McMahon: Down the road...more costs for NY
If you think driving in New York is an unusually jarring experience, you are not imagining things. As measured by federal statistics, highway and bridge conditions in the Empire State are among the worst in the country.
That buckling pavement on a state highway near you can't be blamed on a lack of funding. According to a 2010 analysis by the Reason Foundation, a private think tank, New York ranked sixth out of 50 states in spending on highways and bridges -- an incredible $402,000 per state-controlled mile, nearly three times the national average.
And the beat goes on. Under Gov. Andrew M. Cuomo's New York Works infrastructure program, the new state budget promises to accelerate -- that is, pull forward from future capital budgets -- $1.2 billion in spending on road and bridge repairs all over the state.
Motorists will welcome the improvements, and contractors will welcome the work. But will the money be spent any more effectively than it has been in the past? The answer is, at best, a qualified "maybe."
Cuomo says New York Works will boost efficiency by consolidating road and bridge improvement contracts on a regional basis. It will also make expanded use of more efficient "design-build" contracting, in which a single firm is responsible for delivering an entire project on schedule.
It certainly will be more urgent than ever to stretch every capital dollar as far as possible -- because the state is depleting its capital financing capacity. For years, we've been relying heavily on borrowed money to pay for infrastructure projects. But by fiscal 2013-14, Albany will be bumping up against its own debt ceiling.
Municipal bond rates are very low by historical standards, making any new borrowing cheap, and the debt ceiling can be overridden by the Legislature. On the other hand, New York is already among the most heavily indebted states in the nation, with a sorry history of excessive borrowing. If the current governor is unwilling to either raise or sidestep the debt limit, where will he get the money to finance future transportation needs?
The answer, Cuomo suggests, is to be found in public private-partnerships, or PPPs -- which, when it comes to infrastructure, means giving private investors (including union pension funds) a direct financial stake in major improvements.
Of course, private investors require solid returns -- preferably double-digit ones -- which, in turn, require a stream of revenue. Not surprisingly, then, much of Cuomo's talk of PPP possibilities has involved replacement of a major toll facility: the obsolete Tappan Zee Bridge.
The governor has fast-tracked planning for a replacement bridge with an estimated cost of $5.2 billion. It's widely assumed the financing will come from some combination of federal loans and toll-backed bonds, with Cuomo sending mixed signals on whether a PPP will really be part of the mix.
Ultimately, the lenders (or investors) will have to be paid off by somebody. In a recent report, New York City-based transportation consultant Charles Komanoff estimated that a fully self-funded Tappan Zee Bridge would have to charge a passenger car toll that's two to four times the current $4.75, depending on whether assumptions about traffic growth and cost overruns are wildly optimistic or realistically pessimistic. It's far more likely all New Yorkers will end up contributing, directly or indirectly, to the cost of a new Tappan Zee Bridge -- and to numerous smaller projects across the state -- for decades to come.
One way or another, the infrastructure projects now on the drawing board in Albany will cost even more than we're already spending. This time, how about some better results?
E.J. McMahon is senior fellow at the Manhattan Institute's Empire Center for New York State Policy.