GOOD NEWS ABOUT INFRASTRUCTURE Sure, our bridges, sewers, airports, and roads are overaged and overused. But better management and financing can turn the crisis into just one more ordinary problem.
By Nancy J. Perry REPORTER ASSOCIATE Rosalind Klein Berlin

(FORTUNE Magazine) – TO READ the headlines, America the Beautiful has turned into a beast: ten or more may be dead in bridge fall. america is buckling and leaking. garbage barge earth. gridlock! In December, New York City tabloids ran wild with the story of a 28-year-old Brooklyn woman who was critically injured when she fell through a weakened sidewalk grate and landed on subway tracks 50 feet below. Pretty scary stuff. But do the disaster stories accurately reflect the condition of the tangled network of American highways, subways, airports, sewers, reservoirs, and landfills that is felicitously known as infrastructure? Interviews with scores of politicians, public works engineers, and businessmen suggest that the answer is no. True, the infrastructure is aging and, as the population increases, new demands are placed on it. But more and more local governments have turned the infrastructure ''crisis'' into just another problem. Their secret: better management techniques to make facilities and financing go further. Let's call it infrastretching. Corporations and communities know the value of good infrastructure. In a 1988 Lou Harris survey of 250 companies conducted for Cushman & Wakefield, a real estate firm, most respondents rated ''easy access to domestic markets, customers, or clients'' as the most important factor in choosing an office location. The survey ranked Atlanta, which boasts an impressive array of freeways, mass transit, and air transportation facilities, as the No. 1 city in which to put a business. Says George Berry, Georgia Commissioner of Industry and Trade: ''Transportation services are to Atlanta what gambling is to Las Vegas.'' Carrying the banner of economic development, cities are in hot competition for new businesses. Says Heywood Sanders, a professor of urban studies at Trinity University in San Antonio: ''Local governments are getting more fiscally crass. They will spend money to attract business and industry instead of taking care of the people and neighborhoods already there.'' What needs fixing? Many of the sewers, bridges, and water systems in America's older cities, built around the turn of the century, are now in disrepair. The Federal Highway Administration's latest report classifies 23% of the 575,600 bridges in the U.S. as structurally deficient: They are either closed or restricted to light traffic. But age does not always imply decay. / The pavement on much of the country's four million miles of highways has been improving since 1982, when Congress raised the federal gas tax by a nickel a gallon.

Still, travelers feel that the roads and airports they use are overwhelmed by congestion. According to the Federal Highway Administration, 65% of the traffic at peak travel times on interstates in urban areas moves at an average speed of less than 35 miles an hour, up from 54% in 1983. Though the U.S. has 16,300 public airports -- more than the rest of the world combined -- no new commercial airports have been built since 1974 (Dallas-Fort Worth). Since then the number of passengers carried has more than doubled to 479 million a year. By 1993 up to one-half of the country's landfills, which collect 95% of the 450,000 tons of garbage Americans generate each day, will fill up and be closed. Partly in an effort to promote alternatives, such as recycling and incineration, cities in some parts of the U.S. are doubling and tripling the price of garbage disposal. Says Thomas Whalen, the mayor of Albany, New York: ''We will probably have to spend as much on garbage as on the war on drugs.'' In its final report to Congress last year, the National Council on Public Works Improvement, which was created in 1984 to assess the state of America's public works (see report card), concluded, ''While America's infrastructure is not in ruins, it is inadequate to sustain future economic growth.'' America has to face its needs even as the federal government is moving out of the infrastructure business: Its last heroic public works project, the interstate highway system, will be complete in 1992. Preoccupied with an unyielding budget deficit, Uncle Sam is doling out less and less money for infrastructure. Heywood Sanders estimates that of the $40.5 billion spent to build and expand highways, airports, sewers, mass transit, and waterworks last year, 46% came from federal grants, down from 54% in 1985. State and municipal governments are stuck with the rest. To get the most for their money, local politicians have come up with four infrastretching strategies:

