SOURCE: Urban Land Institute

April 29, 2008 11:30 ET

Infrastructure 2008: A Competitive Advantage Says 2008 Marks Critical Juncture in U.S. Infrastructure Investment, Development

New Report Examines Major Issues and Trends; Cautions That U.S. System Is Flawed

WASHINGTON, DC--(Marketwire - April 29, 2008) - The United States needs to overhaul its outdated regional infrastructure planning process and create a viable federal framework, or face compromising its ability to compete in a global marketplace, according to a new report co-published by the Urban Land Institute and Ernst & Young.

Infrastructure 2008: A Competitive Advantage provides a snapshot of current and planned infrastructure investment in a variety of categories across the globe, with an in-depth look at the United States, China, Japan, India and Europe. The second annual report also touches on the infrastructure needs in several of the nation's largest metropolitan areas, highlighting the consequences of inadequate federal policy and guidelines that have resulted in "a mish-mash of disconnected regional infrastructure management approaches."

"The status quo increasingly looks like a precarious option -- relying on existing networks and systems will only hamstring future growth and compromise sustainability," the report states. "2008 seemingly marks a critical juncture in a rapidly changing economic environment where new approaches to land use, infrastructure and energy efficiency will likely determine and possibly reorder the next generation of winners and losers -- countries, companies, investors, and peoples."

The pull-no-punches report says the United States is headed toward decline, and needs to wake up to the dire state of its infrastructure, but cautions that "political will may only emerge when people face imminent reward or immediate risk -- a bridge collapse or a burst levee, and maybe not even then." The report estimates that the U.S. has at least a $170 billion annual funding gap in addition to its outmoded land use and infrastructure models. "America heads for a crisis in the next 10 years if nothing is done," warns the report.

"It is increasingly clear that the infrastructure funding gap will need to be addressed with public/private partnerships," says Dale Reiss, Global Director of Real Estate at Ernst & Young in New York City. "If the U.S. fails to embrace this model, it could lead to our economy falling behind more of our global competitors."

"Infrastructure investment and development are having stronger-than-ever implications for urban growth patterns," says Richard Rosan, president, ULI Worldwide. "If we continue to minimize transportation infrastructure as a federal priority, we are setting our urban areas up for decline, rather than prosperity. This country simply cannot afford to keep treating infrastructure as an afterthought."

The Infrastructure 2008 report was released at a press conference at ULI headquarters in Washington, D.C. and will be presented to ULI members at ULI's Spring Council Forum in Dallas May 7-9.

The report identifies four stages of the infrastructure lifecycle and identifies the U.S., Canada and Australia as "coasting on prosperity." India, China and the United Arab Emirates are in the "growth and development" stage. The United Kingdom, the European Union, Spain, Singapore, Japan, South Korea and Panama are in the "retool and revamp" stage, while Mexico, Brazil, the Czech Republic and Russia are in the "inadequate investment" stage.

Highlighting the different approaches to infrastructure investment, the report makes clear the U.S. is falling behind and needs to "rethink accepted land-use models which led to rampant suburban growth during the last half century." Since 1980, vehicle miles traveled in the U.S. increased 95 percent but road capacity only increased 3 percent, according to the report. Congestion also increased dramatically. For example, Washington, D.C. experienced an increase in annual delays from 10 hours to 60 hours from 1982 to 2005. The report also points out: "Traffic congestion costs motorists $78 billion a year in wasted fuel and lost time."

Numerous worldwide trends and issues are discussed in the report, including:

Infrastructure as a competitive imperative -

--  China leads the world in infrastructure spending topping out at $150
    billion annually or 9 percent of its GDP. India grappling to keep up
    concentrates on new airports and ports. Dubai and Abu Dhabi are fashioning
    desert oases in the Middle East.
--  The U.S., Canada, Australia and Russia all need to ramp up
    infrastructure spending to stay globally competitive. Australia, however,
    is developing public/private financing structures tapping domestic
    institutional funds.
--  In the United States, the window of opportunity is narrowing as a
    massive budget gap and outmoded land use models strangle economic
    competitiveness.
--  Brazil, Mexico and Eastern Europe face insufficient funding for
    infrastructure maintenance leading to economic weakness from lowered
    productivity and efficiency. President Calderon has promised a major
    overhaul in Mexico and the Czech Republic hopes to benefit from European
    Union connectivity programs.
    

