Rebuilding American Infrastructure

When Donald Trump chose “Make America Great Again” as his campaign slogan, he put words to something Americans had increasingly come to see and feel. For many people, their personal lives and communities were no longer as great as they used to be, and they were looking for someone to set things right. Restoring rather than building greatness is an unusual challenge in America. But it is one that has become increasingly real over the last two decades, as much of the country has sunk into a malaise that is physically visible in distressed but once-thriving towns.

This need to Make America Great Again applies especially to our infrastructure. We have already built fantastic national networks of highways and bridges, airports, rail lines, inland waterways, electricity, water and sewer, and telecom infrastructure. The challenge today is not to build some vast footprint of new infrastructure in the style of the Transcontinental Railroad. Rather, it is to make the infrastructure we already have, much of which has been unconscionably left to decay, great again.

Like the project of restoring prosperity to many of our communities, this is an unusual challenge in our national history—and a politically difficult one, too. Politicians love to cut ribbons on new projects; it is much less exciting to maintain and renovate something built long ago under previous administrations. That political incentive to favor new construction over maintenance is part of how we got into this situation.

But this is a task President Trump knows something about. He has already proven that he knows how to obtain glory from rebuilding, not just building, infrastructure. In the 1980s, he pulled off a public relations coup by rescuing the reconstruction of Wollman Rink in Central Park.¹ This meant rebuilding an ice rink that already existed, not creating an ice rink in the first place. But Trump still became a hero from it. This ability to make rebuilding buzzworthy means President Trump is the right man to make America’s infrastructure great again, if he focuses the government’s efforts on the right challenges and approaches.

New Infrastructure Is Not A Priority

Too often the term “infrastructure” is conflated with “transportation,” especially highways. This is because the federal government is a major financier of highway and transit infrastructure, and debates over the federal highway bill, the gas tax, etc., generate significant debate and publicity.

But America’s infrastructure encapsulates much more than just roads, even if the federal government is less directly involved in funding it. For example, there is the electricity infrastructure, which provides nearly ubiquitous power to the nation. Most of this infrastructure is privately owned by utility companies, and so receives less debate in Washington.

A look at our electric infrastructure helps illustrate the nature of today’s infrastructure needs. The initial electrification of the country provided enormous benefits to which it is difficult for us to relate. How many of us can imagine what life without electricity was like? This process of electrifying America was largely carried out by private utilities. The federal government helped by extending electricity to underdeveloped and hard-to-serve rural areas through programs like the Rural Electrification Administration and the Tennessee Valley Authority.

There is no way for us to replicate the gains that came from electrifying the nation, since basically everybody who wants electricity already has it. Today’s expansions are limited, mostly to serve new development. The need today is to repair or replace aging transmission lines, substations, and power generation plants, updating them to twenty-first-century needs. Much is made of the so-called smart grid or smart meters, but it is difficult to see these as economic game-changers for America. Their value is also questionable to the average person, as they come with serious privacy concerns and security risks.

It is similar with water and sewer lines. America is already well served either by utilities or by high-quality well and septic systems. How many people today don’t have running water and flush toilets in their homes? Again, these were revolutionary at the time, but those gains can’t be repeated. The main challenge is to rebuild aging systems and bring them up to modern standards, though some areas do need to develop additional water sources.

The same applies to transportation. When the Erie Canal was completed in 1825, it offered revolutionary increases in travel speeds. Compared to the horse and wagon, the canal cut travel costs between Buffalo and New York City by 95 percent.² Other transport innovations like the railroad, the automobile, and the airplane also radically increased travel speeds and reduced transport costs.

Previous generations already built out networks for our major transport modes, and there are no game-changers in speed improvements on the horizon. David Metz, former chief scientist of the UK Department of Transport, argues, “We have largely run out of possibilities for travelling faster by means of new technologies.”³

The one transportation technology the United States has not employed is high-speed rail. But even in Europe this is a niche service. It also is not faster than flying in most cases. Projects like Elon Musk’s “hyperloop,” which uses tubes to transport people or freight between cities at extremely high speeds, are speculative at best.

