Infrastructure Crisis: Wake Up America!

America is lagging seriously behind Asia and Europe in infrastructure construction and repair, and will lose ground in the rapidly globalizing economy without a dramatic increase in investment. That wake-up call was delivered today to attendees at ULI’s Spring Council Forum by ULI Vice Chairman Dale Reiss; director of the Ernst & Young Global Real Estate Group.

Reiss outlined some of the findings in a new report, Infrastructure 2007: A Global Perspective, just published by ULI and Ernst & Young and released at the conference. The report, the first in an annual series, offers a comprehensive look at the status of current and planned infrastructure investment and development in a variety of categories in countries worldwide, with a particular focus on the United States, China, Japan, India, and Europe. The first of its kind, the report discusses the evolving infrastructure market, including private and combination public-private systems for funding, construction, operations and management.

According to Reiss, the private sector is going to play a significant role in what she predicts will be a global movement to build and modernize the world’s infrastructure. She is expecting a fundamental shift in the current business model that will change the playing field across the board. "The private sector ­- by virtue of both the capital it controls and the skill sets it exhibits -- is going to play an increasingly important role in the effective and efficient development of infrastructure here in the U.S. and abroad over the next 50 years," she said. "Public-private partnerships are here to stay and may well be the only viable way for governments to reach their infrastructure development goals." According to Reiss, private investors will vie with traditional bond financing techniques to compete for, and woo the ownership and management of these costly systems, drawing them out of the exclusive realm of the public sector.

In the U.S., reluctance toward new financing mechanisms such as privatization and resistance to higher tolls and taxes will have to give way, as the issue of failing infrastructure has now reached a "crisis" stage, Reiss said.

The report notes that solving the mobility problems in the U.S. will require more than a greater commitment to infrastructure repair and construction. In addition to revamping funding mechanisms for construction and operations, long-term solutions must include rethinking land planning models so they are far less auto-dependent and offer plenty of options for getting from on place to another. If driving continues to be the only practical transportation option in many metropolitan areas, "no amount of infrastructure investment will be adequate," the report says.

Infrastructure 2007 offers plenty of reasons to be concerned about what may happen to America’s underpinning if we keep ignoring it. As Reiss pointed out, infrastructure is not an attention-grabber. Rather, it’s one of those things that we take for granted -- until it fails. The comprehensive overview provided in this report will hopefully raise the visibility of this critical issue and spur some much overdue action.

Stay tuned for more insights from the Spring Council Forum.