From March, 2018

Human Capital as Infrastructure

This is the fourth in my series of posts on the recently released White House infrastructure plan.

Release of the White House infrastructure plan triggered a flurry of news about the nation’s ports, dams, water works, sewer systems, rails, and rosenbridges. Little noted in all that coverage was the fourth part of the president’s four-part plan: workforce development.

Human capital shortfall

The human capital—the educated, qualified, and experienced workers who build and maintain the nation’s infrastructure—is suffering from the same kind of shortages that plague physical infrastructure. Infrastructure work is skilled work, and skilled workers are aging out of the labor market faster than they’re being replaced. The return on infrastructure investment will be poor if workers aren’t available to operate and maintain what’s built. The availability of qualified workers has real consequences for utilities. A study I published with David Switzer linked labor market human capital to drinking water safety, for example. The challenge is particularly acute for small utility systems, which often struggle to attract and retain talent. Organizations like AWWA  and Baywork have invested heavily in workforce development initiatives in an attempt to address the shortfall.

Astonishing Part 4

Just as Parts 1-3 of the White House plan are meant to incentivize communities and corporations to invest in physical capital, Part 4 would change federal rules to incentivize individual workers’ investments in human capital.

The White House plan would revise Pell Grant eligibility to cover operator training, reform the Perkins CTE program to facilitate infrastructure-focused training, and expand federal Work Study to include trade apprenticeships. Perhaps just as importantly, the White House plan would push states to harmonize their operator licensing requirements. This last move would liberalize the labor market, which would open up opportunities for infrastructure workers and employers.

Taken together, these changes help make infrastructure careers more attractive. As Joe Kane at Brookings has observed, infrastructure jobs are good for the economy, too—they offer good pay, foster transferable skills, and aren’t easily outsourced to foreign workers. Unlike the plan’s provisions for physical capital, Part 4 is aimed squarely at the American working class.

The prominence of workforce development in the White House plan is extraordinary.

Federal investment in infrastructure is nothing new, and federal investments in human capital have been around for decades. But the White House plan’s Part 4 makes workforce an integral part of its vision for infrastructure. That’s important, and hopefully it marks a deep change in the way we think about infrastructure policy in America.

Water on the infrastructure menu

This is the third in my series of posts on the recently released White House infrastructure plan.

One of the most remarkable things about the White House plan is that water is a big part of it.

Infrastructure initiatives are hardy perennials in American politics, with good reason: they’re less ideologically loaded than other kinds of programs, they can provide immediate jobs, and they have proven long-term economic benefits. Although water is literally essential, when politicians and pundits speak of “infrastructure,” one phrase dominates the discussion:


Roads and bridges. Roads-and-bridges. Roadsandbridges. Rosenbrigez. (…and, occasionally, energy).

Listening to public pronouncements on infrastructure, a casual observer could be forgiven for thinking that roads and bridges were the only public infrastructure in America. The reason, I think, boils down to visibility. Water and sewer are ubiquitous facets of daily life, but the public facilities that provide these critical services are literally buried or located far away.

By contrast, transportation systems are large and visible and quite clearly public; they provide terrific symbolic credit-claiming opportunities for politicians. Water mains and sewer interceptors? Not so much. Think of how many highways and bridges are named for prominent politicians and historical figures; how many water or sewer treatment plants enjoy that kind of acclaim?

So for water wonks it was disappointing, but not surprising, when water and sewer got the runt’s share of the 2009 Stimulus bill. The $800 billion American Recovery & Reinvestment Act spent more than $100 billion on infrastructure, but less than $20 billion went to water-related systems—less than half of what was spent on transportation or energy.

A great hydro-awakening

Accustomed to neglect, the American water community has been a bit startled by the surge in public interest over the past two years. The Flint Water Crisis helped push the issue to the fore, but drinking water disasters in places like Milwaukee and Washington DC have come and gone over the years. These events made waves in professional water circles and drove changes in regulatory and operational practices. But they never held the national spotlight for significant time.

Something seems different this time. Presidential candidate Bernie Sanders mentioned water and sewer plants in a nationally-televised debate in February 2016 (the water twitterverse fairly exploded in giddy astonishment!). Over the past two years, hardly a week has gone by without a major American news outlet running a story on drinking water and sewer issues.

The prominence of water, sewer, and flood control in the White House infrastructure plan is the latest and perhaps most encouraging sign that water is more than a passing concern this time around. Whatever the White House plan’s political fate, its emphasis on water denotes a shift in the zeitgeist.

Water leaders would do well to coalesce around core elements of a national infrastructure strategy and strike soon. Windows of opportunity for momentous public policy changes are infrequent and perilously short.

What Jacksonville utilities say about municipal governance

The City of Jacksonville, FL is contemplating sale of JEA, its municipal electric, water, and sewer utility. For years Jacksonville has toyed with the idea of selling JEA to a private investor, but the possibility has gained new urgency recently with the release of a valuation study. The city’s current mayor is advocating for the sale, which has generated significant controversy within the city council; a former mayor recently weighed in on the issue with an Op-Ed.

Why sell a utility?

This kind of privatization is uncommon for a couple reasons. First, JEA is a very big utility: it serves more than 450,000 electricity, 340,000 water, and 264,000 sewer customers. Privatization is uncommon for utilities of that size; most privatizations (or municipalizations, for that matter) occur with small or medium-sized utilities.

Second, sale of a municipal utility usually follows some kind of failure. The utility may be failing due to poor investment decisions, mismanagement, or inadequate revenue. Alternatively, a city in financial crisis may choose to sell an otherwise solid utility simply for a badly needed cash infusion. Neither seems to be the case in Jacksonville; by all accounts, JEA is a well-managed utility with a strong record of financial, regulatory, and environmental performance. The city appears to be in solid financial shape. The utility generates a great deal of revenue for the city, both in service fees and taxes.

Arbitrage opportunity

Instead, it seems that the proposed JEA sale is simply an arbitrage opportunity for Jacksonville. It’s a seller’s market for utilities, and some of the city’s leaders apparently see the multi-billion-dollar windfall from the JEA sale as a chance to channel resources to other city priorities. From a governance and policy perspective, the critical question is: what would Jacksonville do with the billions in proceeds from a JEA sale?

Along with such economic considerations, the sale would shift JEA’s primary governance from city hall to the state’s Public Utilities Commission. For better or worse (or better and worse), JEA’s new owners would make supply, contracting, employment, and investment decisions with its investors in mind.

City as holding company?

The JEA controversy also prompts deeper questions about the nature and purpose of municipal government. In colonial America, the first municipalities were private, investor-owned companies (that’s why the process of forming a city government is called “incorporation”!)—collections of assets that generated profits for their owners. At some level, a municipality is still a collection of assets—utilities, streets, parks, stadiums, etc.—any of which might theoretically be commodified and sold to investors.

But as Alexis deTocqueville observed, local governments are also social institutions that facilitate citizenship and foster democracy. When public infrastructure moves from municipal to investor ownership, the span of local governance shrinks; democracy becomes technocracy, and another element of daily life is transformed from collective choice to private transactions.