One area where new infrastructure needs have emerged recently is in telecommunications. The nation’s wireline network was deployed decades ago, and the internet created a need for a vast new broadband network. However, the marketplace has largely taken care of this problem. Most of America, outside of some rural areas, already has high-speed access, and there’s an enormous high-capacity backbone network in place. Private companies likewise continue to invest in ever-better wireless data networks. There appears to be little need for government intervention here, outside of subsidizing service to the poor or difficult-to-serve regions.

In short, our infrastructure systems are, by and large, built out. There is little need for a major deployment of new infrastructure, or new types of infrastructure. There do not appear to be any huge economic gains to be had from new infrastructure on par with those coming from electrification or building the interstate highway system. That is not to say that we do not need to build any new infrastructure, but additions such as new pipelines will be incremental, not revolutionary.

Infrastructure Investment Is Not an Economic Development Tool

Those who advocate increased infrastructure spending often tout it as an economic development tool. However, as just shown, there is little in the way of cost reduction or other game-changing economic benefit left to be had from new infrastructure development because America is already largely well served.

One area where new infrastructure investment can potentially enable economic growth is by opening new land to development, converting rural land into urban land. This is pejoratively labeled “sprawl” by opponents. But in rapidly growing areas like Dallas-Fort Worth or Houston, expanding the urban footprint to accommodate demand is clearly needed. Regions like the San Francisco Bay Area that have failed to expand their urban footprint in response to demand have seen housing prices soar into the stratosphere. The same need for expansion to serve rising demand might also apply in the case of new transport lines, such as the Second Avenue Subway in New York, whose completion is badly needed to relieve overcrowding on other lines.

But adding new water lines and expanding roads to keep pace with growth is not what most people mean by economic development. Instead, they view infrastructure expansion as a way to stimulate development in slow-growing or struggling areas. This is where the trouble begins.

First, it is here that the sprawl critique holds more water. New construction on the fringes of a region that is not growing will only devalue development elsewhere. The location of development may be influenced, but not the overall sum of regional development. This is just robbing Peter to pay Paul. For example, between 1980 and 2011, governments in the Buffalo, New York, area issued almost 60,000 building permits for single-family homes—while the region lost population.⁴ Subsidizing infrastructure to serve this kind of development makes no sense. America does too much of this.

Also, as Harvard economist and Manhattan Institute senior fellow Ed Glaeser has pointed out, a signature attribute of a shrinking city or region is excess infrastructure—too many houses, streets, sewer lines, etc.—relative to its reduced population and commercial base. Building new infrastructure only adds to this pile of woes. The paradigmatic example is the forlorn Detroit People Mover monorail that circles its downtown. I75 near Flint, Michigan, is already eight lanes wide. Many impoverished, aging, or shrinking rural areas are now crisscrossed by four-lane highways, to little economic effect. There may be an equity case to be made for serving these areas, but not an economic one.

Even in relatively successful regions, new infrastructure often does not pan out the way boosters had hoped. For example, Google chose the Kansas City region in a nationwide competition to become the first market for its new Google Fiber service. Google laid a super-high-capacity network with direct fiber service to homes, a service that debuted to much fanfare locally and nationally. But a recent Bloomberg review of the project found that, despite local backers’ initial claims that this was a “once-in-a-lifetime opportunity” to “spark economic development,” results were poor. Kansas City has not become a major tech hub, and its GDP growth has trailed the nation since the fiber system went live.⁵

Unsurprisingly, Google has halted the rollout of Google Fiber into additional markets beyond the cities where it already operates.⁶ Here, Google follows on the heels of Verizon, which largely halted the rollout of its own FiOS project in 2010.⁷

Those who believe that a new piece of infrastructure will have similar economic effects to the Erie Canal seem doomed to be disappointed. Any economic gains from new infrastructure will be incremental at best.

