On Monday, April 7, I was in New York City, and the subject of Mayor Bloomberg’s congestion pricing became part of several conversations. The depth of the discussion was clearly driven by the outcome of the plan that failed to gain popularity amongst the democrats who ultimately refused to put the bill to a vote on the floor of the state assembly, as highlighted in an article published by the New York Times. I believe that any discussion about infrastructure finance usually is explicitly more complex than publicized with regards to whether or not the public versus the users should be taxed for infrastructure-related capital projects. However, just below the surface of any discussion about raising taxes, fees, tolls, or implementing congestion pricing is a lack of trust about whether the money raised by the government will be spent for infrastructure improvement or absorbed into general revenues. (more…)

People who should know better, such as sophisticated investors, members of the media, or experts, are always surprised when a successful firm, or for that matter, a successful industry such as financial services, experiences a rapid and severe decline. I am not surprised, because virtually every kind of success contains within it the seeds of future failure. There are four reasons for this.

First, successful companies that achieve a dominant position in a market are most vulnerable to disruptive technologies precisely because they have the greatest stake in maintaining the business model that made them successful. Clayton Christiensen eloquently and cogently discussed this in his landmark book The Innovator’s Dilemma. Thus, even legitimate success can become a trap that prevents a firm from adapting to a threat. (more…)

One of my commitments to readers of this blog is to “see a different game.”  At times, that involves linking seemingly unrelated events and experiences.

Last week, we all watched the tragedy of the Minnesota bridge collapse unfold.  Unfortunately, although there will be a study that will detail the technical reasons the collapse occurred, a study that will be completed months or even more than a year from now, the fundamental reason underlying the collapse is that all accountable levels of government paid insufficient attention to preventive maintenance.

By the way, I reject the notion advanced by some political partisans that, if we were not spending so much in Iraq, money would be available for bridge repair and maintenance.  Neglect of preventive maintenance of our infrastructure has been going on for decades, and it long predated the Iraq war.  Stephen Flynn of the Council on Foreign Relations wrote a book called On the Edge of Disaster which detailed our long-standing neglect of vital infrastructure of all kinds. 

Why do we allow infrastructure neglect to happen?  Our experience here in Connecticut with the Mianus River bridge collapse along I-95 in 1983 tells the story.  Many government officials have defined success in governing by highly visible projects and accomplishments in which there is a great photo-op.  Thus, it is far more tempting to break ground on a new highway or bridge, or to celebrate the purchase of a new rail car or bus than to do the boring, low-visibility, but absolutely essential work required to repair and maintenance existing assets.  Not surprisingly, with this mindset, preventive maintenance is given a far lower priority than increasing capacity by new building activity.

In a seemingly unrelated story that appeared in the New York Post the French actress and environmental activist Julie Delpy was appropriately concerned about a truck idling outside a restaurant at which she was having a meal.  As the story goes, the driver explained that he had to keep the engine running because he was carrying perishable meats that required continuous refrigeration.

The question should have been: why was he there, rather than along a highway which had generators to which his truck could have been hooked up?  The answer again is that governments under-invest in amenities for truckers, such as rest stops which they need to make sure that they are not driving while fatigued, and generators that they can use to keep power flowing to their storage cabins, so they do not have to keep engines running.  Like bridge maintenance, the decision to spend money on truck stops is not the kind of event that gets politicians media coverage because it lacks the elements that get media people interested.  Additionally, few people want truck stops or weigh stations near them.

As a result, truckers end up eating or resting in more crowded residential and commercial areas off the major highways with their engines idling as they are eating or resting.

Likewise, one of the best techniques for reducing traffic congestion is to promote demand reduction strategies, such as increased use of mass transit, car pooling, and van pooling. In our area, rail station parking is a major constraint on rail usage.  In 1985, I got my start in volunteer work trying to get funding for rail station parking expansion, but there are other ways to expand rail station access, including the provision of bicycle storage areas, like Amsterdam does, encouraging smaller vehicle usage to increase available parking capacity, and building satellite parking lots at which rail commuters can park.  Unfortunately, none of these techniques create photo-ops.

Beyond the lack of media visibility many of these transportation programs entail, they also tend to cost money in the current year and hit operating budgets.  Big capital projects, like highway construction, can be financed by bonds and their cost is deferred.  The repayments on the bonds hit current-year budgets, but, very often, these have a smaller current-year impact than a much lower actual expenditure on maintenance or on upgrading a truck stop, or on a program to subsidize mass transit usage increases. 

Because of poorly-conceived balanced budget requirements, constitutional provisions and statutes, many politicians avoid spending money to avoid current-year hits.  They starve transportation departments of the staffing needed for maintenance projects.  They defer current-year maintenance expenses.  They also spend less money on smaller, but very important, transportation enhancement initiatives because they do not produce the political and media “bang for the buck” that larger projects do. 

Strong government leadership would organize stakeholders, define measurable goals for how to spend public money, make the achievement of the metrics the media event, and trust in the intelligence of the voters.  They would also balance the need for current-year budget discipline with investment in the future.  We also need to demand that governments do more life-cycle costing and explain to voters what it should cost to maintain infrastructure assets.  We do not demand enough disciplined thinking from government officials, and, therefore, we get short-term, high-media-intensity actions that do not constitute good government.

If the bridge collapse has any positive consequence, it will be to refocus governments on the need to do the boring, but necessary, current-year expenditures that will make our public infrastructure better and safer.