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5 The Future of Urban Public Works: New Ways of Doing Business Douglas C. Henton and Steven A. Waldhorn INTRODUCTION Two or three decades ago, the world of urban public works seemed for the most part to be set in concrete. Financing methods were standard, engineering designs uniform, and politics mostly local. Starting in the mid-1950s, however, cracks began to appear in that concrete, and recent developments have speeded up the crumbling of the urban public works foundation. Beginning in 1956 the federal government first increased, then decreased, its involvement in such areas as interstate highways, wastewater treatment, and mass transit construction. Over the same period, deferred maintenance has presented the country with a huge bill- now coming due for repair and construction. In the last few years, fiscal constraints have forced localities to abandon traditional financing approaches and to search for new ways to fund public works. In this context, infrastructure has within the past year or two been discoverer! as a national issue. The once fairly traditional arena of public works is being forced to adapt to new realities. Federal, state, and local roles, as well as the nature and extent of private-sector involvement in infrastructure issues, are being re- thought in a fundamental sense. There" is debate regarding how funds for capital improvements should be raised and spent at every 178
THE FUTURE OF URBAN PUBLIC WORKS 179 level of government. New political alliances are emerging arounc} these issues. Finally, at least some new technologies seem to have developed to a point at which they can significantly affect both the cost and design of some public works. In short, there is a new florid of urban public works and a future that requires new ways of doing business. This chapter examines these new ways of doing business from the diverse standpoints of economics, politics, and technology. It draws in large part on research here at SR} International. We try to identify some of the major questions that research in this area should address over the next decade. From an economic point of view, some questions requiring in- vestigation include: · What types of financing methods to pay for infrastructure are likely to become more prevalent? · Is there a significant shift in the willingness of people to pay for different kinds of facilities and services? From a political point of view, some basic questions need to be addressed: · Which stakeholder groups are likely to support increased in- vestment in public works? · What new coalitions are likely to emerge on different sides of issues, and what new roles can we expect to see for business in this issue? Finally, from a technological point of view, critical questions that need to be looked at include: · How will new patterns of urban development linked to new technologies change demands for infrastructure of different types? · What potential innovations in public works technology are likely to occur and what are likely to be major constraints to their adop- tion? We conclude that public financing for infrastructure is likely to become more benefit-based and user-oriented, moving away from traditional tax and spending approaches. New types of public-pri- vate options will become more prevalent. Research is needed to assess the equity effects of these new methods of finance and to determine how extensively they can be applied. We also find that new political coalitions are merging around the
180 PERSPECTIVES ON URBAN INFRASTRUCTURE infrastructure issue, often involving a special role for business at the state and local levels. Infrastructure may be seen less as solely a government issue and more as an issue of public-private invest- ment. Research is needed to determine the consequences of these structural changes and opportunities for joint investment. Finally, we suggest that current demands to rebuild our decaying infrastructure may not be taking into account new patterns of urban development and new technology, which call for very different kinds of investments in public works. Research is needed to determine how critical developments in technology will shape demand for in- frastructure and how technology innovation can be promoted in the provision of infrastructure. INFRASTRUCTURE AS AN IMPORTANT NATIONAL ISSUE Infrastructure will remain a national issue because the problem is going to get worse, and there is little indication that the root causes are going to be addressed soon. State and local finances cannot deal with the problem without major changes. The basic tension in this issue for the future is determining who is responsible for what. Is infrastructure a national, local, or state issue, and what role should the private sector play? A second question, only beginning to emerge, is how much in- frastructure can we afford, and of what kinds? For example, is more new industry likely to be attracted by a better highway or by the installation of broadband data transmission lines and microwave facilities? If local phone companies die, will municipalities be re- sponsible for telephone service as well as sewers? Visible Signs of Decay In 1982 infrastructure went from an obscure term known to only a few into the national spotlight. It is likely to remain high on the national agenda for a number of reasons. The causes of the prob- lems deferred maintenance and inadequate public investment- are likely to continue at least into the near future. More recently the public has become aware of visible signs of decay, notably in the form of potholes, breaks in water mains, ant! bridge closings. The media have picked up on these visible signs and dramatized the worst cases in articles and news stories. The business community has become especially concerned about this decay because it recognizes how critical infrastructure is for
THE FUTURE OF URBAN PUBLIC WORKS 181 its own future development. Most studies of business decisions to locate plants and facilities put adequate infrastructure near the top of the list of factors influencing decisions (Choate and Walters, 19811. Adequate roads, water systems, transportation, and sewers are essential to business. While the current recession has slowed company expansion and capital outlays, business can look ahead and see potential bottlenecks and constraints on its growth and development. A recent news article on infrastructure questioned the ability of local governments throughout the nation to provide the infrastructure needed for economic growth (Business Week, Oc- tober 26, 1981:7-91. Although there is controversy over the extent of infrastructure needs, few observers question that the task is one of major magnitude. Deteriorating State and Local Finances Concern about how to pay for infrastructure has increased with the deterioration of state and local public financing. Beginning with the tax limitation movement heralded by Proposition 13 in 1978 and continuing through 1983 with the effect of the recession on revenues, state and local governments throughout the nation have been experiencing extreme fiscal constraints. The response has been to cut services. Since 1978 per capita state and local expenditures have decliner! steadily in constant dollars (U.S. Advisory Commis- sion on Intergovernmental Relations, 19814. At first, like the public, business saw the cutbacks mainly as a move to reduce the fat in government; now the perception is that of being down to the muscle and bone in some services. For example, a recent poll conducted for the Bay Area Council in California by Mervin Field (Field Research Corp.) found that for the first time since Proposition 13, a majority of Bay Area citizens felt that cuts made in local budgets after Prop- osition 13 were in the wrong places and that taxes should be raised, if necessary, to maintain municipal services. A question that many municipalities are grappling with is how operating and capital in- vestment costs should be paid for in the aftermath of the tax lim- itation movement. A lon~er-term Question is how much long-term ~ v ~ v ~ ~ ~ ~ ^ ~ ~ ~ investment should be made. A National or Local Issue While infrastructure has become a national issue, public works still remain primarily a local concern. There is a basic tension
182 PERSPECTIVES ON URBAN INFRASTRUCTURE between forces that centralize this issue at the federal level and forces that decentralize it to the community. During the 1950s and 1960s, there were strong centralizing forces resulting from such acts as the creation of the interstate highway system and federal grants for urban mass transit and wastewater treatment. In the 1970s, growing concerns about an overloaded federal system and budget deficits led to moves to decentralize and reduce federal ef- forts. By the l980s, growing fiscal constraints at the local level have limited the ability of local government to finance capital im- provements. Today there is a basic problem of increased federal financing accompanied by federal standards versus local adaptation to regional differences. The next few years should provide an opportunity to sort out some appropriate roles for federal, state, and local governments as well as the private sector in infrastructure. It is important to avoid, first, too many national standards that do not allow for necessary regional variation and, second, local adaptation so decentralized that there are tremendous inequities by region and among service areas. How to avoid these traps is one of the most important ques- tions the infrastructure debate will address in the future. SOME FUTURE TRENDS IN URBAN DEVELOPMENT AND TECHNOLOGY Changing technology is affecting urban development and the type of infrastructure that will be needed. At the same time, new tech- nology is changing the way infrastructure can be provided. Thus, engineering and technology affect both the demand for and the supply of infrastructure. Those relationships need to be examined more fully to understand what types of public works will have to be paid for in the future. Future Development and Public Works Infrastructure is both a consequence and a cause of urban de- velopment. The evolution of urban public works shows a clear re- lationship between changing spatial dimensions (urban sprawl, for instance) and infrastructure. New technology (e.g., railroads, au- tomobiles), energy resources, and work and housing patterns all interrelate and determine the types of public works that are needed. Urban development from 1880 to 1920 demanded one type of cen
