The Big Costs of Infrastructure Cutbacks

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The budgetary impact of the COVID pandemic is hitting the city of Fargo, ND hard. Last month, the city cut nearly $10 million, including $7 million from capital improvement projects. Such projects included investment in “street, flood control, pavement preservation, and sidewalk projects” which are core building blocks in the city’s transportation and disaster resiliency systems.  

Unfortunately, Fargo’s story is far from unique. As the country heads steadily toward the second wave of the coronavirus, cities continue to grapple with the severe fiscal fallout to the tune of $360 billion over the next three years. To accommodate increased pressures for services, like health, safety, and social services, along with decreased revenues and looming uncertainty about the economy and overall public health, many cities have turned to costly infrastructure projects and capital investments as the release valve for their budgetary pressures. 

To better understand the spending and service adjustments that city leaders are facing, the National League of Cities conducted a survey of over 1,100 cities, towns, and villages from all 50 states, the District of Columbia, and Puerto Rico in June 2020. The results point to difficult cuts that will hinder economic reopening and recovery, with significant ripple effects felt throughout the private sector.  

Of note, 65% of cities indicate that they are delaying or completely canceling capital outlays and infrastructure projects, and 61% say they are delaying or canceling equipment purchases, which will stunt local commercial activity among businesses that supply equipment for municipal projects. 

Local Survey Bar Chart

Infrastructure Challenges Haven’t Gone Away

Cities shoulder the most responsibility for infrastructure investments. Over two-thirds of all public infrastructure projects in the United States are locally financed by municipal bonds. Greater investments in infrastructure from the federal government and other partners are critically needed. This call has been made clear over the past decade with the American Society of Civil Engineers consistently ranking our nation’s infrastructure a D+. Poor-quality infrastructure has taken on new meaning during the pandemic as many urban and rural communities suffer without broadband services, for example, and the accompanying lack of access to critical jobs, education, and health services.  

Costly Savings 

The widespread reduction of local investment in infrastructure projects is a particularly troubling trend with well-documented negative consequences on economic recovery. These consequences are widespread and range from decreased employment and economic productivity to hampered efforts to advance resilience and equity.  

Infrastructure-related employment has a massive multiplier effect. Every job to design, build and repair road, freight, port, harbor, airport, water and other infrastructure, creates three additional jobs supplying services and running that infrastructure. Conversely, as projects are halted or canceled, the 14.2 million workers employed in the infrastructure sector face an uncertain future. For cities like Bellingham, WA, where 75-80% of local construction projects were shut down, the future of work for the city and surrounding county’s 10,000 construction workers is still uncertain. 

Sound infrastructure is also critical to ensuring that workers do not waste hours in commuter traffic, that supply chains run efficiently and that businesses can connect virtually with the global economy. In short, the GDP (Gross Domestic Product) of our cities and nation rests on infrastructure. A recent study found that Lake County, FL experienced a 100% increase in economic growth compared to comparable counties after making significant investments in their broadband infrastructure. Lack of investment in infrastructure, on the other hand, threatens $4 trillion in GDP losses nationally by 2025. 

Additionally, pulling back on infrastructure has negative consequences on community resilience, like in Fargo, and on racial equity. Notably, evidence suggests that the distance between where people of color live and where jobs are located has increased, and that people of color are more likely to rely on public transit. In cities, such as Seattle, WA, decreased revenue has resulted in cuts to transit projects which will further challenge economic recovery for people of color.  

Now is the Time for Countercyclical Federal Support

With our nation’s economy hanging in the balance, now is the time for countercyclical investments in infrastructure. These investments have the potential to employ millions of prospective workers, connect rural communities with urban and global economies, ensure our communities can weather not only economic, but natural disasters, and address historic inequities. Unfortunately, our recent survey reminds us of dramatic reductions in municipal revenue many cities lack the fiscal capacity to continue these critical investments.  

As of this writing, the House has sent a proposal with economic stabilization to the Senate where it is sitting waiting for their response, and many Senators – from Louisiana to West Virginia, to New Jersey, to Colorado – have indicated their willingness to find a path forward. As cities are forced to drawback to balance their budgets, Congress should provide a package that responds to the economic impact COVID-19 has had on cities and follow that closely with an infrastructure package that mirrors the House INVEST Act proposal which increased the federal cost-share in 2021 to stem the infrastructure bleeding and includes essential transportation, water, and broadband investments. NLC urges city leaders to share their own economic needs and cuts with their Senators in the coming weeks as we continue to urge the Senate to act. 

 

About the Authors

Joshua Pine is a Research Fellow in the Center for City Solutions.

Christy McFarland small

Christiana McFarland is NLC’s Research Director. She leads NLC’s efforts to transform city-level data into information that strengthens the capacity of city leaders and that raises awareness of challenges, trends and successes in cities. Follow her on Twitter @ckmcfarland.

 

Brittney Kohler is the legislative director for transportation and infrastructure at the National League of Cities.