External Affairs

[Alyssa Bray]

Various infrastructure issues were frequently cited by our members as an issue for the 2018-19 Top Ten. Here are some of the responses we’ve received so far.

• Aging infrastructure in this country
• Funding the Gateway tunnels on the Northeast Corridor.   Sandy damage will require each of the two,  more than 100 year old tunnels, to be closed for extensive repairs in the near future.  That will result in reduction of trains per hour from 24 to 6.  This will have a devastating impact on the regional economy which is some 20% of the US GDP and could lead to a national recession.
• Cumulative impacts on access to real estate due to the historic lack of infrastructure maintenance. The poster children for this topic are the New York subway system, the DC subway system, and BART. If you build it, and they come (by the millions), isn’t it a good idea to keep it in decent repair? It is most obvious in dense urban settings, but it is a suburban problem as well.
• Cumulative impacts from historic underinvestment in infrastructure. We have not been building the new infrastructure we need in order to effectively utilize our existing commercial and residential structures or support additions to the supply. Mass transit is an obvious type of infrastructure this applies to, but also water and sewer systems and stormwater systems are not keeping up with the new development that is getting permitted and are preventing other projects from getting permitted.
• The urban renaissance in many cities has raced past the infrastructure required and is pushing growth outside of the urban core. That can be good for suburban growth. But it is causing lots of other problems. Housing affordability within growing cities is plummeting. Without effective transportation infrastructure, especially mass transit, increasing congestion prevents the outlying areas from providing relatively affordable housing unless commuters are willing to spend hours in traffic (which amounts to a cost and an offset of their wages). As housing costs rise, there is significant displacement of the lower end of the income spectrum. But when those folks get displaced outside of the urban core, it can be expensive and time-consuming for them to commute back into the urban core for work.
• The cost of new infrastructure is mind-boggling. New infrastructure did not used to be this expensive, even when it was done in existing dense urban areas. The time needed to build new infrastructure is also much longer. Infrastructure is a nontraded good and cannot be made in a factory in China. But, as the New York Times and others have pointed out, some infrastructure projects cost considerably more in the US than they do in Europe. https://www.citylab.com/transportation/2018/01/why-its-so-expensive-to-build-urban-rail-in-the-us/551408/
• Public agencies, public and private utilities, consultants, and construction firms involved in infrastructure are understaffed and suffering brain drain. Payrolls were reduced after the great recession. Between 2008 and 2017, I have seen large numbers of experienced folks retire. But there were not many middle career people to move up and take their place in early career people had not been hired. So enormous amount of expertise and historical memory retired and disappeared. And compared to high-tech and healthcare, these employment sectors do not appear to be as attractive to young workers and do not seem to be able to hire the brightest bulbs in the pack.

Have any information to add? Share your comments below, and feel free to share articles and data illustrating this issue.

[Dr. Victor Calanog, Ph.D., CRE]

Generally cannot help but agree on the crying need for infrastructure investment in the US. The devil, however, is in the details:

1.  Should federal level fiscal policy play an outsized part in encouraging infrastructure investment?  Now, at this point in the business cycle, where we may well be at full employment?  How would that impact inflation?

2.  Wouldn’t incentives for infrastructure investment push construction costs upwards even more, even as in many markets, participants feel like construction costs have become prohibitively high?

Useful questions to ponder.

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