Revisiting Rural America Infrastructure
Downtown Selma, AL
Given the national discourse surrounding President Biden’s $2 trillion infrastructure proposal, I discussed infrastructure investment in rural communities with residents and local leaders across the country over the past few months. Infrastructure upgrades would have numerous positive impacts for local communities: improved public utilities would enhance residents’ qualities of life, new projects offer increased employment opportunities for residents, increases in public capital stock reduces costs in the private sector and increases economic output, and digital infrastructure upgrades enables remote work, telemedicine, and advanced technology capabilities. Rural and small towns across the country will need significant upgrades to their infrastructure to remain competitive in the national and global markets, so that these areas remain viable and livable options for more Americans.
Previous blog posts briefly highlighted categories of infrastructure which are critical to a community’s ability to retain and attract new residents and businesses. With additional detail and new entrants, below is a summary of key infrastructure priorities for rural communities moving forward:
Digital infrastructure (broadband access): An estimated 35% of rural households lack access to high-speed broadband internet. In the 21st century, this is a backbreaker for any local economy, workforce, and community to establish viable businesses. The pandemic only sharpened awareness for how broadband can enable remote work, remote learning for students and workers, and also remain connected to communities virtually. Residents in rural communities also point to the increasing reliance on the internet to enable remote capabilities for advanced farm equipment, and transition to digital storefronts to capture additional customers beyond the physical borders of a small town. (Multiple states recognize broadband access is critical, and have introduced or passed legislation to expand broadband access)
Local roads and bridges: As a person driving cross country through rural America, I’ve experienced the full range of quality in roads – large potholes and cracked local highways in Kansas and Nebraska caused me to grimace and hope my car is intact, roadways in Louisiana were closed off due to flooding, and houses in Alabama lied off unpaved paths off main local highways. Community leaders and economic developers each stressed the necessity to upgrade roads and bridges to enable transportation of goods and enable commuting for workers in the region. Corporations and local businesses have told these leaders they may be less inclined to move to, or remain in, local towns or smaller metro areas without quality infrastructure.
Water treatment, sanitation, sewage systems: Some small towns across the West and Middle America continue to have fairly rudimentary water treatment systems: water towers may still be seen in remote rural communities, some rusting and experiencing the impacts of years of underinvestment in upgrades; water treatment systems have not been upgraded to remove harmful chemicals. Small towns in Utah described the strain placed on their limited resources by hundreds of thousands of tourists annually, which now causes systems designed for 5-10,000 residents to accommodate multiples more.
Public service buildings (e.g. schools, hospitals/health clinics): Aging school buildings require significant upgrades to ensure children can learn safely. Lead pipes continue to impact the quality of drinking water in public schools, with ~37% of school districts nationally reporting elevated lead content in students. Some schools also lack ample space to accommodate growth in students attending these schools, leading to overcrowding and negatively impacting the learning environment. Additionally, 136 rural hospitals have closed in the US since 2010, which dramatically influenced the ability for rural residents to receive necessary care in their communities. Residents would need to drive multiple hours in certain areas to receive necessary care, and the remaining hospitals open now have large physician-to-patient ratios which can adversely impact quality of care.
Public transportation: Many rural communities adjacent (30 minutes – 1 hour) to urban areas lack viable public transportation to go to cities. Residents may be stuck in multiple hours of traffic depending on the city, cause even more strain on the roadways with additional vehicles, and also adversely impact the environment given the number of vehicles on the road. Additionally, lower-income residents who need to travel to the city for necessary goods or services may not do so since they have no affordable options to commute into the city.
While federal investment can be a helpful accelerant to improving the quality of infrastructure in rural America, it’s important to remember most current infrastructure funding occurs at the state and municipality level. As of 2017, state and local governments own 93% of public capital in the country, and contribute to 75% of the cost of maintenance and improvements of this capital stock. State-by-state spending on infrastructure as a share of total spending varies from ~7% - 22%, however in aggregate state and local spending on infrastructure has declined from 2010 to 2017 (as a share of GDP). State leaders should design creative solutions to finance new infrastructure projects, and assuming passage of the American Jobs Plan, will have to designate appropriate federal funding to local jurisdictions to carry out infrastructure projects. Tools may include:
Regionalization of infrastructure upgrades, thereby spreading costs among multiple municipalities while enabling enough scale to justify upgrades: In South Carolina, the Lowcountry Regional Water System is a consortium of five towns which share costs of treatment, delivery and administration while also reducing individual water bills for community members.
Public-private partnerships: While such partnerships should be designed with a clear understanding of risk-sharing, costs, and responsibilities of each party, public-private partnerships allow the public sector to use funds and expertise from the private sector to conduct infrastructure upgrades. One example is the Environmental Impact Bond used in Washington DC to improve the local sewage system for the city. A $25M project was financed by private investors, the local government determined measurable outcomes and cost-savings incurred by the improved sewage system, and then repaid private investors with incurred cost-savings for the total amount.
Direct pay bond issuances: On average, states finance 27% of public capital spending through bond issuances. Direct pay bonds are taxable bonds issued by state and local governments, with interest payments subsidized by the federal government. ~$185B direct pay bonds were issued as part of the American Recovery and Reinvestment Act in 2009, with issuers netting approximately $20B in cost savings relative to borrowing costs from traditional tax-exempt debt.
Quality infrastructure is a minimum requirement for communities across the country to compete economically, and more importantly retain their populations. The talent and population migration from rural America to urban centers is well documented, and if the country aims to diversify its geographic and economic footprint nationally, there needs to be enough incentive for people to live in a healthy, safe and technologically modern community.
Future blog posts will continue to explore infrastructure needs in different communities, and identify critical upgrades needed to spur economic opportunity these areas.
How should federal, state and local governments invest in infrastructure upgrades? Which infrastructure upgrades do you believe are most important? Please comment below with any reactions, ideas, or recommendations for The Next Tide to improve in the future. Thanks for reading!
Blogs will be posted on a biweekly schedule on Mondays. The next blog will be posted on Monday, 6/21/2021.