Infrastretcher No. 1: Make the most of what you've got. No infrastructure investment generates a greater return than timely maintenance. A study last year by the New York City Department of Transportation for Mayor Edward I. Koch concluded that it is one-third as expensive to maintain a bridge -- just cleaning and painting it -- as it is to let it deteriorate and then reconstruct it. In his report to Koch, New York City transportation commissioner Ross Sandler pointed out, ''Currently, New York City bridges receive virtually no preventive maintenance.'' As a result, the city must embark on a ten-year, $3 billion program to reconstruct 371 of its 846 bridges. The 80-year-old Manhattan Bridge, which daily carries 78,000 vehicles across the East River, will undergo a $170 million face lift. Why have cities let upkeep slide? Because politicians make voters happier by sacrificing dull efficiency and putting money someplace else -- in schools, parks, and hospitals. As Louisville, Kentucky, Mayor Jerry Abramson says, ''It's hard to run for reelection on the theme of 'I kept your sewers from falling apart.' '' To save political hides, localities are creating more public authorities. These independent bodies, made up of appointed officials, can raise money specifically for bridge and sewer maintenance instead of competing for general funds with schools and hospitals. The Port Authority of New York and New Jersey and the Triborough Bridge and Tunnel Authority use the money they collect in tolls to maintain the 11 bridges and four tunnels they operate. As of 1986, the last time a survey was published, all the bridges were classified in good or very good condition. By contrast, 46% of the 846 city-run bridges were found to be in poor or fair condition. Three years ago the Massachusetts legislature created the Water Resources Authority to repair and replace Boston's ancient sewer system, which has done as much damage to Boston Harbor as Boston Harbor did to Michael Dukakis's presidential campaign. This group can set water rates and, according to executive director Paul Levy, will probably become the largest issuer of revenue bonds in the country. Says Levy: ''The average household water and sewer bill is going to have to increase by $50 to $60 per year for the next ten years. The legislators couldn't have taken the heat. They'd get thrown out of office.'' One of the trendiest techniques for making the most of existing highways is called incident management. It turns out that 60% of all traffic delays are caused not by lack of capacity but by truck and automobile accidents, from fender benders to jackknifed tractor-trailers. Since these tie-ups often recur near the same locations, why not get the tow trucks to the scene before the accident? In Chicago, a huge mobile crane dubbed Mad Max moves disabled . trucks off the road in half the time it used to take emergency vehicles to get there.

Infrastretcher No. 2: Reduce demand. In a society that has grown accustomed to having more where that came from, people pay scant attention to pleas to drive less, fly less, and stop throwing out all those returnable bottles and cans. Going back to Economics 101, the best way to bring demand into sync with supply is through efficient pricing. Airports, which expect a 72% increase in passenger volume by the year 2000, are leading the way. One of the pioneers is Logan in Boston, New England's major air traffic hub. Officials there discovered that general aviation and commuter planes accounted for 40% of takeoffs and landings but only 6% of passengers. This inefficiency was due partly to a landing-fee system based on airplane weight: 747s paid $740 to land, Piper Apaches only $25. To encourage general aviation to use smaller airports and commuter lines to use larger planes, Logan last July instituted a fee schedule based on fixed airport costs, such as navigational aids, as well as weight. During the last three months of the year, Logan's passenger load was up 3.3%, compared with the same period a year earlier, while the number of takeoffs and landings dropped 7%. In terms of on-time takeoffs, Logan rose from No. 24 to No. 2 among the country's 27 busiest airports. But the new fees were short lived. The U.S. Department of Transportation declared the plan to be discriminatory, and Congress, under pressure from the commuter lines and private plane owners, forced Logan to revert to its old fee schedule by threatening to withhold maintenance funds. Richard Giesser, chairman of the Massachusetts Port Authority, which runs Logan, is appealing the decision: ''We're getting blocked when we try to manage better.''

More efficient pricing can be applied to highways as well. Only 35% of the two trillion vehicle miles that Americans traveled in 1988 were work related; most trips were made for personal reasons. Congestion pricing -- charging drivers more to use the highways during rush hour -- would inspire Gramps to leave the bowling alley and head home before 5 p.m. The hitch is that congestion pricing requires collecting tolls, and that can create even more congestion. At the San Diego-Coronado Bridge, the California Department of Transportation is experimenting with automatic toll collectors, which electronically read tags attached to car windows, and then bill the drivers. According to Michael Shelton, director of the bridge project for the California Department of Transportation, the electronic toll collectors can record fares for cars traveling up to 75 miles per hour. During tests, these drivers didn't slow down, let alone stop. One of the most effective ways to reduce highway congestion is the good old car pool, now getting renewed attention. According to a study by Jeffrey Lindley, a researcher at the Federal Highway Administration, if one lone commuter of every five jumped into a pool or took mass transit, traffic would decrease roughly 18% during peak hours. The trouble is, car pooling can be inconvenient and is a tough sell: The average occupancy of private commuter vehicles during rush hour today is only 1.3 persons. One thing that might encourage a solo driver to bring along a friend is the high-occupancy-vehicle (HOV) lane, a corridor reserved for cars carrying more than one person. Introduced in the late Sixties, HOV lanes are proliferating almost as fast as car phones. On Shirley Highway between Springfield, Virginia, and Washington, D.C., cars in two HOV lanes carry 54% more passengers than the other four lanes combined. Houston now has HOV lanes on four of its six major highways and plans to open another 35 miles of HOV lanes by the summer of 1992. According to Paul Bay, assistant general manager of Houston's Metropolitan Transit Authority, riders in the city's HOV lanes save about one minute per mile traveled.

