Funding Our Future

An effective and reliable transportation system is pivotal to the economic well-being of Greater Philadelphia.  Regional mobility depends upon a well-functioning network of roads and public transportation assets capable of moving people and goods both quickly and cost-effectively.  A metropolitan area’s transportation infrastructure also has important implications for safety, pollution control and quality of life.  In short, a region with a high-performing, financially-stable, and multimodal transport system will have a competitive advantage in retaining and attracting residents and businesses.

While selected system expansion projects are needed to improve mobility in Greater Philadelphia, our primary challenge is bringing our existing transportation assets up to a state of good repair, and increasing their capacity to handle growing demand.  We have inherited an extensive highway and transit network with “good bones”, but those bones have become brittle with age, and susceptible to breakage.  Recent events like the collapse of interstate bridges in Washington and Minnesota show how vulnerable transportation infrastructure is.  Our priority must be renewing the existing but aging assets we already have in place. 

This was the sentiment of the World Class Infrastructure Strategy team, of which I was a member. In discussions to identify infrastructure strategies for Greater Philadelphia, the team identified bringing our transit systems up to a state of good repair and upgrading aging roads and bridges as top priorities.

Much of the region’s rail infrastructure—including more than 100 SEPTA bridges—is over a century old.  Many of the area’s highway and bridges are at or near the end of their useful lives, and must be completely rebuilt:  Southeastern Pennsylvania alone has 470 bridges that are structurally deficient, and 3,500 miles of highways that haven’t been resurfaced in a decade. 

Moreover, Greater Philadelphia’s transportation system needs to be able to accommodate new commuting patterns connecting the region’s 21st century economic hubs.  The strategy team also placed emphasis on ensuring good connections to newer employment centers such as the Philadelphia Navy Yard, King of Prussia/Great Valley and new suburban office centers in New Jersey and Delaware. Strengthening transportation connections between these hubs will put our region on the pathway to having a World Class transport system.

It’s no secret that the primary obstacle to attaining this World Class objective is insufficient and unpredictable funding sources.  This situation is not unique to Greater Philadelphia:  Across the nation, metropolitan areas are confronting a pattern of mounting infrastructure investment needs, stagnant or diminishing funding, and political stalemates in working towards solutions.

Yet, there are encouraging examples of progress being made elsewhere that could help inform our own thinking for solutions here at home.  Some ideas involve new revenue streams, others involve new financing tools or project delivery techniques, and many involve both.  For example:

Los Angeles County— voters in the midst of the recent economic recession approved an increased county-wide sales tax for transportation investment.  They have combined this new $600 million/year funding source with new financing tools such as USDOT’s expanded TIFIA loan program, as part of LA’s strategy to accelerate a 30-year capital improvement program to completion within the decade.

Northern Virginia—a new, rapid transit line is being built in the median strip of the Dulles Toll Road, connecting Dulles International Airport to Washington’s Metrorail system.  This $6 billion project is being funded with a combination of toll-backed debt, bonds backed by special assessments on benefiting commercial properties, and state and county contributions, with only 15% coming from federal grants.

Chicago—recently established a new nonprofit entity (the Chicago Infrastructure Trust) to serve as a loan revolving fund for various types of municipal infrastructure improvements, starting with energy retrofitting of city buildings but ultimately expanding to include transportation projects. 

There have been some encouraging developments locally, as well.  Pennsylvania last year enacted new enabling legislation(Act 88) allowing the use of public-private partnerships (P3s), giving project sponsors new options for delivering transportation projects.  In addition, the Pennsylvania Senate in early June approved a comprehensive highway and transit funding bill that would raise an additional $2.5 billion per year in statewide annual revenues for transportation; it awaits action by the House. 

These developments signal a potential breakthrough in addressing the region’s infrastructure investment backlog.  In addition, there are promising legislative proposals at the federal level involving new techniques such as a national infrastructure banks, interest-free tax credit bonds, and tax incentives for repatriating U.S. corporations’ overseas earnings into infrastructure investments.  Used in tandem with state or local revenue sources, these federal policy tools could provide financing for projects and programs on highly favorable terms.

To help get these measures adopted and ensure that Greater Philadelphia benefits as much as possible, our region’s business and civic leaders will need to speak with a united voice about regional transportation priorities, and support promising new models for funding, financing and delivering capital improvements. A coordinated effort toward sustained investment will be key to putting Greater Philadelphia on track for world class infrastructure over the long term.

David Seltzer

Principal, Mercator Advisors