Milken Institute
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A framework for trade
By: Milken Institute
November 15, 2012
Imagine waking in the morning to discover rain pouring through your kitchen ceiling, your toilet backed up and water coming in your front door. Then think about the shock when you discover the cost to fix your roof and plumbing system, along with cleaning up the flood damage, is more than you would earn in a year, maybe two.

That's where CaliforniaaEUR(TM)s transportation system is today -- a complex infrastructure of highways, bridges, railroads and ports that is badly in need of repair, modernization and expansion. Yet Californians lack the political will to change it, a public understanding of the problem or the money to pay a $300 billion maintenance bill, according to panelists at the Milken InstituteaEUR(TM)s session on improving trade infrastructure.

Transportation is a major economic concern because of CaliforniaaEUR(TM)s size and its importance as a gateway to Asia and Latin America. The ports of Los Angeles and Long Beach are the two busiest in the country and handle 40 percent of imports from Asia. Competition for that business will increase dramatically in 2014, when the completion of a third lock on the Panama Canal will provide easier access from the East Coast to Asia.

But until the public understands the importance of investing in the stateaEUR(TM)s infrastructure -- and political leaders are willing to come together to tackle the complex NIMBY issues that have sidelined many of the stateaEUR(TM)s most important transportation projects -- it is going to be tough to find support or money. It might take a disaster to open the taxpayersaEUR(TM) eyes.

"If the Golden Gate Bridge fell down tomorrow, we wouldnaEUR(TM)t leave it in the water," says Noel Massie, president of United Parcel ServiceaEUR(TM)s Central California District. "Why does it take that to bring the conversation to a real place? ThataEUR(TM)s where our country is now." Massie said the United States devotes less than 2 percent of its GDP to infrastructure funding, compared to 9 percent for China and 5 percent for most European nations.

Fran Inman, a senior executive at Majestic Realty and a member of the California Transportation Commission, said the collapse of government funding has left the stateaEUR(TM)s transportation system in such disrepair that it has become a drag on economic recovery. She said the commission is only able to approve 23 percent to 27 percent of the repair requests it gets each year.

Finding a way to pay the stateaEUR(TM)s multibillion-dollar transportation bill isnaEUR(TM)t going to be easy, given the shrinkage in federal funding and the political gridlock over taxes. The panelists discussed a number of avenues to raise money -- from increased user fees and bond measures to public-private partnerships -- but they agreed that the state had to begin by jolting Californians out of their complacency and providing real solutions.

"What we have learned from the sales tax initiative is that the public is willing to support us when they know what theyaEUR(TM)re buying and when we provide transparency and when we deliver," says Inman. "We have to reconvene, and we have to start talking to each other."