THE FUTURE OF URBAN PUBLIC WORKS 183 tralized infrastructure, while the suburban developments of the period 1950-1970 determined a different, more decentralized type of public works. What type of urban development can we expect in the future and how will these patterns determine the types of in- frastructure that will be needed? In many ways these basic questions of urban development and new technology are not being asked today in planning for public works. A large part of today's problem is repairing what has already been built and thereby preserving the investment in public works. The only controllable part of today's problem seems to be what type of new infrastructure investments we want to make for the future. However, rebuilding the nation's decaying infrastructure exactly as it is may be like refighting the last war instead of the one we really face. Perhaps we should instead be investing in new types of infrastructure even for old systems for the emerging economy of the United States. One way to deal with the question is to say that changes will come slowly and tomorrow will look pretty much like today. The implication is that the necessary adjustments can be made as we go along. Another way to look at this question, however, is to relate infrastructure demand to future scenarios that are different from today. SR} has used these types of scenarios to explore possible future developments in such areas as transportation and energy (SRT International, 1977a, 1980a). In laying out future scenarios, it becomes possible to explore the relationships between technology, urban development, and infrastructure requirements. One future scenario is based on the continued emergence of the postindustrial information economy. Increasing numbers of work- ers are employed in high-technology, services, and information- related fields; the application of computers changes the nature of work. These developments combine with major advances in tele- communications to drastically change the patterns of both urban development and work itself. Businesses that communicate infor- mation by satellite no longer need to be concentrated in central cities. Increasing numbers of people can work at home using com- puters connected to their telephones to do their work. It is estimated that as much as 7 percent of the labor force will work by using computers at home by the end of the century. With workplaces more widely distributed instead of concentrated, there would be less com- muting to work and lower demand for highways. The shift toward high-technology information services that would reduce the demand
184 PERSPECTIVES ON URBAN INFRASTRUCTURE for heavy industrial infrastructure would also increase the demand for communications infrastructure. This pattern of development thus drastically alters needs for public investment: Are today's pub- lic works planners preparing for it? The Japanese have been giving this type of future and its im- plications for infrastructure some serious thought. A recent journal of the Ministry of International Trade and Industry described how changes in Japan's industrial structure require a new type of in- frastructure. It states: "Our industries have shifted toward knowI- edge-intensive and high value added industries.... The high tech- nology industries require an infrastructure remarkably different from those required by the industries leading our economy in the past.... Increasingly, a 'soft' infrastructure organized around the demands of the information has become important" (Kobayashi, 1982:2). New Technology of Infrastructure Another scenario is based on the assumption that new technology for providing infrastructure will emerge. New, less-expensive road surfacing methods and materials, alternative bridge construction, and new water system methods are becoming available. New types of community waste treatment, solid waste disposal, and heating systems are developing. Some examples of these technologies from recent research at SR} include new membrane separation tech- niques that can reduce the level of organic waste that has to be treated and new uses of polyurethane to reinforce bridges (recently used on the Golden Gate Bridge). A particularly interesting innovation is the development of a noncorrosive substitute for salt made from biomass feedstocks such as corn. In a recent report for the Federal Highway Administration prepared by SRT, methods of genetic engineering are described for creating a mutant strain of bacteria critical to the fermentation process for producing a substitute deicer, calcium magnesium ace- tate (SR} International, 1982a). A recent article in Chemical En- gineering states that "biochemical technology could well prove a major weapon against the deterioration of our roads, bridges, rails, autos, and other steel structures (Chemical Engineering, 19834. The article notes that a major cause of the decay of these structures is the use of salt about 9 million tons annually. The Federal High- way Administration is now sponsoring efforts to develop methods for producing calcium magnesium acetate economically.
THE FUTURE OF URBAN PUBLIC WORKS 185 An important question is whether local governments can adapt to new technology. Research by SRI for the National Science Foun- dation on the adoption of science and technology by state and local governments indicates that a variety of institutional, political, and economic constraints stands in the way (SR} International, l980b). Chief among those constraints is that bureaucracies tend to be dominated by those who have a low propensity to innovate, at least partly because there is an absence of rewards for risk taking. At the same time, economic factors work against adoption. SRI's work on transportation in the future found that "increasing cost and risk associated with introducing a new technology on a grand scale seems certain to slow down its acceptance and diffusion" (SRI Interna- tional, 1977b:3~. Suppose both scenarios apply to some degree, so that there is a situation in which some new types of infrastructure will receive more emphasis (satellite networks) and others less (new commuter freeways) anti in which new technologies will be used in repairing aged systems. The question then is, are we up to it? Robert Yin has found that technological innovation can be promoted at the local level, if the particular innovation can serve bureaucratic goals anct economic self-interest (Yin et al., 19761. Thus the key to this sce- nario seems to depend on the political, bureaucratic, and economic characteristics of local governments. A recent SRI effort to transfer space technology illustrates some of these issues. The National Aeronautics and Space Administration had developed a new automated water quality monitoring system that had application to municipal water supply systems. This tech- nology had been tested at the Santa Clara Valley water reclamation plant. SRI's technology applications team sought to transfer this technology to other localities. For the most part, cities and counties were not really to adopt it because they had not adopted recycling methods that made the new technology economically feasible ant! thus considered the cost of this new technology too high. Two cities that die! adopt the technology, Denver and Houston, had decided that the economics of water required recycling methods and saw the value in purchasing this automated approach (SR} Interna- tional, 1981a). In this case the acceptance of new technology was linked to the economics of water systems and the willingness of local government officials to change approaches. Even old technology can be difficult to implement. An example of a technology that is itself not so new but is innovative for most U.S. communities is district heating and cooling. While a number
186 PERSPECTIVES ON URBAN INFRASTRUCTURE of European cities have district systems, few U.S. cities do. Pro- ponents of district heating point out that it is economical in that it reduces the need for large numbers of individual systems and is energy-eff~cient in that it can burn a wide variety of materials with less waste. Why then is it not readily adopted by cities that need more economical and energy-efficient heating systems? One barrier is the institutional complexities involved in obtaining agreement from the multiple owners of user facilities so that specific projects can become economically feasible. Another is that current public policies do not encourage citywide district heating development. Existing utility companies do not see the need to get involved in such developments. In short, institutional, economic, and political constraints plus the general weight of prior commitments to exist- ing systems make massive redesign of heating and cooling systems difficult. Changing economics and growing awareness of the option may alter this situation in the future, but for now constraints block action. This problem of checks on new developments, innovation, and risk taking is described in more global terms in Mancur Olson's recent book, The Rise and Decline of Nations. The growth in the number of organizations and interest groups committed to preserv- ing the status quo (or at least their piece of the pie) acts as a check to innovation. In terms of infrastructure, there is a risk that people may be so committed to existing technologies and approaches that they cannot adopt new approaches that are more suited to future needs. An Infrastructure for Infrastructure Innovation Research by SRI for the National Science Foundation has found the importance of a research and development "infrastructure" for linking research and development to users (SR! International, 1977b). Recent research on the adoption of innovations has pointed out the key role that an infrastructure of intermediary institutions can play in helping to translate new technology into forms that are useful to adopters (Brown, 19821. In the area of public works, there is clearly a need for networks for the diffusion of innovations in tech- nology. Research on innovation diffusion has indicated that tech- nical and scientific professional groups can help to perform a useful function in this regard (Bingham et al., 19784. One example is the engineering profession. A recent article (C)vi!