America’s Infrastructure Is in Need of Repair

The American Society of Civil Engineers (ASCE) publishes an annual “Infrastructure Report Card” for the United States. Its 2017 edition gives the country an overall D+ score for infrastructure.⁸ Roads, aviation, and drinking water all get a D, among many bad grades across all dimensions of infrastructure. But ASCE members stand to gain a lot of work from any major infrastructure program, so they’ve got an incentive to play up the problem. Their take should be crosschecked against other sources.

In truth, the condition of some of America’s infrastructure is often not as bad as generally perceived or portrayed. According to the Federal Highway Administration, there are 59,000 structurally deficient bridges in the United States. That’s a big number, but it amounts to only 9.6 percent of total bridges in the country.⁹ High-profile infrastructure failures are also not always caused by a lack of maintenance. The I-35W bridge collapse in Minneapolis, for example, appears to have stemmed in large part from a design flaw.¹⁰ According to an analysis by the Reason Foundation, only 5.4 percent of urban interstates are in poor shape.¹¹ The transportation research organization TRIP gives a higher estimate, saying that 20 percent of the nation’s major roads are in poor condition—32 percent in urban areas.¹² For highways and bridges alone, only a minority, perhaps a fairly small minority, of major facilities is actually in poor shape. (Local streets often are in poor shape, but as we’ll see, these are not eligible for federal grants.)

America’s freight rail system is also in solid shape. Even the ASCE gave it a grade of B, noting the major investments by the system’s private owners—$27.1 billion in 2015 alone.¹³

Anyone who has flown through a dazzling foreign airport like Madrid Barajas can tell you that American airports do not measure up. Even so, it’s important to acknowledge that many American regions have spent heavily to improve their air travel facilities. Chicago spent about $10 billion on its O’Hare Modernization Program to add and reconfigure runways at this critical hub.¹⁴ Indianapolis and Detroit replaced their decrepit terminals with sparkling new facilities. Even LaGuardia Airport’s notorious Central Terminal, the one that regularly causes American politicians such as former vice president Joe Biden to compare our airports to Third World countries, is now being replaced at a cost of $4 billion.¹⁵ America’s air infrastructure may have a way to go, but progress has been made. And as anyone who has flown to London can tell you, America has no monopoly on bad airports.

Also, it is not necessarily a bad thing to have a certain percentage of our infrastructure at or near end of life. After all, few of us maintain all of our personal infrastructure and possessions at pristine levels of quality. How many people replace their furnace at the first sign of rust, rather than waiting until it is truly at end of life and can no longer be cost-effectively maintained? American citizens and businesses very frequently “sweat the assets” when it comes to their own property, so it should not be surprising that they are often less than impressed with calls to spend more tax dollars on infrastructure.

Yet there clearly are major infrastructure repair needs in America. We have not been properly maintaining the assets we have built. Levee failures notoriously caused much of the flooding in New Orleans after Hurricane Katrina, but America has yet to address the neglect of its dam and levee systems. For example, the recent possibility of an overflow or collapse at the Oroville Dam in California forced 180,000 people to be evacuated.¹⁶ Many dams, levees, and locks on our inland waterway system are in need of repair, often at significant cost. Examples include Locks 52 and 53 on the Ohio River. Built in 1929, their replacement cost is $2.9 billion. As the New York Times reported, this replacement has been botched, and it was originally supposed to cost only $775 million—still a lot of money.¹⁷

Tens of billions of dollars are also needed simply to renovate America’s legacy transit infrastructure. The District of Columbia’s own Metro subway system has suffered several accidents that require emergency repairs to improve safety. It lost 14 percent of its riders last year, as they lost faith in the system.¹⁸ San Francisco’s BART rail system needs at least $10 billion in repairs.¹⁹ Boston’s transit system needs over $7 billion in repairs.²⁰ New York’s subway signals still mostly rely on 1930s-era technology.

