ULI: U.S. Infrastructure, Land Use Models Weak, Outdated

MBA (4/30/2008 ) Palaparty, Vijay
The United States has an annual funding gap of $170 billion in its land use and infrastructure models, according to a report co-published by the Urban Land Institute and Ernst & Young, New York. ULI urged action to overhaul outdated planning processes to create a viable federal framework.
“Infrastructure investment and development are having stronger-than-ever implications for urban growth patterns,” said Richard Rosan, president of ULI Worldwide. “If we continue to minimize transportation infrastructure as a federal priority, we are setting up our urban areas for decline rather than prosperity. The country simply cannot afford to keep treating infrastructure as an afterthought.”

Dale Anne Reiss, global director of real estate at Ernst & Young, noted that "most Americans don’t realize how archaic their roads and airports are compared to other countries. The U.S. is in a sad state of affairs. Vehicle miles traveled have increase 95 percent but there has only been a 4 percent increase in roads. Twenty-four percent of roads are in poor condition and over 25 percent of bridges are obsolete or in poor condition.”

With a projected increase in U.S. population by 100 million, infrastructure needs will certainly increase, creating an imminent demand. Existing networks and systems would not suffice, preventing future growth as well as displacing sustainability, the report said. “This year seemingly marks a critical juncture in a rapidly changing economic environment where new approaches to land use, infrastructure and energy efficiency will likely determine and possibly reorder the next generation of winners and losers—countries, companies, investors and peoples."

The credit crisis and downturn in the U.S. economy could be to blame for the U.S. government’s lack of attention on infrastructure imperatives, the report said. Additionally, the housing downturn has also dented U.S. state and local government budgets with a slowdown in home sales translating into lower permitting fees, real estate transfers and taxes.

“Governments ponder structuring more public/private partnerships to pay for needed projects and wonder how to deal with global warming,” the report said. “In the background, international money managers continue to raise billion-dollar funds to invest in infrastructure. As rising construction and material expenses give pause to budget hawks, bankers and money managers calculate strategies and investment gambits for maximal gains, concentrating on one-off projects and concessions, which can fit their risk/reward parameters.”

The report discussed urban sprawl in the U.S—when gasoline was relatively inexpensive and when buyers could get better value for suburban homes in outlying districts. “But pricey gasoline and new user fees make driving more expensive and may tip the value equation in favor of infill locations and less driving,” the report said.

A shift has occurred now as rising gasoline prices have increased transportation costs faster than housing costs. This, accompanied by productivity declines due to road congestion and lower fuel efficiency, has resulted in a demand for more housing in urban centers or housing that is closer to public transportation. But public transportation must be available to meet the demand—something not found in many U.S. cities.

“Monies should fund projects and redevelopment that enable people to reduce their car dependence and/or distance traveled in cars," the report said. “Subsidies need to encourage infill housing and commercial development, served by mass transit. Provide development and tax incentives to builders for master planned projects around rail and transit hubs, ensuring pedestrian-friendly environments with nearby housing and retail. Plan for green space—parks and recreation areas—and incorporate more bike lanes into roadways.”

The credit crunch and skyrocketing construction costs could pause progress, however. Compromising infrastructure budgets and causing delay in implementing new initiatives such as public transportation projects, financing has become more expensive and difficult to transact materials such as concrete and steel rise in price as well.

“In the United States, a weakening dollar has less purchasing power with offshore suppliers, exacerbating further potential budget gaps,” said Jonathan Miller, author of the report. “Denver’s light-rail expansion suddenly pencils out at $6.2 billion, up from earlier $4.7 billion forecasts. In addition, the troubled American economy has engendered reduced tax flows into state and local coffers, leading to funding cutbacks. Governors and mayors start to slash budgets, tabling projects in the short term.”

The report said some politicians see infrastructure investment as a means to keep recessionary impacts at bay. “If the unemployment rate escalates and private industry stalls out, infrastructure spending could provide some economic stimulus and a plentiful source of jobs, especially in the construction trades” Miller said. “About 47,500 jobs are generated for each $1 billion spent on highway construction in the United States. If the country invested the full $1.6 trillion required over five years to meet current infrastructure needs, about 5 million jobs would be created.”

“Lead with a vision. Communities of all levels of affluence deserve high-quality, well-maintained infrastructure and thoughtful civic design," Miller said. "Infrastructure investment should be informed by a long-range vision for quality of life. Encourage strong community participation in the visioning process. Build walkable communities with access to transit to reduce the overall cost of living, increase affordable housing, and create access to good jobs. Encourage strong community building.”