Megaregion Conference

Knowledge in Action:

USC Faculty, Experts Discuss Infrastructure Strategies

By Ashley Wilson, Jody Beth Rosen and Ben Dimapindan

Mega-region Conference

More than 160 leading experts – ranging from USC faculty to government officials to business executives – gathered at a June 19 conference at Davidson Conference Center to address pressing infrastructure challenges facing the Southwest Megaregion, which encompasses Southern California as well as portions of Nevada and Northern Baja, Mexico.

The event, Rebuilding and Renewing America: Infrastructure Strategies for the Southwest Megaregion, was part of an America 2050 forum, sponsored by the Regional Plan Association, the USC Bedrosian Center on Governance and the Public Enterprise, and the USC Keston Institute for Infrastructure and Public Finance. America 2050 is a national initiative focused on developing an investment strategy that will support sustainable growth and keep America competitive in this Century.

Tom Sayles, USC’s vice president of government and community relations, opened the session noting the need for infrastructure as the foundation for both growth and sustainability. He emphasized the importance of developing an infrastructure investment program for the region and the country. Sayles also identified the university’s resources that are coming together to provide assistance for this effort.

According to America 2050 Director Petra Todorovich, who delivered introductory remarks, the initiative was launched in response to key challenges facing the country, which includes critical infrastructure shortages, over-dependence on foreign oil, a need to reduce carbon dioxide discharges, an expected population growth of 40 percent by 2050 and changing land use habits.

Todorovich noted that the emergence of megaregions – networks of adjoining metropolitan areas – may provide the “building blocks” for a national infrastructure plan. Since most megaregions spread across multiple states, they can serve as effective partners with the federal government in regard to goods movement and water infrastructure, she said.

Todorovich also explained that water, energy and transportation infrastructures are all interconnected. For example, population growth necessitates higher energy production and puts pressure on the water supply; however, energy production is a highly water-dependent process. And, changes in the climate will further increase water demand.

Bob Yaro, president of the New York-based Regional Plan Association, noted that in Europe, people are already making much-needed investments in infrastructure. Europeans are working across political boundaries in ways that we aren’t, he said. We must create synergies between transportation and other interests and be more efficient; the United States must decide whether to lead the “3rd Century” or fall behind, Yaro added.

In response, Mark Pisano, senior fellow at the USC School of Policy, Planning, and Development and co-chair of America 2050, noted that we should apply to public policy what we already do in our households and families — “put all the costs on the table.” The America 2050 paper ”Toward a Strategic Investment Framework,” which Pisano helped author, states that society collectively should identify all of the available resources, then focus on what specific goals are trying to be achieved. Pisano said he believes government officials cannot figure this out for us; instead, we must accomplish it together.

Critical Issues

Tim Brick, chairman of the Metropolitan Water District of Southern California, called out for a national water policy. He cited that water is distributed among 26 different federal agencies, with no one agency responsible for coordinating national policy. Given the seriousness of water in the future of the megaregion, a new framework needs to be created within the region, much like what our predecessors did, that will carry us for 50 years, he added. Brick also lauded America 2050 for taking the initiative to launch an effort to establish such a policy.

California State Senator Alan Lowenthal (D-Long Beach) discussed passenger and goods movement via high-speed rail. Lowenthal, who chairs the state’s transportation and housing committee, advocates four basic principles for the proposed train:

  • an initial corridor from Anaheim to Los Angeles to San Francisco via the San Joaquin Valley;
  • prohibition against using local or state funds for high-speed rail; instead, public-private partnerships must fund it;
  • must connect to regional rail transportation systems and urban mass transit systems;
  • accountability and peer review.

Doug Failing, District 7 director of Caltrans, said that one major transportation challenge is how to approach the region’s critical needs. With container traffic down at the ports because of the economy, Failing suggested that this may be an opportunity to create freight corridors, and also recommended involving the private sector.

Nevada Assemblyman Tick Segerblom said that the problems aren’t much different between Las Vegas and Southern California; the transportation and water issues are only on a smaller scale in Las Vegas. Segerblom added that he’s very interested in creating or enhancing a transportation corridor between L.A. and Las Vegas, and that the two areas need to work together on water to share this precious resource more efficiently.