THE FUTURE OF URBAN PUBLIC WORKS 187 Engineering, 1982a) on infrastructure and the role of the civil en- gineer points out that engineers have an important role in accu- rately assessing needs and developing innovative and more cost- effective techniques to renew and rehabilitate infrastructure. A later article (C)vi! Engineering, 1982b) points out that civil engi- neers have a direct impact on codes, regulation design, contractual risk sharing, and technological innovation, all of which have a major impact on cost. Civil engineers along with transit designers and public works experts need to become a force in promoting tech- nological innovation and more cost-effective methods. This could involve a greater focus on innovation in career training and de- velopment. In general, it may be useful to think about new ways to promote better infrastructure for infrastructure innovation. Engineering and technology are only part of the triad of concerns involved in infrastructure. As we have seen, economics and politics also shape the adoption of new technology. THE SEARCH FOR CREATIVE ALTERNATIVES Benefit-Based Approaches Versus Ability to Pay No matter how many different types of new infrastructure are built in the future, one thing is clear: New ways to pay for them are needed. Major changes are occurring in public financing for public works. Chief among these has been a shift toward user- oriented, benefit-based approaches. Since the time of Adam Smith, political economists have argued the virtues of a benefit approach to public finance, whereby those who benefit from a service pay for it. Concern over equity led John Stuart Mill and others to argue for an ability-to-pay approach, in which each should pay for a service according to his or her ability to do so. Thus income and property taxes are based on an individual's financial resources. The twen- tieth century saw a rapid increase in the use of a broad range of taxes based on ability to pay. Then came the taxpayers' revolt, initiated by Proposition 13. A variety of benefit approaches are on the rise. A recent survey by the Municipal Finance Officers Asso- ciation and the Advisory Commission on Intergovernmental Re- lations found a 77 percent increase in user charges and a 26 percent increase in benefit assessments by cities in the United States (Cline and Shannon, 19821. When the U.S. Advisory Commission on In
188 PERSPECTIVES ON URBAN INFRASTRUCTURE tergovernmental Relations (1982) surveyed the public, asking which method is the preferred way to raise revenue, 55 percent chose charges for specific services and only 5 percent chose to raise prop- erty taxes (21 percent chose to raise sales taxes). In this phenom- enon we see a return to basics in public finance-the link between services and taxes is reestablished. How does this evolution in public finance toward benefit-based approaches address issues of equity? Not very well, if equity is defined in terms of ability to pay. Anthony Pascal of the Rand Corp. has suggested equity-based charges that take into account the user's income. This can be done either directly, through discounts, or in- directly, through rebates or credits on taxes. Any solution to the equity problem, however, will create problems in administration. Finally, one of the advantages of a user charge is its link to efficiency. Consumers use public services more efficiently if they know they have to pay for them. User charges will thus relate consumer demand to supply more effectively. Here, then, is the classic trade-off in economics: equity versus efficiency. The Impact of Fiscal Constraints: A New Role for Local Government Some have called California a bellwether state in the past, and it may well be leading the way in new approaches to infrastructure. Recent studies of infrastructure options by the Bay Area Council and the Association of Bay Area Governments, from the local per- spective, and by the Governor's Office of Planning and Research, from the state viewpoint, indicate the type of rethinking that has been going on (Bay Area Council and Association of Bay Area Gov- ernments, 19831. First, Proposition 13 has forced local officials to consider alter- native ways to finance public works. The ability to raise property taxes was sharply curtailed, and the issuance of general obligation bonds was limited. This has led to a move toward benefit-based, user-oriented, pay-as-you-go approaches. Second, current budget crises (arising as much from the economy and federal grant cutbacks as from tax limitations), have made local governments look more seriously at ways to work with private business as a partner in solving problems. Infrastructure is a natural area for collaboration with business, because business has so much to gain in terms of the effects on economic growth. New types of public-private ar- rangements have been emerging.
