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Area Development - Site Selection, Facility Planning and Workforce Development

Infrastructure 2011: A Strategic Priority for U.S Competitiveness

6/10/2011
The Urban Land Institute and Ernst & Young released the results of their annual joint global infrastructure survey - Infrastructure 2011: A Strategic Priority - at the ULI spring meeting in Phoenix.

According to E&Y's summation of the report, trillions of dollars have been spent rebuilding and expanding infrastructure around the world, but not in United States. This lack of an ongoing, sustainable, and strategic commitment to rebuild and expand its infrastructure will begin to seriously weaken U.S. competitiveness, predicts Howard Roth, Ernst & Young's Global Real Estate Leader. However, Roth said that while the forecast may look grim, there are some immediate steps that may be taken to close the gap and also help the U.S. 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," said Roth, "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."

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 stated. "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 U.S. must recognize that public private partnerships are beneficial to the speedy delivery of some projects, but aren't the only solution.

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," said Roth.

Roth also told the group that almost every major U.S. economic competitor in the world - including both developed and developing countries - has committed to programs investing trillions of dollars over the next several years to rebuild and expand their strategic economic positions and enhance the lives of their citizens.

"China, India and Brazil have all embarked upon strategic infrastructure programs and will invest about US$1 trillion each over the next three to five years in high speed rail, new highways, toll roads, and urban transit - in efforts to improve or solidify their global economic positions over the next few decades and into the future," Roth said. "Even the United Kingdom, which is in the midst of a severe austerity program, and the Middle East, which has been torn by civil strife, are continuing to invest billions in physical infrastructure, aware that to take their foot off the pedal will eventually bring their economies to a halt," he added.

In contrast, the recent U.S. approach to infrastructure improvement has relied on the federal economic stimulus program, which peaked in 2010 at just over US$20 billion, and will see a significant reduction in outlay next year and through to 2020. State and municipal authorities are also dealing with what has become for most "an era of less" - less revenue, less capital for investment, and less ambition to address the infrastructure challenge, even though voters rank building and maintaining U.S. infrastructure as a key goal. "It's hard to see a comprehensive approach to addressing infrastructure issues here in the U.S.," Roth said, adding, "the stimulus helped, but it was only a down payment on what's needed." In fact, the American Society of Civil Engineers (ASCE) has projected that the U.S. needs to invest US$2 trillion over the next five years just to maintain its existing infrastructure. "As if the past few years of economic debilitation haven't been enough, in just the past few months we've had major setbacks by Mother Nature on several fronts. Tornadoes, floods, and other major catastrophes have damaged a lot of what the U.S. did have in place last year, and they are an additional wake-up call that the nation's foundation needs constant attention.

Rebuilding the U.S. [infrastructure] is no longer an option, it's a necessity - and one that requires a strategic and considered approach if we are to remain a global leader," Roth concluded.

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