Infrastructure and the Need for Regional Clout

Some new approaches are emerging that could help booming and struggling areas alike.
November 19, 2015
By Charles Chieppo  |  Contributor
Principal of Chieppo Strategies and former policy director for Massachusetts’s Executive Office for Administration and Finance

A new report from the Bay Area Economic Council, a business-sponsored public-policy advocacy group, reminds us that economies are regional and so are solutions to area transportation and housing problems. While "A Roadmap for Economic Resilience" focuses on the needs of northern California's booming San Francisco Bay Area, it holds lessons for almost every large metropolitan region.

Infrastructure is supposed to facilitate economic growth, but all too often the tail wags the dog as growth outstrips the capacity of infrastructure. Bay Area Rapid Transit ridership has increased by 55 percent since 1998 and is at capacity during rush hours. More than 20 percent of Bay Area commutes now take 45 minutes or more. One reason for the long commutes is that people are moving ever farther from cities in pursuit of affordable housing. But the savings on housing costs are often counterbalanced by dramatically higher transportation costs.

A recent analysis by California Forward, a good-government organization, found that only $495 billion of the state's estimated $853 billion in transportation, water and K-12 school infrastructure needs over the next decade could be financed with currently identified funds. Nearly $300 million of that $358 billion gap is for transportation infrastructure.

The Bay Area Economic Council report recommends addressing the shortfall through creation of a regional planning, finance and management entity with the ability to raise money from tolling bridges, highway corridors and express lanes. It also calls for facilitating public-private partnerships to help address the funding shortfall.

Northeastern University Professor Joseph M. Giglio would take public-private partnerships even further. He has proposed creating what he calls "Regional Mobility Corporations" (RMCs) that would own area highways and fund them with revenue from mileage-based tolls.

An RMC would have three classes of owners. The first would be government, whose political instinct would lead it to try to keep tolls low. The second would be private investors, whose goal would be to maximize profits by charging the highest possible rates while providing the lowest levels of service.

In theory, these competing agendas should lead to balanced policies that translate into reasonable service levels at toll rates the public finds acceptable. But since they could also result in policy stalemates, Giglio proposes a third group of owners: businesses such as commercial banks, utility companies, large retail chains, trucking and other service firms, along with media companies that live off of advertising income. Together, these three classes of ownership, Giglio argues, would push for policies that assure affordable transportation that accommodates travel demand in a fiscally sound manner.

Housing is another important piece of the regional economic picture. The Bay Area Economic Council forecasts that the region will need nearly 1.3 million additional housing units by 2040. But fearing that additional K-12 education costs will outstrip the property tax revenue generated by new housing, some municipalities make it very difficult to build.

The "Roadmap for Economic Resilience" authors recommend addressing the problem by ending local approval authority in communities that don't meet state-mandated housing goals. But mandates and loss of local construction approval are awfully heavy-handed; it would be better to start by trying state or regional incentives for housing development.

In fast-growing metropolitan areas like the Bay Area, Boston and Seattle, sub-par infrastructure and pricey housing threaten to put the brakes on rapid economic growth. In struggling areas, infrastructure can be an important obstacle to growth. In either case, as these studies argue convincingly, coordinated regional strategies that include private participation would offer an important competitive advantage.