Locally Administered Infrastructure Finance and Implementation
Development of monorail systems as community-centered and locally managed transportation services will be vitally dependent upon stable local economic conditions and the support of local financial institutions. Creation and growth of state, county and other local banks, lending institutions and financial services organized to provide funding for infrastructure and transportation system development can serve the best interests of city and county governments, as well as, monorail manufacturers, system builders and operators, and local business communities.
Construction loans, intermediate and long term loans that local government-supported community banks can provide to local transportation system builders and operators are vastly more stable sources of funding than one-time federal or state grants, new local taxes or additional bonded indebtedness; none of which return interest or any other financial growth to the local economy. Community banks can have a profitable, stabilizing influence on participating pension funds, private banks, government and quazi-government utilities, authorities and infrastructure-managing local government entities and departments.
Recent Congressional proposals to create a National Infrastructure Bank would appear to replace federal grant programs intended to fund “Shovel Ready” and other public works stimulus programs that received relatively few applications from local governments. A key difference, and distinct feature of the new federal infrastructure bank concept is that all lending, credit and servicing of infrastructure loan debt would take place in federal government and banking industry entities with little or no connection to the local jurisdictions, communities or economies in which the infrastructure improvements were taking place. Local communities, and their taxpayers, would assume the obligations to repay the infrastructure improvement loans to financial institutions outside, and unrelated to their respective local economies or business communities. Commitment of substantial credit and debt obligations to infrastructure projects may reduce local communities’ options in prioritizing and allocating their limited financial resources.
Innovative financial and organizational efforts of public and private interests that can lay the foundations and set up the legal structure for the creation of a new monorail industry, and the extended manufacturing, engineering, logistical, administrative, financial and public relations networks required to support it, could take the form of” business accelerators” that are changing the national investment and business start-up landscape. Private foundations may play a central role in initiating and coordinating the development of business accelerators, venture capital and joint venture processes in specific communities and regional economies. Cities and urban areas able to establish proactive policies and implementation environments that support applied research, new business, and innovative industries, while providing training and long-term joint commitments to their successful growth, can attract and grow networks of new business and industry capable of transforming local and regional transportation environments.
Moody’s April 2011 cuts of California’s Infrastructure and Economic Development Bank ratings from Aa2 to Aa3, should bring attention to the structural problems and limited capabilities of the state’s financial institutions to support or underwrite any significant or large scale transportation systems development. It is increasingly clear, that local governments and transportation planning agencies must define their own priorities and means of support separately from the top down, centralized planning and tax-based financing regimes of federal, state and regional transportation authorities.
Perhaps the most effective means of financing currently available to both local governments and monorail-developing private entities are “Conduit Municipal Bonds”, which have financed a wide variety of private developments by means of government issued bonds, that are issued by local and state governments, and repaid by the private entities undertaking specific development projects. Refinement of conduit municipal bond evaluation, regulation and issuance processes to assure the integrity and optimal benefit to both government and private development interests should enhance the joint venture potentials of local government and monorail builders alike. Local infrastructure financial institutions may assume some of the authority or play a significant role in issuing and administering monorail and other localized infrastructure bond programs in cooperation with established public bond issuing entities such as the California Statewide Community Development Authority or the California Municipal Finance Authority, without subjecting local or state taxpayers to further bond indebtedness or long term debt service obligations.
Community-level public banks can establish stable and profitable sources of community development funds independent of the existing tax and government program structures that are inherently vulnerable to fiscal and transportation grant-based program funding fluctuations. The stability and profits derived from local lending are most likely to remain assets of the local economy, in the form of credit, financing and economic growth. In reaching out to specific interested partners, community banks can bring together local government, business and construction industries to focus on transportation and infrastructure development initiatives that would not materialize under existing conditions or planning regimes. By underwriting and providing funding for all phases of monorail system developments, local lending institutions can provide incentive, as well as, long term support for monorail system development and continuing operation that will in turn serve as community assets, rather than financial liabilities, for decades onto the future.
Private sector financial activity generally provides tax revenue to all levels of government, while federal, state, and local taxes, fees and grants committed to transportation development, operations and subsidies do not generate tax revenue beyond the taxable profits of contractors and builders of the systems: Nor do the billions of dollars in local and state tax revenues committed to long term transportation debt service tend to generate local lending institution income, profit, tax revenue or jobs. The recently proposed commitment of a substantial portion of LA County’s ½ cent transportation sales tax annual revenue to a 30-year debt service on an $8.8 billion federal government loan to the Los Angeles County MTA (LACMTA) would remove the stable, predictable, long term sales tax revenue from all future alternative uses of the funds.
Long assumed to be an economic incentive and stimulus to the communities and local economies they serve, public transportation systems and developments funded exclusively by public agencies and tax-based revenues are proving to produce little or no lasting economic stimulus or growth in their respective local service areas. The majority of jobs created by transportation system development are limited to construction jobs that disappear upon completion of the projects, while jobs associated with ongoing operation of the new transportation systems tend to be a fraction of the workforce required to construct the systems. The once-massive amounts of money spent on public transportation system development, that most often go to out of state contractors and foreign manufacturers, tend to fade or stop altogether, as service operations become the responsibility of local or regional public transportation system authorities, and are essentially removed from the tax- and job-producing private sector.
Lingering and continued impacts of new transportation system developments on local streets, highways, utilities, business districts and neighborhood environments become the responsibility of various local government agencies and departments, once construction is complete and systems are put into service. Local government response and obligations, in the form of repair and maintenance of streets, signalization of street crossings, maintenance of sound walls and buffer areas, reconfiguration of property and structures altered by transportation system development and right of way acquisition, and other permanent impacts on local communities and their economic networks, are seldom completely compensated for by transportation authorities over long term operational periods. Without adding to tax revenues or local economies, public transportation facilities tend to impose additional burdens and expenses on local governments, communities and economies that often go unaddressed and insufficiently compensated.
Inclusion of local government and business interests in the initial planning stages of transportation system development processes could facilitate their participation in the processes as partners and co-investors in long term transportation system improvements. Monorail technology and systems are inherently adaptable to local planning and development processes as integral parts of local economic structures, and are uniquely capable of bridging the widening divide between the public and private sectors of the American economy.
