Infrastructure 2014: shaping the competitive city

Top trend shaping cities: public willingness to pay for infrastructure

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The public’s willingness to pay for infrastructure is seen by survey respondents as the most important factor shaping the future of infrastructure and real estate over the next decade. Whether funding for infrastructure is collected via taxes (income, sales, property, etc.), user fees like tolls, or other means, how the public feels about these levies greatly affects how much money is collected.

The public’s willingness or ability to pay for infrastructure is viewed as more important than most other cultural and technological factors churning now.

  • A combined total of 82% of respondents (87% of public sector and 76% of private sector) said this factor will have a dramatic or significant impact on infrastructure investments.
  • Shifting market demands and demographic trends, including growing demand for compact, walkable development, and the appeal of cities and metro areas to families with children, are seen as the next two most powerful factors overall.
  • Private sector respondents were likely to think that the cost and availability of energy were more important than demographic shifts.
  • Climate change and extreme weather events were seen by just 37% of survey respondents as important infrastructure-shaping forces.
  • Global respondents were more likely than US respondents to see climate change as significant—60% of them said climate change and extreme weather events would have a dramatic or significant impact.

Willingness and ability to pay are influenced by a variety of factors, including economic conditions and perceptions of debt and government. That public willingness and ability to pay came out so strongly points to the need for infrastructure proponents to:

  • Make a strong, forward-looking case about the need for investment;
  • Develop messages that resonate with the public, and find other ways to generate public support for infrastructure;
  • Identify cost-effective infrastructure investment strategies; and
  • Carefully steward resources when projects are approved.

In the face of challenging economic times, with many economies around the world still digging out from recession, it is difficult to ask people to pay more for anything. And in the United States in particular, a gloomy economic atmosphere has combined with an increasingly politically charged conversation about government and taxes.

Other factors exacerbate the problem. Recent lower economic growth means that national and local economies are unable to generate the same levels of tax revenue as they once did. And local public pension obligations are squeezing spending on other needs in some places.

But there are exceptions to every rule. Some communities have managed to persuade the public that paying for infrastructure is a worthwhile endeavor, and lessons from those places are worth paying attention to.

Infrastructure may be a key driver of real estate investment, but answering the question of how communities will foot the bill for it remains a work in progress.

EY – trends and issues shaping cities