Similar maintenance backlogs affect other infrastructure types. America’s older urban regions need to spend vast sums of money on sewer system environmental retrofit—$2.7 billion in Cleveland and $4.7 billion in Saint Louis.²¹ The state of Rhode Island had to pay $163 million to replace its Sakonnet River Bridge because it had failed to perform routine maintenance on the old one.²² This is just a sampling of America’s infrastructure gaps.

But the poster child for American infrastructure problems is Flint, Michigan, where a water treatment error caused lead to leach into the water supply, rendering it unfit for human consumption. This caused then-candidate Trump to say, “It used to be cars were made in Flint, and you couldn’t drink the water in Mexico. Now, the cars are made in Mexico and you can’t drink the water in Flint.” To be clear, Flint’s water crisis was caused by human error, but that was only possible because of the city’s old lead-pipe infrastructure. America’s water lines, in many cases, haven’t been touched since they were originally installed many decades ago. Some cities still have wooden water pipes in service. Syracuse mayor Stephanie Miner once said that if her city received the same $1 billion commitment from the state that Buffalo did, she would spend three quarters of it just to fix the city’s water lines.²³

While things are not uniformly dire, it is clear that there is a need to repair and upgrade America’s existing infrastructure. It is this rebuilding, not building—making America’s infrastructure great again—that the Trump administration should focus on.

In doing this, however, President Trump faces several major barriers that must be addressed before progress can be made. Politics and regulations will remain a barrier even if more funding is put in place. The existing federal infrastructure finance programs are poorly aligned with America’s needs in any case, and private funding is at best a partial solution in many troubled infrastructure categories.

Barriers to Improvement: Politics and Regulation

Many of the biggest barriers to fixing America’s infrastructure are not financial, but political and regulatory. Take, for example, the sorry state of the New York region’s airports. How is it possible that one of America’s wealthiest regions has such poor airport terminals? The problem is politics. The three main New York airports—Kennedy, Newark, and LaGuardia—are run by the bi-state Port Authority of New York and New Jersey. These airports are highly profitable, generating $581 million in operating profits in 2016 alone.²⁴ But the Port Authority uses those profits to subsidize the money-losing PATH subway and real estate developments like the World Trade Center. This tangled web of cross-subsidies, and the politics of New York and New Jersey that make them difficult to unwind, are why the airport facilities are in such bad shape. When New York governor Andrew Cuomo made a political priority of replacing LaGuardia’s Central Terminal, a deal was quickly struck for its replacement. Airport improvements are also often opposed by the airlines themselves, who do not want to pay the increased fees needed to finance them.

Many pieces of infrastructure paid for through utility fees—electricity, water, sewer, etc.—also face political challenges to upgrades. Many of these services are de facto monopolies and thus subject to rate regulation. Politicians have a powerful political incentive to keep rates low, at the price of deferring maintenance and other needed investments. This is especially true for municipally operated water and sewer systems. For privately run utilities like electricity, capital investment has historically been strongly opposed by organized citizen groups that exist to maintain low rates. In some states, the opposite has occurred. Utility interests have captured the regulatory apparatus, resulting in poor oversight and sometimes dubious investment that does not serve the public interest, such as the Deepwater Wind offshore wind project in Rhode Island that will cost consumers hundreds of millions of dollars.²⁵

Activist pressure of other sorts can also derail projects subject to approval by weak-kneed politicians. In recent years, perhaps the most famous examples are President Obama’s rejection of the KeystoneXL and Dakota Access pipelines. Environmental activists regularly attempt to kill infrastructure associated with fossil fuels. This often works in places with amenable governments.

