be recaptured in many cases through various tolls or user fees.