THE FUTURE OF URBAN PUBLIC WORKS 189 Business has shown increasing willingness to support public works not only through taxes and benefit-based revenue approaches (e.g., user fees, benefit assessments, developer contributions), but also through direct participation in infrastructure development and pro- vision. The MFOA-ACIR survey also found that cities had expanded their use of"privatization" options: 24 percent had increased de- veloper contributions to infrastructure; 17 percent had increased contracting out (Cline and Shannon, 19821. A recent review of in- frastructure financing in California prepared for the California Tax Foundation found increasing use of bargaining between the public and the private sectors over infrastructure provision, with devel- opers increasingly providing public improvements as a condition for gaining approval of a development (Kirlin and Kirlin, 1982~. Private businesses are also increasing their contribution to infra- structure development as an investment opportunity with substan- tial tax advantages through sale-leaseback arrangements. There is every indication that this trend will continue- a trend that has major implications for the changing nature of governance. The traditional role of local government as a tax collector and provider of publicly financed services is being replaced by a newer role of local government as entrepreneur, catalyst, collaborator, and broker with the private sector. In some cases, citizens are paying directly for services through user fees or benefit assessments; in other cases, developers are paying through exactions and fees. In still others, private businesses will share the investment cost (and possibly gain some tax benefits). A fairly straightforward tax and general obligation bond financing system is being replaced by a much more diverse set of financing measures: tax, fee, developer exaction, revenue bond, certificate of participation, and sale of leaseback. In the process, local government is learning how to use its powers of governance (regulatory, tax, administrative J in ad- dition to its spending powers to achieve local ends (SR} Interna- tional, 1980c). The consequences of this creative adaptation for both public finance and public administration are immense. Let us look more closely at some of these local alternatives. Al tern a fives in th e Bay Area In November 1981 the Bay Area Council (which represents over 300 businesses in the San Francisco Bay Area) joined the Associ- ation of Bay Area Governments (which represents over 500 local governments) to address the infrastructure issue. A public-private
190 PERSPECTIVES ON URBAN INFRASTRUCTURE task force began working on the problem with assistance from SRI (Bay Area Council and Association of Bay Area Governments, 1983~. After documenting the scope of the problems involved in local streets and roads, water treatment, local drainage, water supply, and pub- lic facilities, the group began the difficult task of identifying al- ternative financing options. Proposition 13 has limited local gov- ernment's ability to raise local property taxes or issue additional general obligation bonds. The state government is experiencing budget crises due to the effect of the recession on revenues and the impact of federal budget cuts. A new range of alternatives for fi- nancing infrastructure beyond traditional tax and borrowing strat- egies is needed. The task force began identifying options within three general categories: · revenue-raising techniques; · debt methods; and · public-private approaches. Within each category individual options were analyzer} using a common set of criteria: · adequacy of funding; · equity; · economic effects; and · ease of public administration. The initial search for alternatives focused on what could be done under current law at the local level through action either by local government or by business. Based on this analysis of options, the group developed a set of feasible alternatives that local govern- ments can now use to help address infrastructure financing issues (Table 5-~. The Bay Area Council/Association of Bay Area Governments task force has now moved into the implementation phase, beginning with the sharing of study findings with local government and business leaders and the encouragement of local governments to adopt new approaches. What is most striking about these alternatives and what they mean for future directions in the financing of infrastructure (and possibly local public finance generally) is their clear orientation toward benefits-based user payments, private-sector participation on an equity basis, and a public-sector role as entrepreneur.
THE FUTURE OF URBAN PUBLIC WORKS 191 TABLE 5-1 Infrastructure Financing Alternatives in the Bay Area Revenue Options · Development Fees and User Charges This conventional approach to raising local revenues could be expanded. · Benefit Assessments Establish special districts to pay for public facilities by as- sessing a levy on property owners in the district. · Community Facilities Districts Establish local districts to enact special taxes to pay for certain public facilities and services. · Redevelopment Authority Finance new construction in redevelopment areas using property tax increases from rising property assessments (tax increment financing). · Special Taxes A revenue source identified in Proposition 13 that local govern- ments may use for specific purposes after approval by a two-thirds vote. Debt Options · Revenue Bonds Bond issues are linked to enterprise activities that will generate dedicated sources of revenue to pay off the bonds. · Certificate of Participation Lease Financing Certificates (representing interest in leases to public entities) are sold to private investors to raise funds for new facili- ties. Certificates are also used in combination with sale and leaseback arrange- ments. · Creative Use of Bond Instruments-This involves unconventional or nontraditional aspects of bond financing, such as zero coupon or indexed bonds. · Short-Term Money Management Various investment techniques are used to pro- duce maximum return on local government funds. Public-Private Approaches · Private Contributions-Contributions can be sought from citizens and private busi- nesses for public facilities and their operation and maintenance. · Private Enterprise Licensing Exclusive rights can be granted to a private firm to construct and/or operate certain facilities. · Public Sector as Entrepreneur-Local government can operate as if it were a pri- vate firm, e.g., jointly participating with business in new developments. Local gov- ernment can bargain with developers to pay for certain facilities in return for public investment and development permits. · Sale and Leaseback Newly constructed or existing facilities can be sold to private investors and leased back for public use. The implications are that local government can no longer be solely an a~ninistrator of local taxes and intergovernmental grants, that private business must become more directly involved in fi nancing through means other than local taxes, and that citizens must be prepared to pay directly for the services they receive. As the change progresses, we find government acting more like a busi ness in many areas, residents paying set prices for public services, and businesses becoming more involved in providing those services and facilities. A critical question is the extent to which these al ternatives will become more dominant in the future.