Environmental studies are another major killer, driven by both federal and state laws. No one wants to go back to the days in which projects could be built with no review, when workers regularly died on work sites, and so on. But today’s process of creating environmental impact statements (EISs) frequently drags on for years, leading to delays of a decade or more in actually building projects. This is one reason President Obama discovered to his chagrin that, “There’s no such thing as shovel-ready projects.”²⁶

Despite few changes in federal law, the process of completing EISs has continued to increase in length. A study by the Regional Plan Association (RPA) found that the average length of time to complete an EIS increased from slightly over two years in the 1970s to eight years by 2011.²⁷ A 2008 study by Piet and Carol A. DeWitt found that the time required to complete an EIS was increasing at a rate of 37 days per year.²⁸ A report by Philip K. Howard cites the example of a project to merely raise the bridge deck on the already existing Bayonne Bridge in New York: The environmental reviews for this basic project totaled around 20,000 pages and took five years to complete. According to Howard’s analysis, in several categories of infrastructure, the cost of a six-year delay in building projects resulting from environmental review adds up to more than the ASCE’s estimates of what it would take to pay for needed repairs.²⁹ The cost of delays is higher than the cost to build.

And after the Port Authority completed those 20,000 pages of environmental reviews for the Bayonne Bridge project? Remonstrators sued to stop it anyway, arguing that the government had not sufficiently studied the environmental impact of the bridge.³⁰ This is hardly the only case. Environmental litigation to stop projects is now routine. These are almost invariably attempts to accomplish through environmental law what could not be accomplished politically. Trying to stave off or win lawsuits is one of the drivers of today’s longer and more complex EISs. As the RPA notes, “The threat of environmental lawsuits motivates lead federal agencies to take time-consuming steps or redesign projects to avoid them, contributing to project delivery delays.”

The fact that these delays are the major source of project delays is amply illustrated by the case of the I-35W bridge collapse in Minneapolis. Quickly replacing this major interstate bridge that carried more than 400,000 cars per day was obviously critical. The state managed to do it in only fourteen months. The RPA notes that this project received no environmental waivers. Yet clearly there was political commitment at all levels to make sure this project was not held up by red tape or lawsuits, and that permits were issued promptly. The I-35W bridge replacement shows what it is still possible to do in America if we don’t tie our own hands with needless and endless study. This should be the rule more than the exception.

Federal Funding Structures Are Poorly Aligned with Infrastructure Needs

Another challenge the Trump administration faces is that existing federal infrastructure programs are largely not aligned with America’s infrastructure needs. Consider two simple areas: roads and sewers.

The modern highway finance system dates to the passage of the Federal Aid Highway Act in 1956, passed to provide funding to build the Interstate Highway System. It is financed by the federal gas tax, providing grants to states for highways (with some allocated to metropolitan areas) and financing the federal government’s transit programs.

As noted above, the major roadway system of the United States is not in terrible condition. There is a segment of America’s roadway system that does have a maintenance problem, however: its local streets.³¹ Yet local streets are largely ineligible for federal funding. This non-federal aid mileage accounts for 86 percent of the total roadway mileage in the United States. Major roadways like interstate highways account for most travel volume and are clearly worthy of special concern. Nevertheless, many of America’s roads that are in poor condition are precisely these local streets. No matter how much money the federal government pumps into its highway funding structure, it will not do anything to help cash-strapped municipalities with this problem.

The backlog of local repairs is significant. Atlanta’s 2013 figure is $922 million for infrastructure needs;³² Seattle’s 2010 estimate was $1.8 billion,³³ with $1 billion for Portland³⁴ and $3.6  billion for Los Angeles.³⁵ Many of these backlogs are, naturally, in economically struggling cities; many more cities don’t have a handle on their problems and don’t even have an estimate. One that does have an estimate is Toledo, with $1.3 billion in needed street repairs.³⁶ Where is a city like Toledo supposed to come up with that kind of money?

In short, the streets where many Americans live, especially those who are being economically left behind, cannot be fixed by the existing federal funding system, even with infinite spending.

