The Future of US Transportation and Water
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Not Everything Is Broken The Future of U.S. Transportation and Water Infrastructure Funding and Finance Debra Knopman, Martin Wachs, Benjamin M. Miller, Scott G. Davis, Katherine Pfrommer C O R P O R A T I O N For more information on this publication, visit www.rand.org/t/RR1739 Library of Congress Cataloging-in-Publication Data is available for this publication. ISBN: 978-0-8330-9971-6 Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2017 RAND Corporation R® is a registered trademark. Cover: The cover image, taken by U.S. Army Corps of Engineers photographer Mark Rankin, is of Chickamauga Lock and Dam, which is located seven miles North East of Chattanooga, Tenn., and was completed in 1940. The lock is owned by the Tennessee Valley Authority and operated by the U.S. Army Corps of Engineers. A project to replace the now-deteriorating lock began in 2003 and is scheduled for completion in 2023. 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Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Preface Federal investment in infrastructure has been receiving more attention than usual since the Trump Administration and new Congress took office in January 2017. Not surprisingly, the debate is largely about money: how to finance repairs, new roads, and other projects without adding to the deficit, either by direct public spending or tax credits. Less discussed but no less important are issues concerning the policies that support the mature and urban-centered econ- omy that the United States has now—rather than the economy it had decades ago, when most of the current terms of federal engagement were set. These issues are the focus of this report. We frame the infrastructure debate around the case for modernizing federal policies related to funding, finance, and project selection; recognizing the centrality of regional initia- tives that transcend local government and state boundaries; and understanding different types of financing—public, private, and public-private partnerships. The premise is that if compel- ling public benefits can be articulated and financial incentives properly aligned on both the public and private sides, appropriate investment and maintenance will follow. Poorly targeted investment comes from poorly designed policy. Inadequate maintenance often is a symptom of management and governance issues. This report examines current policy and considers pos- sible improvements. Our intended audience includes members of Congress and their staffs, and other public officials and their staffs at the local, state, and federal levels; private investors and organizations committed to public-private partnerships; and the interested public. This project was supported by Lovida H. Coleman Jr. and other RAND donors, income from RAND’s endowment, and RAND’s program of self-initiated research. RAND Infrastructure Resilience and Environmental Policy This research reported here was conducted in the RAND Infrastructure Resilience and Envi- ronmental Policy Program, which performs analyses on urbanization and other stresses. This includes research on infrastructure development; infrastructure financing; energy policy; urban planning and the role of public-private partnerships; transportation policy; climate response, mitigation, and adaption; environmental sustainability; and water resource management and coastal protection. Program research is supported by government agencies, foundations, and the private sector. This program is part of RAND Justice, Infrastructure and Environment, a unit of the RAND Corporation dedicated to improving policy- and decisionmaking in a wide range of policy domains, including civil and criminal justice, infrastructure development and financ- ing, environmental policy, transportation planning and technology, immigration and border iii iv Not Everything Is Broken: The Future of U.S. Transportation and Water Infrastructure Funding and Finance protection, public and occupational safety, energy policy, science and innovation policy, space, and telecommunications. Questions or comments about this report should be sent to the project leader, Debra Knopman ([email protected]). For more information about the Infrastructure Resilience and Environmental Policy Program, see www.rand.org/jie/irep or contact the direc- tor at [email protected]. RAND Ventures The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND Ventures is a vehicle for investing in policy solutions. Philanthropic contributions support our ability to take the long view, tackle tough and often-controversial topics, and share our findings in innovative and compelling ways. RAND’s research findings and recommenda- tions are based on data and evidence, and therefore do not necessarily reflect the policy prefer- ences or interests of its clients, donors, or supporters. This venture was made possible by a generous gift by Lovida H. Coleman Jr. and other RAND donors, income from RAND’s endowment, and RAND’s program of self-initiated research. Contents Preface ........................................................................................................... iii Figures and Tables .............................................................................................vii Summary and Recommendations .......................................................................... ix Acknowledgments ........................................................................................... xvii CHAPTER ONE Introduction .................................................................................................... 1 U.S. Infrastructure: What Is the Problem? .................................................................... 2 Public Expectations of Infrastructure Investment ........................................................... 9 Approach to Analysis ...........................................................................................10 How This Report Is Organized ................................................................................11 CHAPTER TWO Status of and Trends in Spending on Transportation and Water Infrastructure ..................13 Color of Money..................................................................................................13 Public Spending on Transportation and Water Infrastructure: 2014 .....................................16 Trends in Public Spending on Transportation and Water Infrastructure ................................19 Trends in Public Spending on Highways and Mass Transit .............................................. 24 Trends in Public Spending on Water Utilities .............................................................. 27 Trends in Private-Sector Spending on Transportation and Water Infrastructure ...................... 27 Findings ..........................................................................................................29 CHAPTER THREE Infrastructure Funding and Finance Mechanisms Currently in Use in the United States ......31 Who Ultimately Pays for Infrastructure?.....................................................................31 Federal Models for Funding ...................................................................................32 State and Local Funding and Finance ........................................................................39 Rationale for Public-Private Partnerships ....................................................................41 Findings ......................................................................................................... 46 CHAPTER FOUR Federal Transportation Policy and Its Impact on Infrastructure Investment .....................47 Challenges of Building and Maintaining Transportation Infrastructure ...............................47 Features of Federal Policy and Programs .................................................................... 48 Issues in Funding ...............................................................................................51 Conditions and Needs Assessments ...........................................................................52 v vi Not Everything Is Broken: The Future of U.S. Transportation and Water Infrastructure Funding and Finance Project Selection ................................................................................................55 Findings ........................................................................................................