In addition, Elisa Arias, principal regional planner for the San Diego Association of Governments, spoke about the cross-border issues that occur in both water and transportation between the United States and Mexico, especially at the Tijuana and Otay Mesa crossings.

Neal Schmale, president and COO of Sempra Energy, made the point that he believed raising money to build projects isn’t the region’s biggest problem, but rather it’s that projects cannot get through the decision-making and permitting processes in a timely manner.

Finding Sustainable Solutions

Despite the severe problems afflicting California, several panelists felt that this crisis presents significant opportunities.

One opportunity, according to John Kirlin, executive director of the Delta Vision Foundation, is for the state to have honest, robust discourse about public finances — delving into important concerns such as discontinuing subsidies for inefficient use of resources and charging people for what they use.

Donald Paul, executive director of the USC Energy Institute and holder of the William M. Keck Chair in Energy Resources, added that he would push for revitalizing a system that enables the state to capitalize on intellectual advancements and convert them into growth industries, because economic development is essential.

California Public Utilities Commission President Mike Peevey also noted that it seems unfair for the government to subsidize the coal, oil and gas industries over many years, but not solar industries. Kirlin agreed, saying subsidies hamper low-efficiency use.

The conference’s keynote speaker, John Fielder, president of Southern California Edison, explained that technology is essential to reducing carbon emissions. Fielder said that since wind and solar power are intermittent sources, there must be a system developed that complements intermittency. “If we can find a way to store electricity, it’s a game changer,” he said.

Fielder also talked about the “smart grid,” which enhances intelligence and communication into the electricity system. The smart grid can assess the system at any instant and will have the capacity to diagnose and repair problems efficiently. It will take several years to roll out, he said.

Paying for the Progress

Amid California’s history of budget struggles, one of the central themes of the conference was identifying long-term financing options for the state’s infrastructure projects.

Keston Institute Director Richard Little, who served as moderator for the panel focusing on finance, noted that “bonds are not revenue and financing needs to be paid back.”

Little also asked the speakers about the role that public-private collaboration can play in achieving infrastructure goals.

Marguerite Young, director of public pension fund relations at Service Employees International Union (SEIU), said that public-private partnerships must be true partnerships, where all the interests are aligned.

According to Young, the private sector has to take true risk, so the public has an opportunity to benefit — and so the public will be assured that that the resource will be available in the future.

Paul Rosenstiel, principal of De La Rosa & Co. and former California deputy treasurer, said that public-private partnerships are viable options if they provide actual value. The partnerships must demonstrate an improvement over traditional delivery of infrastructure — better quality, lower cost and faster delivery, he said.

The public and private sectors have different abilities to assume different kinds of risk, Rosenstiel added, and if there’s a reason to use capital other than tax-exempt bonds, it might be that those investors are more willing to take on more of the risk.

Kathleen Brown, head of public finance for the western region of Goldman, Sachs & Co., commented, “you need to control your own destiny by getting what you can from the Feds.” She said that the degree to which the federal government starts focusing on public policy goals instead of earmarks might encourage local government to be more efficient. With scarcer resources, we should have more prioritizations, which would incentivize the state and local governments to be more efficient, Brown added.

Moving Forward

Sunne Wright McPeak, president and CEO of the California Emerging Technologies Fund, concluded that we should have a plan of action, with outcomes, metrics and the ability to have investments that don’t get caught up in legal challenges. Regulations should be streamlined to ensure protection of the environment is done in a more efficient way.

“Economy, environment and equity” should not come with political tradeoffs, McPeak said. According to McPeak, we cannot optimize one of three without the other two. The new paradigm must have leadership to break through silos; we need true public-private partnerships that are transparent, accountable and have regional collaboration, she added.

The forum concluded on the theme that this was the beginning of a network of organizations and individuals using the knowledge and resources of universities to further the megaregional and national investment strategy.

Photo courtesy of America 2050
From Left: Leslie Daigle, Councilwoman, Newport Beach; Elisa Arias, Principal Regional Planner, San Diego Association of Governments; Doug Failing, District 7 Director, Caltrans; Mark Pisano, Co-Chair, America 2050 and Senior Fellow, SPPD