Survey: U.S. Not Committed to Rebuilding and Expanding Infrastructure Compared to World

The lack of an ongoing, sustainable and strategic commitment to rebuild and expand its infrastructure will begin to seriously weaken the U.S.’s competitive position in the coming years, predicted Howard Roth, Ernst & Young’s global real estate Leader. The warning came during an address to urban planners, architects as well as real estate developers, investors and lenders attending the Spring Meeting of the Urban Land Institute (ULI) in Phoenix.

The ULI and Ernst & Young released the latest results of their annual joint global infrastructure survey: http://www.ey.com/Publication/vwLUAssets/2011_infrastructure_report_setting_strategic_priorities/$FILE/Real Estate_Infrastructure_2011.pdf

Roth said that while the forecast may look grim, there are some immediate options that can help close the gap and also help the country create sustainable jobs.

First, the U.S. needs to put in place a national infrastructure strategy rather than take a piecemeal approach to maintenance and development. “The leadership in the U.S. needs to neutralize politics by adopting a ‘Race To The Top’ model for determining priorities and funding projects,” Roth said. "And one of those priorities should be to concentrate on refurbishing and expanding global market gateway cities like New York; San Francisco; Los Angeles; Washington, D.C.; Chicago; Miami; Atlanta; Houston and Dallas in order to put the U.S. squarely back into the game.” Roth also pointed to the need for a national as well as state-sponsored infrastructure banks to funnel capital into strategic programs.

Second, the U.S. must make itself the preferred market of choice for institutional investment capital by encouraging private investment. “Studies show that institutional investors plan to increase their allocations to infrastructure five-fold over the next 15 to 20 years and although a majority of these funds come from U.S. investors, most of the capital is being diverted to Asia, Europe and Latin America because we don't have our act together," Roth said. “We need to set the right conditions for U.S. investors to keep more of their money here, and we also must attract overseas investors.”

Third, the US must recognize that public private partnerships (P3s) are beneficial to the speedy delivery of some projects, but aren’t the only solution. “P3s are just one arrow in the quiver; to be truly successful in maximizing public and private dollars and getting the best infrastructure we can afford, we need to be strategic about our investments,” he said.

Fourth, the U.S. must realize that too much of the past funding for vital infrastructure has been siphoned off to plug holes elsewhere in the federal budget. “We already have the lowest total taxes (excise and gas consumption) of any country in the industrialized world but not all of those funds flow into road and infrastructure improvements. We have to learn that we can’t continue to have everything and pay for nothing,” Roth said.

Source: Ernst & Young