The Privatization of Public Infrastructure – R. Baker

A long but important story centered on Yale and New Haven; about how private cash now rivals public money for infrastructure. I collected the best parts (IMO) at the top below. But note the part that compares $2.7 billion of public spending on TOTAL US public infrastructure with $2.5 billion of private spending on Philanthropy. This situation is clearly way out of balance, and as compared to spending on the basis of rational need.

At least in the historic college town of New Haven, the private and public money are in some degree of harmony; they share many of the same logical goals to patch up long-neglected problems (except for the lowest income residents).

In Austin the situation is probably worse, policy-wise, than New Haven.Here in Austin, there is a shadow government tied to real estate profits. In the past it has mis-allocated public money to try to perpetuate sprawl, using public roads (the proposed double decker US 290 W toll road being a blue ribbon example) as publicly funded subsidies to benefit private development and so revive the profits on the imprudent land investments that seemed perfectly sound a few years ago. Now that the side effects of sprawl and congestion are clogging up the roads and the cost of fuel is soaring, mobility is reduced in the absence of a good transit system, the core part of Austin is gentrifying and edge cities are economically encouraged. This explains an incentive for infill and redevelopment in the core city; the development profits are finally shifting from the suburbs back to the core.

But the residents are in the way of progress. In a city with hundreds of registered lobbyists focused on real estate deals, it should be no wonder that the neighborhood plans promised to be observed by the city are now being undermined, ignored, and reversed by the Austin city council. They make the ultimate decision for a let’s-make-a-deal city government with few checks and balances.

The piece below implies that public spending was historically squandered, but is now being spent wisely under the influence of private money. Neglected is the fact that the US is conspicuously splitting into rich and poor, and that the public-private infrastructure alliance in New Haven is clearly tilted toward the rich.

Roger Baker

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Private Cash Sets Agenda for Urban Infrastructure

“… Philanthropic spending adds mainly to the nation’s stock of hospitals, libraries, museums, parks, university buildings, theaters and concert halls. Public infrastructure — highways, bridges, rail systems, water works, public schools, port facilities, sewers, airports, energy grids, tunnels, dams and levees — depends mostly on tax dollars. It is hugely expensive and the money available, while still substantial, has shrunk as a share of the national economy…

The American Society of Civil Engineers estimates that government should be spending $320 billion a year over the next five years — double the current outlay — just to bring up to par what already exists.

The shift from public money to private wealth in shaping the nation’s cities is evident in national data. Government outlays on physical infrastructure have declined to 2.7 percent of the gross domestic product, from 3.6 percent in the 1960s. Philanthropic giving, in contrast, has jumped to nearly 2.5 percent of G.D.P., from 1.5 percent in 1995 and 2 percent in the ’60s.

Most of this money goes into endowments and foundations, or comes in the form of individual gifts, and then is increased through leverage. Of the $3 billion that Yale has spent so far on its vast building program, for example, slightly less than two-thirds came from gifts and from the endowment, which now totals $22.5 billion. The rest was borrowed, Mr. Levin said.

Yale now spends more than $400 million annually on its renaissance, nearly six times its outlays for construction and renovation in the mid-1990s. New Haven, by contrast, budgeted $137 million in the current fiscal year for all its capital projects, including those subsidized by state and federal governments. That is less than twice the amount budgeted in the mid-’90s.

Government investment nationwide has lagged for several reasons, say business leaders, academics and public officials. Tax cuts have helped to hold down overall government spending. So has the view, widespread in recent decades, that public investment is often inept and wasteful. And politics intrudes, with the widely criticized earmark process in Congress cited lately as a prime example of misdirected spending.

“Governments are accountable to the democratic process, which has many, many virtues; I would not trade it for anything else,” Mr. Levin said. “But it is not particularly good at focusing resources and driving things efficiently.”

Perhaps most important, big businesses no longer put as much clout and attention behind public infrastructure investments. In an earlier era, corporations, many with deep roots in local communities, lobbied government for the railroads, highways and many other facilities they needed to operate successfully. And they served as a crucial fountain of local tax revenue.

But companies are more mobile today. And many of the urban manufacturers most dependent on public infrastructure have moved or gone out of business…

Some government-business alliances still carry weight. In the Seattle area, for example, Microsoft has pushed its headquarters city, Redmond, to spend millions to upgrade roads for its expanding campus, along with the millions that the software giant has spent.

Now Microsoft wants the state to replace a 40-year-old, two-lane bridge on a highway that connects Seattle and Redmond. “We joined the city in arguing for the new bridge,” said Lou Gellos, a Microsoft spokesman, “and that was instrumental in bringing the issue to the forefront.”…

As Yale invests, pursuing its goals, Mayor DeStefano falls increasingly into step, blurring the line between public and philanthropic infrastructure spending. Yale has acquired land to build two more residential colleges, and the mayor contributed by closing off and giving portions of two streets to the university.

In return, Yale has agreed to spend $10 million to repair bridges, streets, lights and sidewalks in the neighborhood — in effect, picking up a bill that would strain the city’s budget.

Read all of it here.

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