It is a similar situation with sewers. America’s cities face billions of dollars in repairs for aging sewers, much of it imposed by the federal government. Just take one example: fixing so-called combined sewer overflows (CSOs). When sewers were first installed in America cities, they frequently combined sanitary waste from homes with stormwater runoff from streets into the same pipe system. In heavy rains, these can overflow, causing untreated sewage to spill into area waterways. Under the Clean Water Act, the EPA is forcing cities to largely eliminate these overflows, no matter what the cost. The agency has sued numerous cities over the issue. Of the 31 consent decrees the EPA has obtained from noncompliant cities, the estimated cost of fixing just this one sewer problem is $29 billion. Combined sewers are often in older, postindustrial cities struggling with a mountain of problems and high poverty levels.

The federal government used to provide grants for water and sewer projects but eliminated these long ago, leaving very little federal help available for these cities. As Springfield, Ohio, mayor Warren Copeland complained to his local newspaper, “This is the biggest, hugest unfunded mandate that I’ve ever seen in the time I’ve been in public life. Basically, the EPA at the federal level is prepared to tell us that we have to keep spending money and there’s no help from the feds to deal with it. It’s just a disaster from my point of view. There doesn’t seem to be any way out of it.”³⁷

What is true for sewers is also true for water systems like Flint’s. While that city received special federal and state help, dozens of other cities have been left high and dry.

In short, simply pumping more money into the existing funding structures will completely fail to address many of America’s most pressing infrastructure problems.

Some economists might argue that it makes no sense to spend $1.3 billion in Toledo, or to spend to fix sewers in Ferguson or Springfield. If they want to triage American communities and effectively write off vast tracts of America, they should have the integrity to say it explicitly. Clearly priorities have to be set, and not every need can be met in the short term. But to the extent that we as a nation decide that we actually do care about struggling communities, we need to align spending programs with their needs. At a minimum, repair of the existing infrastructure in these communities is one thing we know we can accomplish.

Private Capital Alone Can’t Solve the Problem

President Trump has pledged to undertake a $1 trillion plan to rebuild America’s infrastructure. While nothing specific has been proposed, early reports suggested that it would lean heavily on private capital.

Many have argued that pension and similar funds could potentially be large-scale investors in infrastructure projects. These funds are chasing stable, quality returns in an era of low interest rates, and infrastructure seems to fit the bill. Infrastructure projects where there are high-quality revenue streams attached are good potential candidates for private equity investment. Toll roads, bridges, and airports around the world are owned or operated by private entities.

But private capital is not free money. Investors expect to both make their capital back and earn a profit. This will ultimately come from users of the facility. From an economic point of view, this makes a lot of sense. The problem comes in when the facilities are in economically struggling communities.

A private firm might buy Flint’s water utility and replace all the lines, but ultimately that cost would have to be born by the residents of Flint through higher water bills. One reason why so many of these communities have accumulated such a huge backlog of infrastructure needs is because their citizens cannot afford to pay for them, or can’t afford to competitively disadvantage their communities by raising taxes or utility rates. That is not to excuse their frequently poor political leadership, but the problem of fiscal capacity is real. For example, the Saint Louis area’s plan to retrofit its sewer system to comply with federal mandates will double or triple the bills of people in troubled Ferguson.³⁸

Moreover, much of the infrastructure deficit we face as a country arises from costs such as environmental remediation, for which there is a public purpose but not enough of a revenue stream to satisfy a private investor. Another large chunk is not amenable to private investment because it is in localities where the citizens and business community have limited ability to pay. America’s infrastructure problems cannot be solved with private investment only. More tax dollars will be required.

