Needed Infrastructure Upgrades, Little Consensus on Funding

Money matters. The infusion of public funds into cities to cover infrastructure (highways, airports, rail, water supply systems, and communications and technology), housing, community and economic development, education, health and human services is essential in creating and maintaining vibrant, resilient communities that service the needs of all residents. While there is a consensus surrounding the need for such spending, there is little consensus on how to finance such items when public funds appear scarce.

At present, infrastructure spending is receiving a lot of attention for a myriad of reasons, though one in particular has had a lasting impression. Public spending at the city, state, and federal level has not kept pace with demand, resulting in images of breached dams in California and Nevada, crumbling, crowded metro systems in Washington, DC and New York City, and collapsing bridges in Minneapolis and Oakland. While cities wait for further funding, the question remains — what can be done to address the immediate infrastructure needs absent city, state, and federal funds?

GMF’s Urban and Regional Policy Fellow, Julianne Herskowitz, seeks to answer this question in her recently publish policy paper, Addressing New York City’s Infrastructure Crisis — Lessons from the London Mayoral Community Infrastructure Levy and its Funding of Crossrail. Herskowitz explores the City of London’s Community Infrastructure Levy (CIL) and its potential application to New York City as a model to address the city’s growing infrastructure funding gap. Facing a similar set of challenges, Britain passed legislation in 2008 under Gordon Brown’s Labour Government that created an infrastructure financing mechanism known as the Community Infrastructure Levy (CIL) (through the Planning Act of 2008).

Implemented in 2010, CIL enables local authorities to raise funds from new real estate developments by charging a pound sterling per square meter rate set by the governing authority. The money raised is used to fund a wide range of infrastructure projects in the local authority’s jurisdiction. Impressive infrastructure projects have been financed through this new mechanism, perhaps the most recognized is London’s Crossrail. Introduced by the Greater London Authority, the London Mayoral CIL helped finance this major east-west tube and rail line that is expected to greatly reduce congestion across the entire tube system while boosting economic growth and regeneration especially in largely transit underserved areas, such as southeast London. Could such a scheme work in New York City?

While Herskowitz argues that the specific CIL model is neither readily nor easily applied to New York City, she nevertheless says that NYC could learn from London’s experience with CIL in two key ways.

• New York City could adopt a citywide levy on new real estate development across the five boroughs to help raise funds for new major infrastructure and transportation projects similar to the Mayoral CIL.
• The New York City could rely on smaller-scale financing mechanisms such as the creation of special districts and the use of the tax increment financing model to advance an overall infrastructure improvement strategy, as it has done on the Far West Side of Manhattan to spur real estate development.

Ultimately, though, Herskowitz’s paper argues that what separates New York City from London’s approach is how it structures its incentives. New York City favors the use of incentives to justify the cost on developers for the provision of infrastructure, while the CIL model legally requires private developers to adhere to a new tax. New York City cannot levy a tax, making the likelihood that it could adopt a CIL model slim.

That said, a comprehensive strategy is needed and this may require rethinking the efficacy of prior approaches. Perhaps there is indeed something to be learned from London’s CIL model.