Infrastretcher No. 3: Use advanced technology. With seven million cars now registered in the Los Angeles area, driving around the City of Angels is not exactly heaven. By 2010, the Los Angeles metropolitan region is expected to grow by another five million people, to 18.5 million. One eye-popping proposal to fight gridlock: double-decking the Los Angeles freeway. But that would cost up to $50 billion and take 30 years. No less visionary, but a lot less expensive, is the Automated Traffic Surveillance and Control Center, which monitors traffic primarily in downtown Los Angeles. In a room five floors below ground, at the end of a long labyrinth broken up by several four-inch-thick steel doors, traffic engineers attack congestion as if they were in, as transportation chief Ed Rowe says, ''a battle situation.'' Sensors in the roads feed information on traffic flow to central computers, which regulate traffic signals accordingly. Flashing red lights on three computer screens alert the engineers to unusual traffic patterns, enabling them to dispatch highway patrol and emergency equipment to the scene immediately. This high-tech attack on gridlock has been hitting the mark. By flushing out the streets through better signal timing and electronic surveillance during the 1984 Olympics, the first major test of the system, Rowe's traffic team increased average travel speeds 15%, and cars consumed 12.5% less fuel than usual. Los Angeles is now planning to install the system citywide, at a cost of roughly $200 million.

Infrastretcher No. 4: Make dollars go further through innovative financing. In spite of gains from better management and modern technology, city and state infrastructure budgets still fall far short of projected needs. Southern California, for instance, estimated last year that it would cost $110 billion over 20 years to build a freeway and transit system that would enable its citizens to move from place to place as easily as they did in 1984. By incorporating better management and state-of-the-art technology into the plan, transportation officials pared the number to $50 billion -- still almost twice as much as the region's share of state transportation revenues through the year 2010. With the federal government easing out of the picture, the money to bridge the gap is coming from individual users and businesses. The largest potential source is the gas tax. In California, legislators are pushing for an increase in the state gas tax of up to 10 cents per gallon, to 19 cents. An increase is long overdue: For all its griping about congestion, California has the fifth-lowest state motor fuel tax in the U.S. and ranks 48th in per capita spending on transportation. Throughout the country, the average state gas tax rate has nearly doubled, to 15 cents a gallon, since 1980. This rise has been offset, however, by inflation and increased fuel efficiency. Says Tom Deen, executive director of the Transportation Research Board: ''We have a ludicrous situation in this country where we spend $650 billion a year to buy and operate our cars and trucks and only $66 billion on the road system.'' The Federal Highway Administration estimates that by increasing fuel taxes, sales taxes on vehicles, and registration fees, states could raise an additional $23.8 billion per year. Cities could also take greater advantage of user fees -- if the states would let them. Local governments now pay half the $100 billion the nation spends annually to build, operate, and maintain its public works. Yet they are severely hampered when it comes to raising local taxes. A number of states -- 31 in 1985 -- impose limits on how much local governments can increase property taxes, and six states restrict the total revenues that local governments can collect annually from any source. Due to such constraints, locally levied user fees account for less than 10% of local highway spending.

