Do our political leaders lack the political will to fix the nation’s infrastructure deficit?  Financial market professionals consistently state that the municipal bond markets have more than sufficient capacity and liquidity to completely fund all of the infrastructure in the queue identified by the American Society of Civil Engineers 2017 Infrastructure Report Card. If funding capacity has not prevented action to address the backlog, what has? From observing the debate over the infrastructure gap, who will pay for the infrastructure cost appears to be the problem.  States and local governments want the federal government to pay the costs, while the federal government wants the opposite. Both viewpoints arise from the axiom that political leaders do not want to be held accountable for raising infrastructure costs (e.g., state taxes, user fees) to their voters.

 

Perhaps the solution to this political funding ping-pong game lies in changing the political axiom from the voters’ side of the equation such as marketing the responsibility of the public to pay for its infrastructure needs. Take the example of a hypothetical city that owns a water utility system serving 100,000 customers with a $90 million infrastructure improvement backlog needing a significant water rate increase to support debt financing for improvements. The city’s leaders could market this needed rate increase by casting it in terms its customers could understand and hopefully accept with minimal political repercussions – e.g., for the cost of one bottle of beer a month at a local sports bar ($5.00 a bottle/$60.00 for 12 bottles for the year), the customers would enjoy the benefits of a $90 million upgraded water system.

 

Marketing the bargain of public infrastructure to voters may also be effective. For example, most voters will routinely stop at their local convenience store to buy a bottle of water, happily paying $1.50 for 16.9 fluid ounces. The Food and Drug Administration estimated that in 2009 more than 8 billion gallons of bottled water were consumed. For the cost of one 16.9 ounce bottle of water, the government water utility can supply hundreds of gallons of water to the voter’s tap. For additional support, the government utility could also point out that its water supply faces more stringent water quality and safety regulation by the Environmental Protection Agency than does the bottle of water which is regulated instead by the Food & Drug Administration. Placed in perspective, paying for infrastructure improvements can be made to look like a bargain.