In addition, even in cases theoretically conducive to private investment, actual experience in the United States suggests it will be harder to pull off successfully than many might think. Consider the case of Chicago’s Midway Airport. That city received special federal permission and tried twice to privatize Midway Airport by leasing it to investors, failing both times. In 2008, former mayor Richard M. Daley announced a deal for $2.52 billion to lease the airport for 99 years to a consortium led by Citibank.³⁹ But that deal fell apart after the consortium failed to obtain financing.⁴⁰ Mayor Rahm Emanuel tried a second time but likewise failed: the deal attracted only two bidders, but one backed out, forcing the city to scrap the tender.⁴¹ The fact that a highly motivated Chicago failed twice to close a deal for this high-profile and well-patronized airport suggests that airport privatization in the United States is not as simple a matter as supporters might suggest.

It’s the same story with private investment in highway and bridge projects. Many of these transactions have not gone well. A number of the operators of privately run toll roads and bridges have gone bankrupt. Even in rapidly growing Texas, the concessionaire operating the SH 130 toll road near Austin went bankrupt.⁴² The company operating the Foley Beach Express toll bridge in Alabama went bankrupt.⁴³ The operator of the South Bay Expressway in San Diego went bankrupt.⁴⁴ Some of these bankruptcies have spawned litigation, with accusations that the deals were done using fraudulent traffic projections.⁴⁵ A private consortium that leased the pre-existing Indiana Toll Road from that state for $3.9 billion also went bankrupt.

In one sense, these bankruptcies might be good news for taxpayers. They revealed that the companies had overpaid. In places like Indiana, this created a windfall gain for the public. But these bankruptcies led private firms to shift strategies, away from skin-in-the-game equity deals toward the so-called availability payments model.⁴⁶

In an availability payments contract, a private consortium builds, maintains, and operates a toll facility over a period of time. In return, the government entity promises a fixed stream of payments to the consortium for making the roadway or bridge “available.” The new East End Bridge near Louisville⁴⁷ and the Goethals Bridge replacement by the Port Authority of New York and New Jersey⁴⁸ are using the availability payments approach.

There is nothing wrong with availability payments per se, but these contracts hardly constitute what has usually been meant by private investment. Because the vendors are entitled to their payments regardless of the revenue stream, they have shifted the revenue risk—the biggest risk, and the one that bankrupted all those toll roads—back onto the government. In effect, this is just a fancied-up form of traditional debt financing.

Chicago looms large as a cautionary tale about the limits of private investment and what can go wrong with privatization. Beyond the Midway privatization failures, in 2006, the city leased its downtown parking garages for $563 million for 99 years. This appeared to be a great deal until it later came out that the city had included an onerous no-compete clause in the contract. Not only did the city itself agree not to build any competing garages, it also promised not to allow any private companies to build competing facilities. This was a highly dubious use of government power. Even worse, the city actually did allow a competitor to open, which exposed them to damage claims. The city ended up paying $62 million in compensation to the vendor they had privatized city garages to.⁴⁹

No-compete clauses are common in privatization contracts and examples of “submarine” clauses that can unexpectedly surface and torpedo a government at some future date. Having used no-compete clauses to his own advantage, such as in the deal to open the Grand Hyatt in New York, President Trump must surely understand how easy it would be for sharks to take advantage of cities and states the same way.

More recently, Mayor Emanuel tried another way to use private capital for financing infrastructure improvements in his city. He devised his so-called Chicago Infrastructure Trust (CIT), announced to great fanfare at a ceremony that included former president Bill Clinton. He hoped to raise as much as $1 billion in private capital to finance projects such as $200 million in energy efficiency retrofits of public buildings. The CIT struggled to execute and has completed only one project to date, a vastly downscaled energy retrofit program that ended up being less than a tenth of the size originally envisioned. A report by the nonprofit watchdog group Project Six found significant problems with that transaction, too: the deal included what was in effect $2.2 million in loans to replace light bulbs and install weather stripping, repairs that should never have been debt-financed.⁵⁰ It also gave Bank of America, the financier on the project, a lien on all the equipment installed in city buildings as collateral. Furthermore, there appears to be no compelling reason why the city needed to use complex, non-traditional financing for the project.