To complicate the matter, Washington policymakers are talking about raising the 9 cents a gallon that the federal government collects at the gasoline pump as a way of reducing the budget deficit. State and local governments view this as a huge threat, since a higher federal gas tax would make it much harder for them to raise their own motor fuel taxes. Says Georgia Governor Joe Frank Harris, who has been trying, unsuccessfully, to persuade his legislature to increase the state gas tax 6 cents: ''The federal government has to be very careful that what they are doing to reduce the deficit doesn't hurt our efforts. If they aren't going to give money to us, they at least need to give us the ability to raise our own.'' A new way to hit the private sector for more money is the so-called special assessment district, a small section of the city that has power to levy taxes and user fees. To expand Route 28, a busy two-lane highway in Fairfax County, Virginia, the state and county created a special taxing district that local politicians think will serve as a model for other communities. Commercial developers along the route pay a surcharge on top of the property tax: an additional 20 cents per $100 valuation. The extra revenue will pay 80% of the $180 million needed to turn Route 28 into a six-lane highway. The payback to landowners? Property values rise. Another way to tap business is through ''proffers,'' or private-sector donations. To speed up a $200 million expansion of the Louisville, Kentucky, airport, for instance, local businesses recently handed over $380,000 to pay for the required environmental analysis. Waiting for funds from the FAA could have delayed the project a year. In Westboro, Massachusetts, Data General and three other companies invested $350,000 to design an exit ramp, lights, and new lanes to handle congestion on nearby Route 9. But most of the proposed project remains unbuilt, due partly to lack of state funds. Says Brad Stroup, director of public affairs for Data General: ''The infrastructure problem has forced industry into confrontation and cooperation with the locals. We are the only ones with deep pockets.'' Communities that really want to cut costs should consider privatization. In a survey of 1,086 city and county officials conducted in 1987 by the accounting firm Touche Ross, 45% of the governments that tried to reduce capital costs by using outside suppliers to build and operate public facilities reported savings of 20% or more. Nearly 80% of the respondents reported that privatization will represent a primary means of providing local infrastructure and other government services in the next decade. When a group of investors realized that a four-year-old state toll road connecting Dulles Airport to Washington, D.C., is accumulating excess cash at the rate of $6 million a year, they decided to explore privatization. They formed the Toll Road Corp. of Virginia after the state legislature legalized the operation of private toll roads last July. Their plan, which needs separate state approval, is to build, own, and operate a toll road between Dulles Airport and Leesburg, Virginia. ''This is the premier privatization project for infrastructure in the country, and it's a model,'' says Ralph Stanley, the former director of the Federal Urban Mass Transportation Administration who heads the group. ''If we're successful, we want to do other projects, like waste-water treatment and toll bridges.'' What's left to do to make sure public works are efficiently run and well maintained? Plenty. Companies can help reduce highway demand by providing flexible work hours for employees so they can avoid rush hour, by providing buses to train stations to encourage mass transit, and by arranging car pools or giving poolers special parking spaces. But more important, businesses can pressure politicians to manage infrastructure better. Says Dick Giesser of the Massachusetts Port Authority: ''Management is the issue.'' And who understands the rigors and rewards of management better than business?


CATEGORY GRADE Highways C+ STRENGTHS Federal and state gas tax increases have provided new capital for expansion and maintenance. Pavement conditions are improving. WEAKNESSES Congestion is getting worse in high-growth urban and suburban areas. Many aging roads and bridges, particularly in rural areas, need major work.

CATEGORY GRADE - Mass transit C- STRENGTHS Federal grants have helped upgrade quality of service in some areas. WEAKNESSES The number of transit vehicles is growing twice as fast as ridership. People still prefer driving cars to riding buses and trains.

CATEGORY GRADE Aviation B- STRENGTHS So far regulators and the airline industry have handled increase in demand effectively. Air traffic control system is undergoing a $16 billion modernization. WEAKNESSES Airport and airspace congestion is increasing because of strong traffic growth.

CATEGORY GRADE Water supply B- STRENGTHS Locally operated programs assure supply in most areas. The 1986 Safe Drinking Water Act created strict new standards. WEAKNESSES In many places, water is priced below costs. Supply is limited in some parts of the West and several cities on the East Coast.

CATEGORY GRADE Solid waste C- STRENGTHS Tougher environmental standards require more rigorous monitoring of solid- waste facilities. Waste-to-energy techniques are gaining as an alternative to landfills. WEAKNESSES The cost of safe disposal facilities is rising fast. Little progress has been made in reducing waste through recycling. People fight new disposal sites where they live.

CATEGORY GRADE Hazardous waste D STRENGTHS Since 1986, government spending on hazardous waste cleanup has risen 500%. WEAKNESSES Only a fraction of the two tons of dangerous waste per capita that Americans generate each year is being treated safely. There is a huge backlog of cleanup projects. SOURCE: NATIONAL COUNCIL ON PUBLIC WORKS IMPROVEMENT