By Odysseus Bostick, October 28, 2014
For a video: https://www.youtube.com/watch?v=TTbElIgLh8o
Our roads are swiss cheese, our sidewalks are like a broken fault
line, our bridges are sagging, and our cars are still the most
convenient way to get through the mess.
We’ve gotten to the point where our infrastructure problems are so
large in scope and the cost to change this is so high that we really
can’t pass enough taxes or bonds to cover all of our needs. That’s not
to say that passing specific bonds isn’t necessary.
Upcoming ballot measures within the County of Los Angeles aimed at
extending Measure R are not just merited, but crucial to ensuring that
all the money we’ve already spent on building a basic network of light
isn’t wasted. And finishing our rail lines is just Phase One.
The basic structure of a rail transportation system won’t be the
cure-all because logistics prevent even a vast network of rail lines
from actually getting people to the places they need to go. Clearly, we
need micro-networks to cover areas that rail doesn’t reach.
Some of these solutions are small in scope – like bike share
programs, walkable/bikeable design, and the like. Others are larger in
scope than that, like a streetcar.
The problem is that bonds and tax increases only go so far and
funding the build out of our rail network will consume most of those big
scope revenue increases. So we are posed with the question of how to
fund the smaller scale, “end of the line” public transportation
ecosystems so that a user has access to the nooks and crannies not
conveniently located at the base of the train station platform?
Reality is, though many of us might be “hard core” enough to walk
that last mile or two, most people will just go back to their car at
that point, thus rendering the investments we’ve made in rail a bust.
Correspondingly, political reality limits the scope of new bonds or
taxes and passing an extension to Measure R will be a Battle Royale.
This mandates that we find creative investment streams to complement
the full build out of a truly functional infrastructure network. These
can’t all be new revenue streams. Some must be reallocated streams.
One really exciting model I think deserves far more consideration
partners government infrastructure investments with public pension plan
portfolio allocations to identify portions of the retirement portfolio
that could be dedicated to infrastructure projects.
The advantages of this model are many, but my two favorites are the synchronicity of efforts and timelines.
In efforts, you’re looking to support livable retirements while
investing in infrastructure improvements that build quality of life and
foster economic growth in the private sector, which in turn, adds to the
general fund in increased tax revenue to build more robust city
services and yes, help fund the retirement plans. It’s also synchronous
in the sense that your public labor force is investing not just a career
in their city, but also their retirement security in a well-run city.
That mutually beneficial relationship paves the way for a collaborative
effort by taxpayers and their public employees.
In timelines, both pension plans and government infrastructure
investments of large scope work because they can leverage longer periods
of time than a private investment stream. That’s why bonds work to fund
large scope infrastructure projects (like the transcontinental
railroad) and why private capital for those “public good” projects is
not relied on. Simply put, private capital needs shorter term profits
whereas pension funds and government investments can wait longer to see
This kind of partnership, however, doesn’t work for every kind of
project mainly because the pension fund does need a quantifiable and
reliable profit to be paid at some point. An example of a bad project
would be sidewalks. How do you easily identify the kind of profits
needed to make a pension pay out when that fund is investing $4.5
billion in road or sidewalk repair? It’s tough to quantify the benefit
to the pension payout. It’s possible that some creative economist may
one day develop a mechanism to do such a thing. All you creative
economists listening out there, get to work.
In the meantime, there are infrastructure investment projects in
public transportation where you have a quantifiable profit in fares
One project I can’t seem to shut up about is a streetcar running down
Lincoln and up Venice Blvd to connect the Expo station in Santa Monica
with the Expo station in Culver City. That would be a $250 million
project with quantifiable investment returns. Partnering with a pension
fund like LACERS (operating an $11.4 billion portfolio) would be a
win-win for building out a fully integrated infrastructure network,
repairing an injured relationship between the city, taxpayers, and our
municipal employees, and ensuring that investments by the taxpayers are
maximizing public good for the city. The pension fund would, obviously,
be a partner in the fare profits in order to ensure the security of the
And I would add that c
ost efficiencies in running such a streetcar by
these public employees would be higher than in a project whose success
was not tied directly to their pensions.
While shifting the approach of investments as long range as pension
funds takes time, I believe this approach merits strong consideration.
The pensions must be funded no matter what, meaning that taxpayers here
in the city (and county) must pay for them. It would be intelligent
policy if those costs could benefit the taxpayers even more than
ensuring a secure retirement for our public sector labor force. It would
be great if that investment provided multi-dimensional benefits that
foster the growth of our economy as well while ensuring that the tax
increases from Measure R are not wasted because we failed to connect
riders from the train stations to the places they really wanted to go.