As President Obama calls for $50 billion in infrastructure spending to stimulate the economy as part of his American Jobs Act, the public needs to be aware of the true costs of infrastructure spending.
Infrastructure, especially for the Interstate Highway System, is a symbol of American strength, mobility, and its ability to carry out commerce. Naturally, new roads must replace old ones, and repairs must be made to keep traffic moving along. Over the last several years, the economy has taken its toll on every working family. While families struggle to survive, state legislatures and government agencies spend freely on infrastructure with little concern for the total costs of the project. The American people believe that the deficit is the greatest long-term threat to the country. The American people want efficiency, accountability and transparency.
One example of a failure to properly forecast infrastructure costs occurred in New Jersey. While constructing a rail tunnel, the Garden State used a $5 billion projection and obtained a $3 billion federal grant. The state also spent $600 million in start-up costs and committed $1.2 billion in contracts. The total cost of the project rose to $10 billion. New Jersey has suspended work on this project, having paid $4.5 billion with nothing to show for it.
The nonpartisan Congressional Budget Office (CBO) has concluded that using life-cycle budgeting to plan infrastructure projects, and to avoid situations such as the one in New Jersey, is the key to creating sustainable roads and bridges. A second CBO study showed that using life-cycle budgeting can reduce long-term maintenance costs by 40%.
Several states, including Indiana and West Virginia, have used life-cycle budgeting as a defense against wasteful spending. In its last four infrastructure projects, the West Virginia Transportation Department’s Division of Highways saved $10 million by using life-cycle budgeting. West Virginia’s largest single-paving project saved $3.5 million in 2008.
Between 2008 and 2010, Indiana recorded more than $10.2 million in savings by using life-cycle budgeting.
No matter how well-intentioned President Obama’s plan to invest in infrastructure is, there is too much evidence to show that a failure to plan an infrastructure project leads to failure of the project.