The American Infrastructure Heritage: A Depreciating Gift
America’s entire collection of infrastructure assets has been refashioned and rebuilt several times over throughout American history. Entire networks of canals, trails, railroad routes, and highways have been discarded in favor of new modes of transport or new commercial practices. There is no reason to expect that this won’t continue in the future. A more accurate description of this task would be “infrastructure refreshment” since every generation since 1789 has faced the challenging task of incremental improvement in existing networks. “Construction” is a poor word to describe the many functions associated with designing, building, operating, repairing, and financing an infrastructure portfolio.
The United States has not yet found a stable mix of delivery and finance mechanisms to accomplish this task on a continuous basis. Since 1789, we have tended to careen between two extremes — over-reliance on the public sector and over-reliance on the private sector, often creating the very crises and scandals that sends the country careening back in the other direction.
Since World War II, attempts at efficient and effective infrastructure programming have focused on big federal programs that fund initial project delivery (but not the project life cycle) of infrastructure services such as transportation, water supply, or wastewater treatment. More stable processes are required that focus on the long term.
Alicia Munnell estimated in 1990 that the country had $7 Trillion in public and private infrastructure holdings. This value of this portfolio is probably now in excess of $10 Trillion. Two-thirds of these assets are held by the private sector, which should tell all Americans that infrastructure asset management isn’t merely a public matter. Eighty-five percent (85%) of publicly held (non-military) assets are state and local, which should tell all Americans that infrastructure asset management is a very pressing problem for state and local government. Five hundred billion dollars ($500B) is required each year to adequately repair and maintain these assets, not including operations or replacement. But, maintaining the assets is not good enough, since existing transportation, water, and wastewater networks won’t provide a competitive advantage to the American economy over the long term.
On the legislative side, Congress has removed itself as a major direct player in infrastructure renewal and replacement. There is just not enough cash available for the federal government to pay to maintain and operate facilities originally funded by the federal government. Federal capital programs continue to focus on initial delivery, but initial delivery is only a small percentage of life cycle costs (5–10% of life cycle costs). Indeed, the federal and state focus on initial delivery have the unintended, but real, consequence of putting additional pressure on local governments to operate assets over the entire life cycle with no funding. Funding levels have slipped to dangerously low proportions of annual needs.
Congress has been reduced to a strategy based on “demonstration projects,” the new code word for inadequate investment in public infrastructure. As a nation, the shortfall in infrastructure investment (primarily public, but also private) is chronic, and often structural. Although the United States was well served by prior generations that adjusted the mix of public and private sector participation in infrastructure refreshment, we have yet to solve this problem for our own generation. The goal is a stable infrastructure strategy that is competitive, efficient, and in the public interest.
The inevitable trend is toward simultaneous management of infrastructure assets at both the project and the portfolio levels. The word portfolio means the collection of buildings, structures, and networks that comprise a system of infrastructure facilities, along with the staff that operate and maintain these facilities. The drivers toward portfolio planning are environmental sustainability, technological innovation (converting from “dumb” to “smart” networks and systems), and value for money. Arrayed against these drivers is a powerful, but ultimately futile, allocation paradigm, in which professional groups all “tug” and “pull” for an “equitable” share of inadequate funds.
The 1980’s and 1990’s can be described as a series of hollow and futile debate over the allocation of inadequate resources to infrastructure assets. Allocation is not the key; insufficient resources are the first order problem, a problem that has never yet been solved solely by government.
KeywordsLife Cycle Cost Infrastructure Development Public Infrastructure Federal Budget Infrastructure Facility
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- 1.The term “infrastructure” is used in a broad sense to mean, collectively (a) buildings; (b) the transportation of people, goods, and information; (c) the provision of public services and utilities such as water, power, waste removal, minimization, and control; and (d) environmental restoration.Google Scholar
- 2.The statistics come from World Resources,A Guide to the Global Environment, 1992–3, at 246, Oxford University Press, Oxford and New York, 1992, at 266, 314, 330, and 336. Power plants in the United States generate approximately 20% of the world’s commercial energy production. Approximately 15% of the world’s large dams (i.e., over 15 meters in height) have been constructed in the United States. Operating at only 35% of capacity, they still generate 13% of the world’s hydroelectric power. Port facilities in the United States load and unload 9% of the world’s volume of crude oil, 12% of the world’s volume of petroleum products, and 11% of the world’s volume of dry cargo. Thirty-seven percent (37%) of the world’s 14,000 public airports are located in the United States, serving to transport cargo and people. These airports, together with four million miles of roads and streets, 135,000 miles of railway, and thousands of miles of pipeline, result in 345 billion passenger miles by air, 2.5 trillion passenger miles by car, bus, and taxi, and approximately three trillion revenue ton-miles of freight.Google Scholar
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- 4.Roads, bridges, traffic control systems, toll collection systems, railroads, railroad terminals, rail traffic control systems, courthouses, jails, prisons, schools, universities, city halls, police stations, canals, navigable rivers, ports, airports, air passenger and cargo terminals, air traffic control systems, power generation plants, power distribution grids and control systems, natural gas production facilities and distribution pipelines, steam generating plants and distribution pipelines, telephone lines, telephone switching stations, satellite communications systems, television communications systems, radio stations, cable systems, fresh water collection and distribution systems from dams and reservoirs to distribution pipelines and pumping stations, waste water and storm water collection and treatment systems from pipelines and pumping stations to secondary and tertiary treatment plants.Google Scholar
- 5.In the past, Massachusetts has been fortunate with federally funded infrastructure projects. In the future, the state cannot safely rely upon federal programs to create competitive advantage for New England’s key industries. Infrastructure strategies and programs must be developed and applied locally.Google Scholar
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- 8.Munnell’s definition of “Capital stock” included equipment and structures but excluded land inventories and rental residential real estate. If federal military bases are excluded, state and local infrastructure assets are six times that of the federal civilian agencies.Google Scholar
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- 13.The trend toward portfolio management is clear, although it is often described as “asset management” or “condition assessment.” All these initiatives have, as the end goal, more effective long term management of the entire portfolio.Google Scholar
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- 22.Generally, these arguments center on the level of detail of government control of infrastructure design, construction, and operation. Rarely does the debate consider the mechanisms through which government can exercise control of the results, with varying levels of control over the details.Google Scholar
- 23.And, of course, grossly overstated.Google Scholar
- 24.Chapter 3 describes the lengthy American experience with allocation, beginning with President Jackson’s veto in the 1830’s of a bill funding the extension of the National Road because it represented an “unfair” allocation of federal spending to benefit a few states. The allocation problem isn’t new, and two hundred years of arguing in the U.S. Congress has not yet resulted in results that all consider “fair.”Google Scholar
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