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Howard Roth, Global and Americas Real Estate Leader
Ernst & Young, LLP., presenting “Infrastructure 2011:
A Strategic Priority” at the 2011 ULI Spring Council Forum.

America’s leaders may talk about “winning the future,” but when it comes to essential investment in infrastructure, the United States is failing to “walk the walk.” Paraphrased, that is the conclusion of a new study by ULI and Ernst & Young titled Infrastructure 2011: A Strategic Priority.

“In the U.S., we are spending only half the amount that needs to be spent on infrastructure,” says Maureen McAvey, executive vice president of ULI. “Federal stimulus money will dry up by 2013; new transportation legislation is stuck in neutral; there is a strong antitax sentiment and no consensus on how money for infrastructure should be raised and spent. Every decade between now and 2050, this nation will add over 30 million new people. In addition to moving all these people, the nation has to move goods.”

Alarmingly, the United States is falling way behind emerging markets, which have committed to fulfilling infrastructure agendas to enhance national living standards in an increasingly competitive global marketplace, according to the report. For example, points out Malcolm Bairstow of Ernst & Young, China is spending some $1 trillion over five years on projects including a 10,000-mile (161,000-km) high-speed rail network scheduled to be completed by 2020. India also is spending $1 trillion over five years, after spending more than $100 billion every year since 2007, and aims to raise half of the investment from private capital sources.

Brazil has earmarked some $900 billion to infrastructure over the next three years, Bairstow continues, for projects including high-speed rail linking Rio de Janeiro with Sao Paulo. That country’s spending is spurred, in part, by its commitment to host the 2014 World Cup and 2016 Summer Olympics. Even the U.K., despite its austerity budget, plans to spend $326 billion over the next five years for projects ranging from rail to energy production and broadband access.

So what are we doing here in the United States? “The U.S. seriously lags behind the rest of the world in addressing its infrastructure issues,” says Howard Roth of Ernst & Young. “We are facing increasing federal, state, and municipal budget deficits, and we lack any type of comprehensive national policy or the political will to develop a long-term approach to funding the significant maintenance needs of aging U.S. infrastructure, much less the modernization and greenfield development of critically needed new projects.”

“America’s unwillingness to confront its infrastructure challenges is undermining the ability of our urban areas to compete globally,” adds ULI’s McAvey. “If we persist with shortsighted decisions, we will lose talented workers and companies to nations and cities overseas that are committed to infrastructure as a vital component of livability and economic viability.” All this is happening, she notes, even as more than 70 percent of all ballot measures for transportation funding have passed since 2007, and over 85 percent of Americans now live in metropolitan centers.

Despite fiscal constraints affecting all parts of the country, some U.S. metropolitan areas are doing better than others, says Jay Zuckerman of Ernst & Young. These winners include Denver with its light-rail extension to the airport, San Francisco, Minneapolis/St. Paul, Seattle, Salt Lake City, and New York City, which is rebuilding the Goethals Bridge. Infrastructure projects in these areas are moving forward due largely to the willingness of local governments to pool resources and their ability to gain consensus on planning and spending strategies, the report explains. Meanwhile, a number of cities including Atlanta, Phoenix, and Dallas are scrambling for funding sources because they do not provide gas tax revenues or general fund support for mass transit.

So what’s the solution? “There’s no free lunch,” remarks Zuckerman, saying that while public/private partnerships are part of the solution, they are not conducive to all types of infrastructure projects, and infrastructure funding sources must be expanded. Public/private partnerships can be made more reliable, especially through improved bidding processes, and user fees should be phased in to help fund many projects. “Infrastructure banks” should be created, and life-cycle costing used to drive down costs. Finally, he says, “We need to leverage emergencies in order to create change.”