Chicago’s use of privatization and private capital for its infrastructure has arguably been a net negative for the city. If a sophisticated financial center like Chicago cannot get it right, this bodes ill for other, less experienced states and cities.

As President Trump might say, too many of America’s leaders have been stupid when it comes to deal-making on private sector investment into transportation infrastructure. If states and cities cannot make smarter deals, they need to stick to traditional tax- or bond-financed public sector infrastructure development.

Policy Recommendations

Any plan to make America’s infrastructure great again has to address both the policy needs and the political realities facing the Trump administration.

In the short term, Trump should look to build momentum for infrastructure renewal by finding five to ten more I-35W bridge–type projects with low environmental impact that can be delivered on an accelerated basis in less than two years. Bridge replacement projects would be ideal to improve safety on some of these aging facilities. He should also build on the Obama administration’s program to accelerate environmental reviews for as many projects as possible and aggressively use all authority he has to issue environmental process waivers.

A longer-term program should include reforms to the environmental review process to dramatically speed up project timelines as well as to limit the scope of litigation. The president should look for bipartisan solutions here: Environmental review dramatically delays and increases the cost of projects that are of critical importance to Democratic constituencies, too, including urban transit projects. Researchers of multiple political persuasions, like Philip K. Howard and the RPA, have already conducted significant analysis of the problems and potential solutions, some of which could include better basic up-front coordination between the agencies involved in reviews (or potentially even creating a one-stop federal shop) and limiting the scope of litigation over projects. It is possible to both protect our environment and get projects built in a timely fashion.

Trump must also realign federal infrastructure spending with needs. This means limiting the use of funds for expansion projects in favor of maintenance. No more boondoggles. State and local politicians will always favor new projects over repairs, so federal funding should be heavily focused on maintenance in both highway and transit funding. One priority area should be rehabilitating aging rail systems in America’s legacy rail transit cities, including New York, Boston, Philadelphia, Chicago, Washington, and San Francisco—high-ridership systems that are critical to the economies of these major metro areas. Another is replacement of structurally deficient bridges. The federal government could potentially help municipal governments temporarily with local street repairs, which are often shovel-ready projects, as it did during the Obama stimulus. But ultimately state and local governments need to take the lead in establishing an adequate funding structure for local streets.

Trump should also reinstate federal grants for sewer and water rehabilitation and environmental compliance. The expense of these items for many communities is enormous and often imposed by the federal government itself, such as in the case of combined sewer overflow remediation. Paying for these unfunded mandates is only fair. Beyond that, many poor, post-industrial communities simply lack the funds. The federal government should also accelerate brownfield remediation  in these communities. These are the very places Trump promised to help in his campaign: they have significant needs, heavy poverty, and large minority populations that have been left behind.

There are select, high-profile infrastructure expansion projects where the federal government should be involved in financing and driving them to completion. These might include the Gateway Project to build new rail tunnels under the Hudson River in New York and the FAA NextGen air traffic control system. The recent derailments at New York’s Penn Station that caused travel chaos show why rail upgrades are critical; there is no slack in the system if anything goes wrong. Air traffic control upgrades are needed to help unclog the congested airspace around our cities. Any such projects should be heavily vetted to avoid funding boondoggles. Too much of the money we spent today ends up wasted on “road to nowhere” projects.

Where will the money come from? Let’s be honest here: more debt or higher taxes and fees. There is definitely a role for the private sector in financing improvements to major airports and other high-quality, revenue-producing assets. But this will simply not address most of the needs the country faces. States and localities need to be willing to bite the bullet and do the same. Doing things like underpricing utility fees by forgoing maintenance needs to end. The illusion that we can get something for nothing has been part of what brought us to this point. If we want to make America’s infrastructure great again, we must be willing to pay to make it happen.

This article originally appeared in American Affairs Volume I, Number 2 (Summer 2017): 107–25.

Notes