by Brianna Crandall — May 25, 2012—Constrained public budgets and a growing recognition at the local level of the importance of infrastructure— combined with lack of action at the federal level—are causing states, regions and cities across the United States to seek innovative infrastructure approaches and solutions, according to Infrastructure 2012: Spotlight on Leadership, just released by the nonprofit education and research institute Urban Land Institute (ULI) and Ernst & Young, a global provider of assurance, tax, transaction and advisory services. The report says that local governments are utilizing a range of strategies, including ballot measures taken directly to the public, increased utilization of technology and pricing, and public-private partnerships.
This year’s report looks at an overall decline in infrastructure funding globally, and it focuses on funding solutions underway in the United States. Even as efforts to increase infrastructure revenues at the federal level remain stalled, states and localities are looking at other ways of overcoming fiscal woes in an effort to move forward with projects that can lay the foundation for economic growth. State and local governments are funding critical infrastructure building or refurbishment needs with increased sales or gas taxes, bond issues, and user fees, including tolls. Public-private partnerships are a growing part of the equation.
Infrastructure 2012 notes that in many localities, people are voting to raise taxes for infrastructure investment — from 2008 through 2011, ballots allocating funds to transit capital or operations had a 73 percent success rate. More than a dozen states have raised fuel taxes over the past year, and drivers nationwide are accepting higher tolls for roads and bridges. Local governments are taking advantage of tax increment financing and special assessment districts as well as public-private partnerships, while exploring alternative sources of private investment such as sovereign wealth funds and pension plans.
The study highlights six case studies showing how local and regional governments are moving forward with much-needed infrastructure investments such as transit, ports, bridges, roads, parks, and water supply. “Global economic competitiveness demands new kinds of regional entrepreneurship,” the report states, noting that each of the case studies can provide insight and inspiration for other localities seeking infrastructure solutions.
The report calls out New York City as a national infrastructure innovator, citing its investments in the World Trade Center transit hub, the long-awaited Second Avenue subway, the Long Island Railroad tunnel under the East River into Grand Central Station, and planned replacement of the Goethals and Tappan Zee Bridges. Chicago is also taking a new infrastructure investment tack, with its aggressive $7.2 billion Building a New Chicago plan and the Chicago Infrastructure Trust.
As in previous years, the 2012 report stresses that the United States continues to lag behind its global competitors in infrastructure funding. However, this year’s report points to a marked spending decline in Europe, which has been reeling from the debt crisis, and is adopting austerity measures as a result of the crisis. Ernst & Young’s Global Real Estate Leader Howard Roth opines, “In both the U.S. and Europe, the era of massive infrastructure investments may be over.”
Infrastructure 2012 also notes that the global recession has resulted in scaled-back spending in China — which for years has invested billions on state-of-the-art transportation lines and other infrastructure — and in a pullback in India and Brazil. The report found that:
- In the United Kingdom, private finance approaches are under fire at the same time that fiscal austerity is forcing the country to rethink infrastructure priorities.
- Despite spending eight percent of its gross domestic product on infrastructure, India may not be able to keep up with the needs of its exploding urban population.
- Brazil, South America’s emerging market superstar, has ambitious infrastructure development plans tied to the 2014 World Cup and 2016 Olympics, but may miss deadlines due to its weakened currency, red tape and corruption in contracting, and other issues.
- One bright spot is Canada, which has made infrastructure investments a national priority, and as a result, has an infrastructure relatively manageable deficit of no more than $125 billion. Canada’s public-private partnership approaches are a model for the world.
- Despite spending eight percent of its gross domestic product on infrastructure, India may not be able to keep up with the needs of its exploding urban population.