192 PERSPECTIVES ON URBAN INFRASTRUCTURE Innovation in Urban Transportation An example of one area in which these types of alternatives are being actively experimented with is urban transportation. Ted Kolderie of the Hubert Humphrey Institute has suggested that, in addition to the choices of raising taxes and reducing services, a third option is available to local communities redesigning and restructuring services (Kolderie, 19821. Kenneth Orski has outlined some of the major changes in the recent American Enterprise Institute's review of private-sector in- itiatives. He sees a move away from the traditional view that the delivery of local transportation services should be the exclusive domain of tax-supported public agencies, toward an emerging belief that government itself need not deliver all services. This change is evidenced in the growing number of communities that are contracting portions of their public transportation and encouraging entrepreneurial transit. It is seen in the growth of nonprofit transportation user organizations (commuter bus clubs and regional ride sharing) and corporate employee transportation programs. Increasingly, private developers are sharing in the ex- penses of infrastructure improvements in transportation. In some cases, developers are granted construction or zoning permits on the condition that they implement programs to minimize the effect of increased traffic on surrounding roads. In other cases, private busi- ness is contributing directly to highway improvements. In Dallas, real estate developers are contributing to the construction of a new light rail system by donating most of the system's right of way. In New York, a private business purchased mass-transit rolling stock and leased it back to the mass transit authority, thereby gaining tax advantages under "safe harbor" leasing provisions. Overall, Orski (1982) has found that these new types of public-private part- nerships "may be the vanguard of a new form of governance a new grassroots approach to local problems that is neither fully public nor fully private, but is instead a merging of public and private interests in new institutional settings." Sale-Leaseback The 1981 Economic Recovery Tax Act created new opportunities for business to purchase and then lease back capital to local gov- ernment and thereby gain tax advantages under accelerated cle
THE FUTURE OF URBAN PUBLIC WORKS 193 preciation. Especially in the area of mass transit rolling stock, busi- nesses have taken advantage of so-called safe harbor leasing for tax credits. In other areas, businesses have been able to negotiate arrangements with cities for the purchase of a capital facility that is then leased back to the city. Sale with leaseback has opened up new possibilities for profitable business participation in infrastruc- ture development. Public-private partnerships can help local gov- ernment raise additional resources for public works improvements using sale-leaseback arrangements and negotiated developments based on mutual self-interest. The blurring of boundaries between the public and private sectors is especially unusual in one form of sale-leaseback arrangement the tax-exempt leveraged lease. In tax-exempt leveraged lease fi- nancing, local governments sell public facilities in order to generate capital funds for construction and rehabilitation. The sale is fi- nanced by tax-exempt revenue bonds. Once the facilities are sold, the municipalities lease them back at low rates that reflect tax benefits gained by private purchasers. Looking more closely at the mechanics of one example Oakland, California shows what is possible and how it can work to the benefit of both local government and the private sector. Oakland needed to spend $10 million to renovate a deteriorating public au- ditorium. After a review of financing options, the city clecided that sale-leaseback financing combined with tax-exempt revenue bonds not only offered the lowest borrowing cost but also required no general fund monies. In the initial phase of this transaction, the city sold its art mu- seum to private investors for $22 million, financed with a ~ percent down payment and a $22,240,000 bond issue. In the second phase, the auditorium was sold for $20 million plus cost of renovation. That purchase was financed through industrial development bonds. The city entered into a 30-year lease with four 5-year renewal options. As a result the city continues to control management of both facilities. At the end of the lease and after the first renewal period, the city will have the opportunity to repurchase the museum ant! the auditorium. Upon expiration of the leases, the city intends to reacquire the facilities. This leveraged lease financing allows the city to sell public fa- cilities to investors in order to use the proceeds to finance the re- habilitation of the auditorium. Measured in terms of savings in the cost of borrowing, these two transactions provide a cost of leasing
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THE FUTURE OF URBAN PUBLIC WORKS 195 ready authorized but not yet obligated. Local governments receiving loans from the bank would have to agree to raise user fees to help finance the repayment of the loan. The advantages of this direction in state local assistance are clear. Economies of scale favor state borrowing; state loans are paid back when grants are not, and localities can design and operate their own infrastructure. Federal Public Works Bank If an infrastructure bank would work at the state level, why not at the federal level? A proposal has been developed for a national public works bank into which the federal government would put $1 billion and the states $! billion. The federal government would use the $2 billion to borrow $20 billion that states could lend to their localities for infrastructure projects. On one hand, the argument is made that the federal government would be able to borrow money more efficiently because of its favored status in credit markets. On the other hand, the federal government issues taxable debt, and thus a federal bank operating with an interest subsidy could disrupt the operation of the tax-exempt state and local bond market. An alternative that would address this concern is a proposal for the federal government to subsidize 25 percent of local debt repayments. In this way the federal government would not compete with the bond market but would encourage people to go into the tax-exempt state and local bond market. An expanded variation on the bond bank theme is the proposed Reconstruction Finance Corporation a federal investment and de- velopment bank that would lend money to both business and local government for capital investment. Felix Rohatyn (1982) has sug- gested that, by leveraging an initial federal outlay of $5 billion and $25 billion of government guaranteed bonds, over $60 billion of new investments could be generated. He suggests that Reconstruction Finance Corporation capital would be available only if local agree- ments on user fees, productivity, and wage concessions ensured the viability of the infrastructure project. The question that must be asked about such a mechanism is whether a single body should be making such significant invest- ment decisions for both the public and private sectors. Are we ready for mechanisms that move toward the central allocation of credit? Clearly, the nation is moving toward a greater role for state and national government in assisting localities in borrowing for infra
196 PERSPECTIVES ON URBAN INFRASTRUCTURE structure. Some type of state-level bond banks appear to be on the near horizon. Federal bond banks and the Reconstruction Finance Corporation appear more remote. THE POLITICS OF URBAN PUBLIC WORKS: A NEW ECOLOGY OF GAMES Political scientist Norton Long viewed politics as an "ecology ot games." In the area of public works he saw a particular highway grid as the result of a series of separate games (Long, 1962:142- 1431: A professional highway engineer game with its purposes; a public works de- partment's bureaucracy game; a set of contending politicians seeking to use the highway for political capital, patronage and the like; a banking game concerned with bonds, taxes, and the effects of the highways on real estate; contractors eager to make money on building roads; labor leaders interested in union contracts.... Each game is in play in the complicated pulling and hauling of siting and constructing the highway grid. Today a new set of stakeholders is entering the infrastructure game and their participation will help to shape the outcome. Public Works as a Job Strategy In Congress, discussion of public works is inevitably linked to jobs. Various job bills have been introduced based on the premise that public works funding will immediately create thousands of new jobs. In 1982 former Secretary of Transportation Drew Lewis estimated that the gas tax increase would create 58,000 jobs for every $! billion in spending. It is now clear that his estimate was optimistic, but the true figure is still not clear. Most studies of the impact of public works spending on jobs indicates that it is not the quickest or most cost-effective way to create em- ployment (Chase Econometrics, 19781. The Bureau of Labor Statistics mode] estimated only 30,000 jobs per $1 billion for the gas tax or $33,000 per job. Still, discussions of public works will inevitably be linked to jobs, as the debate over the recent Emergency Jobs Bill made clear. In the politics of infrastructure, stakeholders concerned about jobs will influence the outcome of the debate. It is important to examine who has a stake in the politics of infrastructure.
