Hurricane Sandy Exposes Infrastructure Neglect

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When President-elect Barack Obama announced in December of 2008 his intention to create a massive stimulus package to jumpstart the economy, mayors from across America sent him a list of some 4,000 ‘ready-to-go‘ projects. It included politically popular but unessential undertakings like community pools, recreation centers, tourism ‘heritage' trails, bike paths, ‘greenways' (that is, walking trails), cultural centers, renovations to historic sites, and fitness centers. Other proposals included money for filling potholes and ‘rut repair,' maintenance that states and cities once paid for themselves but now petitioned to do with federal funds. The Washington Post noted that much of what was proposed was "not exactly the stuff of history."

It was not exactly the stuff of disaster readiness and recovery, either. Preparing for catastrophic events like Hurricane Sandy requires building a sound basic network of roads and bridges that can withstand additional stress from events like major storms, constructing protective infrastructure like water surge barriers in coastal areas, and designing modern emergency response systems that don't collapse into confusion amid widespread destruction.

This is precisely the kind of spending we neglect these days because its political payoff is rarely as attractive as a ribbon-cutting ceremony for a new municipal natatorium (that's a fancy name for an indoor swimming pool, I learned after reading the mayors' 2008 wish-list). The mayor's projects list was a reminder of how we have redefined and trivialized what infrastructure investment means, while shortchanging important spending.
Consider what states have been doing with so-called 911-tax funds. Federal legislation gives states the right to levy a tax on cell phones so localities can upgrade their emergency response systems. Those systems are essential in a disaster, as first responders who descended on New Orleans after Hurricane Katrina, where the communications system proved inadequate, can attest.

Wondering what states were doing with 911 money, Congress asked the Federal Communications Commission to investigate. In budget year 2009 alone, the FCC found that states had swiped $135 million of the money to close budget gaps, often moving the money directly into their general funds where they pay for things like employee benefits, Medicaid programs and education aid. New York State, one of the places hardest hit by Sandy, has been the biggest diverter of funds. In 20 years it has collected more than $700 million in cell phone surcharges and distributed less than one-sixth of that money for emergency system upgrades. Instead money has gone to state agencies, including the National Guard, which used some of it to pay for hotel rooms, dry cleaning and meals at Denny's, an audit found. Meanwhile, the state's 911 system is so imprecise that one emergency call from a cell phone received in Niagara County about a baby in distress was actually placed in North Carolina, according to the Buffalo News.

Today our elected officials look at big disaster mitigation projects that might be "the stuff of history" and dismiss them as too expensive, even as they spend billions on nonessential programs. Engineers have warned for years, for instance, that New York needed to do something to protect against a Hurricane like Sandy given that previous big storms dating back to the 18th Century have wreaked havoc on Gotham and Long Island. Even before Sandy forecasters were predicting that the city faced a 99 percent likelihood of being hit by a major hurricane in the next 50 years.

After Sandy, Mayor Bloomberg dismissed the idea of building surge barriers or tidal gates around New York as too expensive and impractical, though several cities around the world now have them. Still, the mayor has spent hundreds of millions of dollars on what he calls livable city initiatives, including building hundreds of thousands of units of subsidized housing and planting one million new trees in New York (though a report in the New York Times last year noted that some of the new trees were already dying because the city couldn't afford to care for them). Meanwhile, New York remains the third most vulnerable city in the U.S. to hurricanes, behind only Miami and New Orleans.

Rather than spend money on prevention, which requires coming up with real dollars for new building, politicians have created ways to help people after-the-fact. It's easier to do that using budget gimmicks. For instance, states have created catastrophe funds to provide coverage for people who can't get affordable private insurance because they live in areas of high risk. To keep premiums low, states subsidize this insurance, or at least they are supposed to. A 2010 Government Accountability Office study found that states had built up a huge potential liability, writing some $3 trillion in coverage that they would be liable for, but not putting the capital aside to account for those potential claims. One state, Hawaii, even raided its hurricane relief fund to balance its budget last year, then tried to borrow money to replace it.

"Instead of looking to government to create special funds," one insurance industry expert told the New Jersey legislature when it was considering expanding its catastrophe fund, "New Jersey should enact statewide building codes, improve infrastructures, develop sensible land-use planning and upgrade plans to recover from a disaster."

Much of our infrastructure has suffered as states and cities have increasingly swiped money from basic construction to spend on political goodies to favored constituencies. A recent report by the State Budget Crisis Commission on Illinois documented the way the state has underinvested in its critical facilities (roads, bridges, dams, water treatment plants, mass transit) even as Illinois increased its worker benefits and expanded programs like Medicaid without having the dollars to pay for this spending. Now the state is insolvent and is unlikely to be able to afford much new investment any time soon. California, whose risk of major earthquakes is substantial, is in much the same shape fiscally as Illinois.

The bigger disaster our budgets become, it seems, the more vulnerable we will become to real disasters.

Steven Malanga is an editor for RealClearMarkets and a senior fellow at the Manhattan Institute

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