WASHINGTON: Stalled in gridlocked Washington, the idea pushed by President Obama of an infrastructure bank to move our roads, rail and water systems up to competitive world standards is getting a test run at the city and state level.
In Chicago, Mayor Rahm Emanuel has inaugurated a Chicago Infrastructure Trust, aiming for $7 billion in funding both from government and top private sector investors — America’s first city-based infrastructure bank.
The bank’s purpose is nothing less, Emanuel claims, than a “breakout strategy” to recover from years of lagging investment to make Chicago competitive with such modernized global competitors as Germany and East Asia. “Whether it is renewing our parks or repairing our pipes, repaving our roads or rebuilding our rails, retrofitting our buildings or revitalizing our bridges, we must restore Chicago’s core,” he asserts.
The trust is designed to merge public and private financing for such projects as O’Hare International Airport expansion or modernizing dozens of local rail transit stations. The idea is a “rent-to-own” system in which private financiers (for example Citibank or JPMorgan Asset Management) build new or replacement projects that Chicago’s government can’t immediately afford, the city paying a fee until terms of the deal are completed.
The Chicago idea is that all capital development ideas — from schools to freight-rail upgrading to replacing 900 miles of century-old water pipes — will have to go through a selection filter to show real cost savings, revenue generation and clear service gains.
What a reversal from historical back-scratching politics! The shortcoming is that the trust’s scope is limited to Chicago proper, ignoring the rest of the big Illinois-Indiana-Wisconsin citistate region of which Chicago is the center.
To the west, California is beefing up the impact of its 13-year-old Infrastructure and Economic Development Bank by putting it in a joint office with key workforce and small business promotion efforts in “GO-Biz” — Gov. Jerry Brown’s Office of Business and Economic Development.
But perhaps the most dramatic effort is in New York state, where Gov. Andrew Cuomo’s infrastructure fund and process — dubbed “NY Works” — represent a dramatic turn on dual fronts.
First, the project suggests a reversal of New York’s balkanized history and politics — the pattern of clashing interests of upstate and downstate, sclerotic governance, deep partisan divisions. Instead, Cuomo seems dead serious in having investment decisions made as a single, coherent state — a historic breakthrough, suggests Michael Likosky, senior fellow at New York University’s Institute for Public Knowledge and a prime authority on infrastructure banks in the U.S. and internationally.
New York’s mechanism is a task force of recognized leaders in finance, labor and other fields — nine appointed by the governor, six by the legislature. (One member is veteran banker Felix Rohatyn, the legendary leader in pulling New York City out of its fiscal crisis in the 1970s.) The task force is empowered to ride herd on the state’s 45 agencies and authorities and their separate priorities, insisting that new capital projects not only promise significant returns but glue together regions and interests.
This means, for example, that decisions on bridges and highways, waste water and dams, renewables and energy-efficiency systems, parks and university systems be made in mutually reinforcing ways. And that business-like procurement principles be applied across departments.
Second, by aligning Wall Street investments with the New York state economy, the plan enables the state — in Likosky’s words — “to absorb and deploy much more capital effectively than we have in ages.” The expectation is that with confidence built in the new management and coordination plans, each public sector dollar can be matched with up to 20 private sector dollars.
Third, while the vision is statewide, Cuomo’s plan aims to promote regional laboratories of innovation — empowering local councils (10 across the state) to select locally significant projects, requiring merit-based competition for their financing.
The secret to Cuomo’s leadership, Likosky notes, is “empowering and incentivizing diverse stakeholders at the local level to work together — and to assure that if they cooperate, they have a partner in the governor’s office.” Or put another way — “a shift from fighting over a shrinking pie to a growing pie, staking out claims in a realistic way.”
As splendid as all this is in theory, the application may be complex with unexpected hurdles. Local political jealousies can re-erupt. New York is depleting its capital financing capacity, and may soon bump up against its own debt ceiling.
But the inherent capacity of a state like New York — fiscal, managerial, technical — is little short of stunning. No American state lacks the intelligence to put dysfunctional politics and localism to the side to invest intelligently in its future. Rules, regulations and delays make infrastructure investing in the United States six times more expensive, for similar projects, than in Canada. The California, New York and Chicago experiments tell us we could do a lot better.
Peirce is a Washington Post Writers Group columnist. He can be reached at firstname.lastname@example.org.