THE FUTURE OF URBAN PUBLIC WORKS The Business Role in Emerging Political Coalitions 197 Businesses are among those interested in infrastructure for its own sake, not solely as a job creation strategy. Business clearly cares about the infrastructure it needs for growth and has shown an increasing willingness to pay for it. We can expect to see new and at times unusual coalitions emerging around the issue of infrastructure. Recently, for example, business, local government, and citizen groups came together in California to form a new organization called Californians for Public Improvements; their purpose is to lobby for improvements in infrastructure in the state id. Lewis Associates, 19821. This group brings together diverse interests that see the need to improve the maintenance of existing infrastructure, establish realistic standards for infrastructure development, and find alternative means for raising additional public capital. Increasingly, the politics of infrastructure will move toward non- traditional solutions that involve more than government alone. Government fiscal resources are limited, so new methods for fi- nancing infrastructure will have to be found. As noted earlier, al- ternatives involving new types of public-private approaches will be increasingly sought. Alternatives will attract both business, which does not want to see an expansion in government spending, and government leaders, who are looking for new ways of doing business with the private sector. One cautionary note concerning private-sector involvement in infrastructure is the diversity of viewpoints of different stakehold- ers. While businesses involved in production and services need and are willing to pay for particular types of infrastructure necessary for their operations, other private businesses may have different interests. The protests of independent truckers against the gas tax and increases in highway user fees dramatize this point. Developers of residential areas may be willing to pay for infrastructure, while "no growth" residents oppose them. Environmentalists and those interested in health will have different views about water quality standards than rate payers and companies eager to avoid investing in costly pollution controls. Thus, not all private interests will line up together on the issue of infrastructure. The questions of what types of infrastructure to create, what the standards will be, and who will pay are all critical in determining the types of particular
198 PERSPECTIVES ON URBAN INFRASTRUCTURE political coalitions that are likely to form around a specific infra- structure issue. Much of this discussion is likely to redefine the political debate toward structural change. Structural Changes in Planning and Financing The politics of infrastructure will push toward structural changes in financing, not just increases, because business is often more interested in how the money is spent (and whether the investment is maintained) than in how much money is spent. More systematic replacement analysis is expected, for example, as well as focuses on maintenance and repair and greater attention to capital bud- geting. These outcomes can be expected from the greater involve- ment of business in the infrastructure issue. Harry Hatry of the Urban Institute has outlined a number of ways that business can become more involved in joint public-private condition assessments and replacement analyses (Hatry, 19811. A business-sponsored tax reform group in California, the California Tax Payers Association, recently organized a statewide conference on new methods for pre- serving and maintaining the state's existing public works. Private- sector involvement in the fiscal crises of New York and Cleveland led to expanded use of capital budgeting techniques. Overall, the new coalitions on infrastructure at the local and state levels can be expected to focus as much on maintenance of what is already in place as on funding for new infrastructure. One structural change already in progress has critical implica- tions for local government: the emergence of independent author- ities. George Peterson (1981) of the Urban Institute has found that "when sewer and water systems are taken out of the general budget process and entrusted to independent authorities or put on an en- terprise fund basis, the capital stock conditions of these systems are superior; greater attention is given to maintenance; and more regular capital replacement and repair plans are followed." The emergence of these independent authorities mirrors an earlier de- velopment in local government in which independent nonpartisan boards and commissions were spun off to operator programs, sup- posedly outside politics. The proliferation of a large number of special authorities can lead to fragmentation of local government and loss of accountability, a charge made about Baltimore, for example. George Peterson (1982)
THE FUTURE OF URBAN PUBLIC WORKS 199 warns that local governments are "unbundling" municipal budgets by earmarking specific revenue sources to finance more narrowly defined public services. He notes that the increased use of dedicated revenue sources and independent authorities could potentially lead to a more fragmented budget process and reduce budget flexibility. A drive to promote the interest of public works that is quite at- tractive to business could have significant negative effects on the nv~rnil venerations of local government. Joint Public-Private Investment Finally, a potential result of the new forms of public-private col- laboration at the local level may well be an increased interest in new ways to negotiate joint public-private investments. In 1979 the Charles F. Kettering Foundation initiated an experiment in local urban policy called the Negotiated Investment Strategy. Mediators helped negotiating teams from local, state, and federal government and the private sector develop agreements on how to invest public and private funds for urban development in three cities: St. Paul, Minnesota; Columbus, Ohio; and Gary, Indiana. An assessment of the experiment by SR} found that each city made significant strides in addressing major intergovernmental and public-private invest- ment issues using the negotiated investment approach (SRI Inter national, l98Ib). An example of how the approach was used is the St. Paul Energy Park. A major industrial/residential/recreational complex on a 250- acre site was negotiated, involving $40 million in public investment and $160 million in private investment over 5 years. Public infra- structure commitments were linker} to private commitments in the development. In Gary, major public infrastructure improvements were linked to private commitments in downtown development and industrial/ commercial development adjacent to the municipal airport. What is different about this approach is that a series of public and private investments were negotiated jointly using a mediator. Thus, trade-offs could be made among government actions (spend- ing or nonspending) and private commitments. While these agree- ments were experimental in nature, the experience did indicate a new way of negotiating urban investments. The politics of infra- structure with the increased involvement of private business will
200 PERSPECTIVES ON URBAN INFRASTRUCTURE push for better methods to relate public works investments to pri- vate investment; thus new approaches to negotiating public-private investment at the local level will become increasingly important. CONCLUSIONS Ultimately the question of infrastructure boils down to the rel- ative emphasis given to investment versus consumption. Many economists will argue that the 1960s and 1970s were a time of accelerated consumption, both public and private. Consumer spend- ing skyrocketed, services expanded, and public and private savings declined. Both inflation and the ability to deduct interest were in- centives to buy now and pay later personal credit grew and public debt expanded. We were disinvesting in the future. Infrastructure received fewer and fewer investment dollars; when budgets tight- ened, maintenance was deferred. In all, investment in public works declined 30 percent over the 1970s in real dollars (adjusted for inflation). Now the bill for deferred maintenance and neglect of new in- vestment that allowed our nation's physical plant to decline is com- ing due. There is interest in reversing the trend of disinvestment in investing more in public works. Whether this will occur is related in part to attitudes toward private investment and investment in general. After all, many other kinds of disinvestment must also be paid for at the same time by both the public and private sectors. The decades-Ion" reluctance of American heavy industry to invest in more modern plants and processes has imposed a cost in unem- ployment and a lowered tax base in many states. The relative dis- investment in public education over the 1970s imposes a similar cost. The picture is not all bleak, however. There has been a growing investment in pollution control over the last decade that has a payoff for both public and private sectors. In areas where water pollution control has been vigorously enforced, for example, new industries will have to spend less to obtain clean process water and cities can continue to use existing municipal water supplies. Individual changes in life-style- investments in smaller cars, energy-saving appliances, shared housing, and recycling have re- duced some of the demand for infrastructure that was foreseen in the early 1970s. Highway systems can be repaired and improved
THE FUTURE OF URBAN PUBLIC WORKS 201 rather than duplicated. Electricity use is not likely to expand as fast as once thought. Municipal solid waste systems in many areas are likely to change in a variety of ways through the application of new technology. Given these changes in public and private investment patterns, how do we relate the private investment needs of the l980s and l990s to public investment needs? Can both public and private investments be promoted so they can be related to and reinforce each other? By structuring tax policies and other incentives to dis- courage consumption, perhaps an investment environment could be created that would encourage greater savings to accommodate the needs for both public and private investment. But what price do we pay for doing that? While the trend toward recognition of the need for greater in- vestment is clear, how the issues will sort themselves out is much less clear. The ways we adapt to technology, find new methods to finance infrastructure, learn to work together, and develop coali- tions to encourage investment will determine the future of urban public works. New and more efficient ways of combining public and private investments are another possibility, but we are only beginning to learn how to do that, and it could take a very long time. Research Implications We conclude by outlining a variety of research implications that arise in the areas considered! in this chapter. Technology 1. We need to assess how critical developments in new technology will affect the demand for different types of infrastructure. 2. Key technological innovations in the provision of particular types of infrastructure should be identified. 3. Major impediments to the adoption of technological innova- tions in infrastructure should be identified to determine what can be done to reduce or remove them. 4. Innovation diffusion networks for public works and what can be done to promote them should be examined, with a special focus on the role of professional associations and career de- velopment and training for public works professionals.
