Creative Mayors and the Infrastructure Puzzle

As Washington argues about a federal approach to infrastructure, two Midwestern mayors are forging ahead with local solutions that focus strongly on economic development.
by | October 19, 2011

While the Obama administration continues to advocate for a national infrastructure bank, Republicans are pushing back with a range of fiscal and political objections that, however legitimate, do nothing to put people and significant amounts of latent private capital to work. Yet in an expression of the notion that all politics (and it seems opportunity) are local, a Republican mayor and a Democratic mayor are pursuing innovative new infrastructure plans for their cities that prioritize wealth-creating and tax-base-expanding projects and bring new investment opportunities to the table.

In Indianapolis, Republican Mayor Greg Ballard faces enormously difficult budget challenges alongside a need to maintain and expand the city's economic backbone. With future federal revenues likely to decrease and a citizenry increasingly sensitive to tax hikes, a new approach to and source of funding for infrastructure maintenance and expansion was sorely needed. In response, Ballard has crafted a remarkable $425 million infrastructure program called RebuildIndy without any increase in taxes or rates.

Ballard's plan to identify new project revenues rests on two creative approaches. First, he worked to combine water, wastewater and gas utilities -- previously separate and duplicative enterprises -- into a single utility run by a quasi-government organization known as a "statutory trust." The new entity combined public employees and national outsourcing contractors to produce $60 million in savings per year, providing resources for nearly $1 billion of water-system debt. Second, Ballard renegotiated the city's consent-decree contract with the U.S. Environmental Protection Agency to creatively achieve greener outcomes at a much lower cost to ratepayers, producing over $740 million in savings. These changes allowed the utility to increase its payment in lieu of taxes to the city -- stabilizing costs to consumers and yielding another $153 million for high-priority infrastructure improvements across the region.

So far, these large-scale innovations have led to a stream of multimillion-dollar investments in Indianapolis neighborhoods, parks, bridges and roadways through a process that takes into careful consideration the interests of local business owners, neighborhood leaders and the region's economic prospects.

In Minneapolis, Democratic Mayor R.T. Rybak is in the process of presenting a similar case that infrastructure investment can, and must, produce economic and property-tax growth exceeding the cost of any debt incurred. In his September budget speech, Rybak introduced a new "Development Infrastructure Fund," proposing to use a modest pool of general-obligation bond money set aside specifically for public infrastructure to fuel private development. The fund, as proposed, calls for $10 million to be set aside over the next five years for projects uniquely suited to demonstrably grow the economy in Minneapolis.

At just $2 million per year, the Development Infrastructure Fund will rest on leveraging and partnerships for its impact. From the outset, the mayor's team would work to identify and prioritize high-ROI projects, leverage private capital and dovetail those efforts positively with the rest of the city's $600 million capital budget plan. To accomplish this tricky task, the city will focus its efforts on a small number of investments uniquely suited to increasing the city's tax base by partnering with businesses ready to expand their operations in short order.

The combined infrastructure funds also would aim to accomplish specific goals, including building an integrated transit system; construction of high-quality, affordable housing; support for active (walkable, bikeable) lifestyles; priority for industrial employment districts; and attracting business.

Identifying these projects will be challenging, but if successful, Rybak will have found a way to leverage relatively small amounts of capital in an innovation-oriented fund for outsized gains in the city's economic base.

In the end, these two mayors took quite different approaches to the financing of their infrastructure plans, yet two common principles spanned their efforts. Both give high priority to economic develop ment and job creation, and both cities are intent on leveraging their investments.

Indianapolis has challenged foundations, neighborhoods, developers and other institutions to participate and used that participation to set priorities. Minneapolis plans to use a dynamic new pocket of funding to launch some projects, and recommend more, that result from extensive collaboration with public, private, internal and external stakeholders that may or may not include financial contributions from them.

Good results follow when creative mayors guide infrastructure spending at the local level. And more and more are, like Mayors Ballard and Rybak, finding creative ways to repurpose existing dollars rather than waiting on Washington.

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