Yaro on Financing Sustainable Cities and Infrastructure

Urban Age Institute
Jan. 6, 2010

FINANCING SUSTAINABLE CITIES AND INFRASTRUCTURE SYSTEMS

Virtually alone among industrialized nations the US is experiencing rapid population growth -an expected 40% increase by 2050--totaling more than 120 million additional Americans in only four decades.

Most of this growth will occur in 10 emerging megaregions -including the relatively slow growing Northeast. By 2030 the NY region will add 4 million new residents, and there will be 1 million additional NYC residents.

We know that cities are the most efficient places in terms of energy and carbon production. So we need to find ways to accommodate the vast majority of these new residents and economic activities in urban centers like NYC.

The good news and bad news is that virtually all of America's growth since 1945 has been in sprawling, low density, automobile-based suburbs. At the same time most US cities experienced hollowing out, with the result that most US cities lost a third or more of their population since 1960. That's the bad news -the good news is that this sprawling pattern of development has left millions of acres of underdeveloped or formerly developed land. If NYC can accommodate 1 million new residents in the most built out place in America, it should be possible to accommodate virtually all of the nation's population growth in redeveloped and infilled cities and suburbs.

By building in existing cities and suburbs we can heal these places, and make the most efficient use of their existing infrastructure systems.

These places should also be the focus of new investments in High Speed Rail and modern transit systems, creating synergies between these investments in the higher density, energy and carbon efficient development they can support.

By developing in existing cities and suburbs this will also permit us to protect large landscapes and ecological systems at fringes of our metro regions

We'll still need to invest several trillion in updated and expanded infrastructure systems. The nation's HSR system alone could end up costing half a trillion dollars. So how can we finance these systems at a time when the public has little tolerance for higher taxes, tolls and fares?

The answer is that we need to harness the economic potential that our growing population will provide. Goldman Sachs has projected that the US should expect at least a 3-fold increase in GDP by 2050 if we can create new capacity in our infrastructure systems to enable this growth. That means moving from a $14 trillion GDP today to a $45-60 trillion economy by 2050. In effect we can pay for the whole enchilada in the last 6 months of the 40 year period.

So who will pay for these investments, and how? Last year, when I was asked this question at a public forum in CT, -my response was : "We will!" We'll have to do what the rest of the industrialized world does: reach into our pockets one way or another to finance these investments.

We could use income taxes or VAT taxes to finance some of these investments, for example a national HSR system.

But if the public and our elected leaders remain unwilling to use broad based taxes to finance these investments, we could also use a range of user fees:
• Transit- value recapture, fares, cross-subsidies from tolls;
• Highways - congestion pricing, Truck only Toll, HOT lanes;
• Environmental infrastructure: user fees;
• Seaports and airports - landing fees, container fees.

There will also be a role for public-private-partnerships, but this won't be a silver bullet. All over the world, major infrastructure systems are being built largely with public funds, because P3s can't foot the whole bill. So there will be a continuing need for up-front public investments in major infrastructure systems.

Thank You.

Robert D. Yaro,
President
Regional Plan Association