202 PERSPECTIVES ON URBAN INFRASTRUCTURE Economics 1. The equity effect of the movement toward user charges and benefit-based methods of financing should be assessed. We should determine how extensively innovative financing alternatives can be used at the local level. Are they of only marginal utility or is there a large potential for their use? 3. A series of comparative case studies of the effect of design standards on the cost of financing infrastructure should be prepared. 4. The extent of private-sector participation in infrastructure fi- nancing should be surveyed to help determine the willingness of private business to pay for particular types of infrastructure using different financing methods. Politics 1. Emerging political coalitions for infrastructure should be iden- tified. 2. The implications of the expansion of independent authorities and special districts must be analyzed. 3. The experience with joint public-private investment efforts should be evaluated. Long-Range Assessment 1. The effects of life-style changes and changes in business op- erations on needs for new infrastructure and public works must be examined. 2. The effects of current government decisions in other fields, such as telecommunications, energy, and industrial policy, on future needs for infrastructure should be assessed. REFERENCES Bay Area Council and Association of Bay Area Governments 1983 Funding Bay Area Capital Improvements and Maintenance. San Francisco: Bay Area Council and Association of Bay Area Governments. gingham, Richard et al. 1978 Professional Associations as Intermediaries in Transferring Technology to City Governments. Report prepared for the National Science Foundation by the University of Wisconsin, Milwaukee.
THE FUTURE OF URBAN PUBLIC WORKS 203 Brown, Lawrence 1982 Innovation Diffusion: A New Perspective. New York: Methuen. Business Week 1981 State and local government in trouble: the decay that threatens economic growth. October 26:136. California Office of Planning and Research 1982 Paying the Piper: New Ways to Pay for Public Infrastructure in California. Sacramento: State of California. Chase Econometrics 1978 Evaluation of National Impacts of Local Public Works Programs. New York: Chase Econometrics. Chemical Engineering 1983 Road-deicer researchers take the genetic route. May 2:27. Choate, Pat, and Walters, Susan 1981 America in Ruins. Washington, D.C.: Council of State Planning Agencies. Civil Engineering 1982a The infrastructure problem and the role of the civil engineer. 52(10):42. 1982b Public infrastructure are more dollars coming? 52(12):63. Cline, Robert, and Shannon, John 1982 Municipal revenue behavior after Proposition 13. Intergovernmental Perspec- tive 8(3). Goldman Sachs & Co. 1982 Tax Exempt Leveraged Lease Financing for the Public Sector. New York. Unpublished report, Goldman Sachs & Co., New York. Hatry, Harry J. Lewis Associates 1981 Maintaining the Existing Infrastructure: Current State of the Art and Practice of Local Government Planning. An information bulletin. Prepared for the Urban Consortium by the Urban Institute. 1982 California's Crumbling Infrastructure: A Political Strategy. Sacramento, Calif.: J. Lewis Associates. Kirlin, John, and Kirlin, Anne 1982 Public Choices and Private Resources: Financing Capital Infrastructure for California's Growth Through Public-Private Bargaining. Sacramento: Cali- fornia Tax Foundation. Kobayashi, Tory 1982 The idea of the technopolis and steps to achieve its development. MITI Journal September:2. Kolderie, Ted 1982 Many Providers, Many Producers: A New View of the Public Service Industry. Minneapolis: The Hubert Humphrey Institute of Public Affairs, University of Minnesota. Long, Norton E. 1962 The Polity. New York: Rand McNally. Orski, C. Kenneth 1982 Urban transportation. In Meeting Human Needs: Toward a New Public Phi- losophy. Washington, D.C.: The American Enterprise Institute. Peterson, George 1981 Financing Options for Urban Infrastructure. Washington, D.C.: Urban Insti- tute. 1982 The Allocative, Efficiency, and Equity Effects of a Shift to User Charges and Benefit Based Taxes. Washington, D.C.: Urban Institute.
204 PERSPECTIVES ON URBAN INFRASTRUCTURE Rohatyn, Felix G. 1982 Alternatives to Reaganomics. New York Times Magazine, December 11. SRI International 1977a Transportation- in America's Future: Potentials for the Next Half Century. Report prepared for U.S. Department of Transportation, Washington, D.C. 1977b Infrastructure Linking Science and Technology to State and Local Govern- ment. Report prepared for National Science Foundation. 1980a California Energy Futures: Two Alternative Societal Scenarios and their En- ergy Implications. Research Report 31 prepared for the California Energy Commission. 1980b Increasing the Capacity of State Governments to Access and Use Scientific, Engineering and Technical Resources. Report prepared for the National Sci- ence Foundation. 1980c Rediscovering Governance: Using Nonservice Approaches to Address Neigh- borhood Problems. Report prepared for the National Science Foundation. 1981a Automated Water Quality Monitoring System Technology Transfer. Report prepared for National Aeronautics and Space Administration. 1981b Rethinking Urban Governance: An Assessment of the Negotiated Investment Strategy. Report prepared for the U.S. Department of Transportation and the U.S. Department of Housing and Urban Development. 1982a Process Development for Production of Calcium Magnesium Acetate (CMA): Interim Report. Report prepared for the U.S. Department of Transportation, Federal Highway Administration. 1982b Redefining Partnership: Developing Public-Private Approaches to Community Problem Solving. Report prepared for the U.S. Department of Housing and Urban Development. U.S. Advisory Commission on Intergovernmental Relations 1982 Significant Features of Fiscal Federalism, 1980-1981. Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations. Vernez, George 1977 Regional Cycles and Employment Effects of Public Works Investment. Report prepared by the Rand Corporation, Santa Monica, Calif. Yin, Robert et al. 1976 A Review of Case Studies of Technological Innovation in State and Local Services. Report prepared by the Rand Corporation for the National Science Foundation. DISCUSSION John M. Armstrong The chapter by Henton and Waldhorn provides an excellent sum- mary of the major issues. My remarks focus on the relationship between technology and patterns of urban development and on tech- nological research. We need a much more complete understanding of this chicken- or-egg situation. We do not fully understand the extent to which the level or pattern of growth is influenced by the technology of infrastructure. We need to understand the obstacles to using new
THE FUTURE OF URBAN PUBLIC WORKS 205 technology. In particular, there is a need to increase the investment and commitment to specific technological research and clevelop- ment. The payoff should be great in producing tools that can help tackle the degradation of facilities. As a rule university research has tended to follow the new tech- nologies. Not much research has been done on facilities repair or adaptation of existing technology. Repair technology as a discipline in itself promises to be one of the most challenging aspects of en- gineering. Interest in the subject has not developed because it is perceived as unglamorous. There is no distinct line between new construction technology and repair technology. If we allow a rationale for repair as well as replacement, we may develop one of the most challenging aspects of the engineering profession. Otherwise we may have no alter- native to a policy of replacing existing systems as they wear out. One of the challenges for the engineering profession is to develop systems by which replacement can occur incrementally. Innovation will be critical, regardless of the nation's economic fortunes, the use of creative financing, or improvements in the de- cision process. We cannot afford not to be innovative. The respon- sibility for innovation ultimately resides with the practicing en- gineer. For the practitioner to be more innovative, education in engineering must change. In addition to the fundamental training given civil engineers, the professional schools must give more em- phasis to the holistic character of infrastructure problems, including system degradation and maintenance. One segment of civil engi- neering, water resources, has learned to look at large, complex systems. Those lessons could be applied to other branches of the ~ . profession. Engineers also need to be concerned not only with builcling fa- cility systems well but also with operating them efficiently. Not much attention is given in engineering education to the operation of existing systems, although a few universities now offer programs in engineering administration. Finally, we need to give considerable research attention to how we go about determining standards for the design ant! performance of facilities, how we decide what is "safe," and how we measure and quantify information for use by those who make decisions. Larry d. Feeser Although the paper deals with technological, economic, and po
