{"id":971,"date":"2018-08-01T14:40:48","date_gmt":"2018-08-01T21:40:48","guid":{"rendered":"https:\/\/southernoregonbusiness.com\/?p=971"},"modified":"2019-07-17T14:42:56","modified_gmt":"2019-07-17T21:42:56","slug":"a-letter-to-potus-on-infrastructure","status":"publish","type":"post","link":"https:\/\/southernoregonbusiness.com\/a-letter-to-potus-on-infrastructure\/","title":{"rendered":"A Letter to POTUS on Infrastructure"},"content":{"rendered":"\n

December 11, 2017\u00a0
by<\/em> Charles Marohn<\/a><\/p>\n\n\n\n

During the presidential transition that took place at the beginning of this year, I was asked to provide my thoughts on how a Trump administration should prioritize what was anticipated to be up to a trillion dollars in infrastructure spending. It was an honor \u2014 and a testament to how large the Strong Towns movement has grown \u2014 to be asked to weigh in with some notes. I knew the odds of our foundational ideas being given serious weight was remote since, if asked what the federal government should do on infrastructure spending, I would have argued: the less the better. So, in the spirit of pragmatism, I tried a different approach.<\/p>\n\n\n\n

The question we at Strong Towns asked ourselves was this: If America’s going to spend $1 trillion on infrastructure, how could that be done in the least damaging way? Using Strong Towns’ framing, how could we limit the downside damage of a surge in infrastructure spending in 2017 and increase the likelihood that there would be some long term upside to these investments?<\/p>\n\n\n\n

While he was roundly criticized for making the comment at the time, I was and remain sympathetic to Donald Rumsfield’s observation during the war with Iraq that you go to war with the military you have, not the one you wished you had. At its core, it’s an acknowledgement that, particularly in major matters, we will never have the ideal set of conditions for moving ahead. Anyone who has successfully managed a complex system for any length of time grasps this intuitively, making reaction to Rumsfield’s comments a litmus test of sorts for a certain type of competency. I referenced it in my comments below as a way to signal that we grasp this limitation.<\/p>\n\n\n\n

I ultimately framed my remarks as an open letter because it helped me think more like a politician and less like a policy advocate, and because I thought it would be helpful for the communities that received this money to think about things in this way. The four-point framing, while not universal, is simple to understand and, if followed, would generally produce better results than whatever is ultimately done.<\/p>\n\n\n\n

Speaking of which, despite seemingly broad consensus among elected officials, policy advisers and pundits that the smartest course of action for the United States is to spend a colossal sum of federal money on infrastructure, we haven’t done it. Perhaps it will happen in 2018, but perhaps not. I’m not going to take the credit for the hesitation, but every day this is put off, we build more of a groundswell of opposition to our current infrastructure approach. If serious reform is not an option, here’s to another year of inaction.  – Chuck Marohn<\/p>\n\n\n\n

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Dear Mr. President,<\/p>\n\n\n\n

I am writing you on behalf of our Board of Directors<\/a> and our membership<\/a> regarding a potential surge in federal infrastructure spending<\/a>. At Strong Towns, we have developed a unique understanding that allows us to speak with a level of clarity on this issue. Our supporters have no financial interest in whether or not more federal money is spent on infrastructure; our mission<\/a> is to advocate for ways those investments can make our cities stronger.<\/p>\n\n\n\n

\u201cTo borrow a real estate term, America\u2019s infrastructure is a non-performing asset. For nearly every American city, the ongoing cost to service, maintain and replace it exceeds not only the available cash flow but the actual wealth that it creates.\u201d<\/p><\/blockquote>\n\n\n\n

To borrow a real estate term, America’s infrastructure is a non-performing asset. For nearly every American city, the ongoing cost to service, maintain and replace it exceeds not only the available cash flow<\/a>but the actual wealth that it creates.<\/p>\n\n\n\n

For example, we did a deep financial study<\/a> of the city of Lafayette, Louisiana. We found that the city’s public infrastructure \u2014 roads, streets, sewer, water, drainage \u2014 has a replacement cost of $32 billion. In comparison, the total tax base of Lafayette is just $16 billion. Imagine building a $250,000 home and needing an additional $500,000 in infrastructure to support it. This seems incredible. But not only is it common, it is the default<\/a> for cities across America.<\/p>\n\n\n\n

This imbalance is caused by incentives we embed in our current approach. When the federal government pays for a new interchange<\/a> or the extension of utilities, local governments gladly accept that investment. The city, while spending little to no money of their own, has an immediate cash benefit<\/a> from the jobs, permit fees and added tax base. The only thing the local government must do is promise to maintain the new infrastructure, a bill that won’t come due for decades.<\/p>\n\n\n\n

Here’s the catch: When we look at that bill, our cities almost always can’t pay it. Cities never run a return-on-investment analysis that includes replacement costs. Cities never even compute the tax base needed to financially sustain the investment. There’s no incentive to do it and every reason not to.<\/p>\n\n\n\n

\u201cCities with huge maintenance backlogs still prioritize system expansion because they are chasing the short-term cash benefits of new growth, even at the expense of their future solvency.\u201d<\/p><\/blockquote>\n\n\n\n

In psychological terms, this is called temporal discounting<\/a>. The people running local governments, as well as the residents they serve, have the natural human tendency to highly value free money today and deeply discount, if not altogether dismiss, the financial burden these projects will create in the future. We’ve been building infrastructure this way for two generations. We have created a lot of short term growth<\/a>, but we’ve also created trillions of dollars of non-performing assets \u2014 infrastructure investments that are slowly bankrupting our cities, towns, and neighborhoods.<\/p>\n\n\n\n

The fundamental insolvency of our infrastructure investments is the root cause of the pension crisis<\/a> and the explosion in municipal debt<\/a>. It is the real reason why our infrastructure is not being maintained. New growth is easy and comes with all kinds of cash incentives. Maintenance is difficult<\/a> and has little upside<\/a>. Cities with huge maintenance backlogs still prioritize system expansion because they are chasing the short-term cash benefits of new growth, even at the expense of their future solvency.<\/p>\n\n\n\n

What do we do today? To paraphrase former Defense Secretary Donald Rumsfeld, we’re going to make investments in infrastructure with the systems we have, not the ones we wish we had. Here’s what we must do immediately:<\/p>\n\n\n\n