By Joshua Hurwitz and Emily Brown, International Economic Development Council
Infrastructure is a critical condition for economic development. Without reliable and affordable access to transportation, electricity, water, telecommunications, and waste disposal, modern businesses and communities simply cannot function.
Critical Condition: Infrastructure for Economic Development, a new paper from IEDC’s Economic Development Research Partners, explores how degraded and obsolete infrastructure jeopardizes economic development in U.S. communities of all types and sizes. More importantly, the report offers actionable, practical solutions that place economic developers at the forefront of rebuilding an infrastructure system that yields sustainable prosperity.
Facing today’s infrastructure problems
Quality infrastructure is a competitive advantage in attracting and retaining firms. Footloose companies will decamp to regions that offer better infrastructure if it affects their business models. And regions where infrastructure systems are modern and efficient benefit from higher land values, greater job creation, and higher household income. Great infrastructure, from the Interstate system to the dams built during the Great Depression, has long been a source of American wealth creation.
Today, however, America’s infrastructure is in critical condition. From weight-restricted bridges to water main breaks to crowded roads and airports, nearly all of us encounter strained infrastructure on a daily basis. Deferred maintenance and congestion cost American businesses billions in extra fuel, insurance, repairs, and labor every year. Spotty transit coverage keeps millions of Americans from accessing the jobs they need. And our bridges, subways, and electric grids are highly vulnerable to increased risks of terrorism, cyber crime, and natural disasters.
At the same time, infrastructure demand is changing. Americans are aging, households are getting smaller, and millennials are a growing consumer force. Some regions are facing depopulation, while others are growing explosively. Business demands on infrastructure also have shifted considerably. As old manufacturing plants have been repurposed into homes for technology companies, the rail spurs that serve these factories matter less than high-speed Internet connections and reliable cellular service.
Meanwhile, for today’s manufacturers, congestion-free roads that allow just-in-time delivery and access to export markets via sea and airports are now essential. New technologies, from bikesharing and ridesharing to smartphones and smart meters, promise to change the way Americans consume energy, get around town, and work–making the places that first adopt them increasingly attractive to cutting-edge business and skilled workers.
Europe, Canada, Japan, and emerging economies have invested proactively to address these challenges head-on and take advantage of new opportunities. Yet in the United States, user fee growth, bond issuance, federal grants, and even private investment in infrastructure have stalled. The projects that do get funding are often prioritized according to rigid formulas, rather than business needs, and even the best projects face long approval and reviews.
How communities are addressing the challenge
Armed with the statistics in this report, economic developers can analyze the challenges and opportunities unique to their communities. Moreover, with their strong relationships in government and business, economic development professionals can effectively advocate for modern, growth-ready infrastructure.
For example, a case study from Mississippi profiles how the Golden Triangle Development LINK economic development organization worked with the Port of Lowndes and the Tennessee-Tombigbee Waterway Development Authority to ensure that inland ports and waterways are a source of regional economic growth. Four additional case studies illustrate the important role of EDOs in infrastructure development.
Though raising awareness is critical, economic developers can also actively participate in planning and financing infrastructure. Consider the Economic Development Coalition of Southwest Indiana, which combines the responsibilities of an EDO and regional council. The group has helped secure more than $73 million for 200-plus infrastructure projects, from gas line relocations to highway bypasses, while also attracting $4.1 billion in private capital investment and 6,500 new jobs through its traditional business development activities. Of the organization’s two-pronged approach, Coalition President Greg Wathen says, “It gives us a better perspective about how everything is interconnected.”
EDOs can become active in building infrastructure themselves. In Virginia, the Arlington County Office of Economic Development is building a high-speed broadband network to attract technology companies, research institutions, and government laboratories.
New approaches to financing and partnerships
The report also explores new financing techniques. One of these is congestion fees, a pricing model being deployed with dynamic toll roads and time-of-use electricity pricing in states around the country. Other states are experimenting with capturing the additional land value created by infrastructure improvements, in which fees and levies on anticipated increased land values are used to fund improvements.
One of the most promising techniques for infrastructure deployment is the public-private partnership (PPP). In a PPP, some combination of the design, financing, construction, operation, and maintenance of a new public infrastructure asset is performed by a private firm which has a stake in the success of the project. Economic development professionals, with their many contacts in government, finance, and engineering, are well positioned to broker these partnerships.
For example, three states and one province have come together to form the West Coast Infrastructure Exchange, which bundles small infrastructure projects into composite design-build-finance-maintain contracts that attract private-sector participation. Other states have created infrastructure banks that offer low-cost loans attractive to private consortia of banks and engineering firms.
Infrastructure is essential for profitable, sustainable business operations. Yet American infrastructure is not always aligned with economic development needs, and it is falling behind. Now, economic developers have a comprehensive new resource to guide them through analyzing, advocating, planning, and financing infrastructure, and thus, ensuring their communities’ future growth.