206 PERSPECTIVES ON URBAN INFRASTRUCTURE litical issues, my remarks will focus on technology. First, ~ want to address the direct effects of technology on infrastructure systems. Some parts of the infrastructure system are basic and are likely to change very little in the near future. Civil engineers will continue to be involved in providing the basic necessities of urban life: shel- ter, transportation, water, and waste disposal. We will have to find more effective ways of providing these necessities. ~ foresee no amaz- ing technological breakthroughs in most of these systems. There is some technology on the frontier of change that will un- doubtedly affect how we design, build, and operate facilities. The computer is the most important of these. The technology is moving very rapidly. The replacement cycle is now about 2-3 years, in contrast with a tO-year cycle for most technologies. Computer-aided design and drafting can soon have a direct impact on facilities systems, as can simulation and operations research. We must keep in mind that computers are a young industry. The integrated circuit is only 40 years old. The advances in technology in the last decade have been so rapid it is no wonder that assimi- lation of it has been slow in public works agencies. But we can expect public works applications to blossom rapidly, due in part to necessity and in part due to the dropping costs of computer-aided systems. Scenarios for the future impact of the computer on the planning, design, construction, and operation of urban facilities are not clear, just as they are not clear with regard to the effect of the computer on the structure of cities. ~ doubt that we are really ready for the wired city. The impact, of course, could be startling on where people live and work, on how they transact business, and the reasons they come together in urban centers and settlements. The computer is a revolutionary technology, so innovation in its use is very hard to predict. Prediction is further complicated by the deregulation of communications industries and the entry of communications com- panies into computer services and vice versa. Advances in biotechnology have great potential for waste treat- ment. It may become possible to provide clean water and to treat wastes at far lower costs than are necessary today. Materials research and technological development have consid- erable potential, as engineers begin to clevelop applications for some of the basic scientific research that is under way. Materials research has been generally underfunded, in part because the lead time for results through practical applications is 10-15 years. Such research
THE FUTURE OF URBAN PUBLIC WORKS 207 needs support, however, even though specific results cannot be guaranteed. Standards for infrastructure can have a tremendous impact on the cost of facilities. We need considerable research on how such standards are set, the kinds of standards that are used, and who is involved in the process. Some standards may be too high, especially in light of the resources that are available to provide facilities. Even though basic materials may cost less today than in the past, the escalation of performance or construction standards may have caused costs to rise considerably. Regulations need to be reviewed to determine if they pose barriers to innovation. We need mechanisms that target resources but allow considerable flexibility in the technology user! to achieve public purposes. Civil engineers can generate a strong technical basis for the fu- ture of cities. Clearly, however, one of the things they need to do is to improve their ability to communicate with nonengineers and to get deeply involved in the process of developing the public con- sensus on infrastructure policy. SUMMARY The Need for Research and Development Research has been a small item in agencies that are concerned with infrastructure and in the industries that supply the materials and equipment used to build infrastructure. In industry the amount spent on research and development is trivial. For transportation, for example, only 0.017 percent of the total capital expenditure is for research; even this percentage is falling. We cannot rely on the industries involved to do the necessary research. In large part this is because the public procurement process provides no incentives for research so long as the industry standard is met for materials and components. When all infrastructure is counted, an enormous amount of money is involved, but there is little actual research. There is not enough of a critical mass for anything to get done. If we expect to improve the performance or durability of infrastruc- ture, then a sustained research effort is needed. We should take a hard Took at how technology has evolved for each kind of facility system and determine if we can depend on that same process for the future. New advances in facilities technology
208 PERSPECTIVES ON URBAN INFRASTRUCTURE may be more complicated than in the past, yet the leverage it can exercise on cost is substantial. If a type of concrete with a 50 percent longer life had been developed, for example, it might have made unnecessary much of the current concern over the deterioration of facilities. We need to clear with the research ant} development prob- lem to make conferences like this one unnecessary 20-30 years from now. One of the impediments to the growth of the public budget for research and development is that such funds are in the discretionary part of the budget. In addition, lead time for research payoff is long. In seeking federal support for research, it is important to remember that two-thirds of the members of the House of Representatives have been elected since 1974 and over half the members have prob- ably never been exposer! to research processes and facilities. The Importance of Innovation Transfer Not only must new technology for and approaches to infrastruc- ture be invented and developed, but there is also a serious problem in the diffusion and transfer of innovations among public works agencies and industries. Currently, about half of all new technology introduced in the Uniter! States comes from abroad. Public works managers are realizing that they will have to be innovative to maintain their systems, because there will be less money available to JO things the same way as in the past. There is a lack of knowledge about new technologies that are available, let alone those that are under development. The profession has not been creative in setting up leadership mechanisms to get decisions on research and development and innovation transfer made, nor has it encouraged innovation and the use of new technology. In many cases regulations and standards have impaired the use of new, feasible technology. Some efforts are being macle in such areas as district heating; a program supported by the U.S. Department of Housing and Urban Development is uncler way that involves 28 . . cities. The Brain Drain" of Engineers Away from Public Works With the movement of engineers into the more exotic branches of the profession, such as computers and defense industries, there is considerable concern about where the public works leaders of the
THE FUTURE OF URBAN PUBLIC WORKS 209 future will be found. The American Society of Civil Engineers has found a dramatic drop in civil engineering students and also a decline in the relative quality of students pursuing a civil engi- neering career. The engineering schools are trying to counter this trend by placing emphasis on some of the more glamorous aspects of civil engineering. There is, however, a real question of whether the trained professionals needed will be available. Further work is needed in the professional schools and elsewhere to give better status to public works careers. The Impact of the Computer on Cities and Their Needs for Infrastructure More studies are needed of the impact of the computer on cities and patterns of urban development. Will cities be encouraged to die? Some people seem to be going back to use of the infrastructure of smaller communities. We need, for instance, to obtain some fee! for the growth of telecommuting as a substitute for face-to-face contact in work situations. There is some evidence that while re- mote work locations are attractive for some purposes, people still like to work in proximity to others.