Stimulating Main Street

Most infrastructure is local. That's where stimulus spending can do the most the quickest.
February 4, 2009
Bob O'Neill
By Robert J. O'Neill Jr.  |  Contributor
Past executive director of the International City/County Management Association

During the past few decades, the United States has cannibalized generations of infrastructure investment and substantially underinvested in its maintenance. We know that if the Obama administration and Congress significantly increase this spending as part of their economic stimulus plan, a few state and local governments that receive funding may not use it wisely. But if we do not make this type of investment -- particularly in our critical infrastructure -- we will not successfully create jobs, boost business development or generate long-term revenues that will jump-start our economy and produce lasting effects.

Taking a long-term view of infrastructure investment is not new. We are surrounded by examples of what this kind of national investment can achieve: a world-class interstate highway system, broadband access to the Internet, and a system of airports that serves hundreds of thousands of passengers daily.

To underscore the importance of providing direct funding to local governments as part of the economic stimulus package, ICMA, the National League of Cities and the National Association of Counties presented a white paper, "Local Governments' Vital Role in National Economic Recovery," to the Obama presidential transition team in December. In that paper, the three organizations stressed that because the majority of U.S. infrastructure is built and maintained by our cities, towns and counties, the most expedient way to create jobs and generate revenue is for the federal government to invest in "shovel-ready" (out the door within 120 days of funding) infrastructure maintenance projects.

According to the American Public Works Association, for example, local jurisdictions manage 90 percent of U.S. transit systems, and they own and maintain roughly 75 percent of the more than four million miles of public roads and 50 percent of the nation's 600,000 bridges. The American Water Works Association estimates that more than 98 percent of the nation's water infrastructure investment has been made through local governments, and the Airports Council International-North America reports that local governing authorities own and operate 87 percent of U.S. airports. Virtually all U.S. public schools are owned and operated by local governments.

Investing in infrastructure -- such as airports, housing, highways, roads, sidewalks, curbs, trails and bike paths, bridges, transit, clean water, sewer, schools and communications technology -- is not only critical to revitalizing our nation's financial viability. Without it, long-term prosperity is impossible.

This big-picture approach to economic stimulus served our country well in past recessions. While cutback management affords public- and private-sector leaders the opportunity to retrench and weather the storm of a temporary slowdown, a downturn on the scale of the current crisis calls for an aggregate view of investment.

In "Navigating the Fiscal Crisis: Tested Strategies for Local Leaders" -- a white paper developed for ICMA by the nonprofit Alliance for Innovation and released just last month -- the authors discuss a number of strategies that have proven effective in addressing our country's fiscal woes while taking a long-term approach to fiscal revitalization. For example:

o Tax cuts have less impact on economic recovery than do cash grants to governments.

o Capital-project support has greater impact than support for operating expenditures.

o Support for capital projects that have low operating costs has a greater impact than support for capital projects with high operating costs.

o Higher-level government projects and block grants speed economic recovery compared to formula grants.

Lastly, in addition to infrastructure investment, easing access to capital through the bond market for state and local governments will act as an accelerator for federal stimulus investment. Unlike in past recessions, neither the business community nor any single level of government can creatively manage its way through this current crisis on its own. Today the challenge of rebuilding our economic recovery requires a cooperative approach, a long-term perspective and the thoughtful engagement of leaders from all levels of government and the private sector.