Expansion of infrastructure privatization -

--  Financing volume in the Euro market grew by one-third during the first
    half of 2007 (excluding UK) following a 37 percent increase in the 2005-
    2006 period, according to the report. The EU seeks public/private
    partnerships to accelerate implementation of connectivity projects. "A new
    report estimates that PPPs provide funding for about 15 percent of
    infrastructure projects in Europe." But, the role of government remains key
    in providing the framework to make the overall system work.
--  China's transformation to industrial power could not be sustained at
    the $150 billion annual pace, so China created corporations to develop and
    manage infrastructure projects. The state owns the corporation as a
    shareholder with private entities and local governments. The corporations
    can be taken public and the government uses proceeds for other projects.
    The China Railways IPO raised $3 billion in 2007. "The U.S. and the rest of
    the world could learn a thing or two about financing its infrastructure
    needs from of all places China," the report concludes.
--  A new Building Canada program targets $33 billion for new
    infrastructure projects through 2014. About one-third of funding comes from
    a federal gas tax.
--  In Mexico, a new 5-year $250 billion program targets 12,400 miles of
    highways and rural roads for modernizing, expanding rails by 930 miles and
    developing suburban rail around Mexico City. The government also wants to
    convert 16 public freeways to private toll roads and build an additional 24
    privately managed toll roads. Airport privatization has been successful
    with 34 airports managed by three operators.
--  Brazil's poor road infrastructure severely hampers its economy,
    particularly agriculture. Airports suffer from inadequate infrastructure
    with air traffic growing at a 15 percent annual pace since 2004. The
    government's growth plan calls for $270 billion in public and private
    investments between 2007 and 2010.
    

Trends and issues in public/private partnerships relative to the U.S. -

--  Infrastructure funds have an estimated $400 billion of buying power
    worldwide but fund managers are gravitating to those assets with proven
    revenue streams.
--  Specialist operators of ports and airports (foreign owned) are blocked
    in the U.S. due to 9/11 security concerns.
--  State governors avoid "Skyway" fallout and focus public/private
    partnership proposals on toll road construction projects.
--  Private fund managers will pay more for "brownfield assets" in high-
    travel corridors, but expect next generation deals to share revenues and
    give states more control with shorter concession terms.
--  Support builds for Congress to allow states to establish tolls on
    interstates.
--  Interest diminishes for raising tolls to cover shortfalls in state
    budgets that are not infrastructure related.
--  The U.S. needs a better policy for undertaking public/private
    partnership transactions. "Until this happens, private capital will steer
    clear," the report states.
--  Freight rail companies are heavily investing in new tracks and
    facilities.
    

The report notes that a bill introduced in the U.S. Senate proposes a national infrastructure bank, while other proposed legislation calls for "Build America Bonds" to pay for transportation infrastructure. A number of recommendations are included in the report, such as: breaking down government silos, focusing on deferred maintenance, and developing national and regional infrastructure plans. "Government needs to set a policy course that enables greater mobility and productivity as the nation's population grows and concentrates in major gateways and mega regions," the report concludes.

The proposed infrastructure bank might provide a solution to a weakening economy by funding job programs related to rebuilding infrastructure, states the report. "A jobs program can be a means to an end, a powerful tool for economic development, funding future infrastructure to increase employment and improve economic competitiveness."

Another key finding: "Land use and transportation planning must be coordinated at state and regional levels... and transit authorities need to operate with common purpose." And regional planning needs to align with national priorities.

The report also recommends new funding strategies, including: user fees; interstate toll roads; funding based on reducing vehicle miles traveled; subsidies to encourage infill housing and commercial development served by mass transit in pedestrian-friendly communities; stop subsidizing sprawl; and stop tapping user fees to make up for other shortfalls.

NOTE TO EDITORS AND REPORTERS: Copies of the report are available at www.uli.org/reports/. For a hard copy of the report, contact Marge Fahey at 202-624-7187 or E-mail: mfahey@uli.org. To interview Dale Ann Reiss, contact Marge Fahey, or Tim Gallen, Gallen and Associates, 925-915-0762 or Andrew Neilly, Gallen and Associates, 925-915-0759.

About the Urban Land Institute

The Urban Land Institute (www.uli.org) is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has more than 40,000 members representing all aspects of the land use and development disciplines.

About Ernst & Young

Ernest & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 114,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited does not provide services to clients.

Contact Information

  • For more information, contact
    Marge Fahey
    202-624-7187
    E-mail: Email Contact