Episode 44 -How a National Infrastructure Plan Positions the U.S. for Long-term Economic Growth
In each episode, we introduce you to leaders in the world of corporate site selection and economic development. We speak with members of the Site Selectors Guild, our economic development partners, and corporate decision makers to provide you with deep insight into the best and next practices in our profession.
In this episode, we have as our guest, Larry Gigerich, executive managing director of Ginovus, one of the nation’s leading location advisory firms. Today, Larry will talk with us about infrastructure. More specifically, Larry will discuss how a national infrastructure plan can position the U.S. for long-term economic development growth. Join me as we welcome Larry Gigerich to Site Selection Matters.
Rick: Larry, today we’re going to be talking about infrastructure, and more specifically, a national plan for infrastructure. But before we jump into the details, why don’t you take a minute, if you will, explain to our listeners exactly what is meant by this word infrastructure?
Larry Gigerich: Well, absolutely, Rick, and great to be with you as always. In my mind, infrastructure is really a physical asset as you think about. It’s something that’s required to support residential, commercial, and industrial development. So I think about things like roads, rail lines, water, sewer, natural gas, electric, broadband. Those kinds of issues are really key underpinnings to economic development and are physical in nature. You know, without it, businesses can’t operate, individuals can’t live their lives. They’re all things that are important to what we all do day-to-day, and we really need certainly a national plan to help us enhance our infrastructure in our country. It’s something that is important. Again, serves as a key underpinning for economic development over the long-term, and it’s something, honestly, we’ve neglected for a few decades as a country in the U.S. and something needs to be addressed.
Rick: You know, Larry with that definition as a baseline, physical infrastructure, you’ve explained that very well kind of what it is. Take a minute, if you can, help us understand why infrastructure development as a process is so important to economic development, and as a follow-up, why a national plan seems to be the right way to go.
Larry: Yeah, absolutely. So, you know, again, as I think about infrastructure and those physical assets, it’s really important for economic development as it relates to being able to either develop or redevelop sites or buildings, you know, having the things in place that you need to. You know, as I always say, it’s kind of like when you think about infrastructure, you know, when you throw on the light switch and your lights come on, you turn on a faucet, water comes out, you don’t necessarily think about that infrastructure and what it takes to get it to your business, to your home every day until you don’t have access to, until you turn the light switch and the lights don’t come on or turn on the faucet, no water comes out, then it becomes a crisis. So I think that the importance of a national plan, especially one that ends up being focused on physical infrastructure is really important. Again, we’ve not seen anything concentrated, probably close to 30 years now, and we’ve seen a lot of aging of our existing infrastructure, let alone the technological advances that are there that help us address things like environmental issues, things like speed, or broadband connectivity. Again, those things that are really important economic development that you have to have, and businesses, in particular, count on having to be able to operate as a business.
Rick: For much of my adult life, Larry, the U.S. was considered a leader in almost everything from science and technology to our transportation systems and physical assets. When I think back on it, I think, you know, the interstate highway system, the development of the national railway system, the Tennessee Valley Authority, the rural electrification programs, many of them post World War II, but certainly big, big major…you know, Hoover Dam, the things…That’s infrastructure, and we really led the world in getting all that done. Today, we seem to be trailing in some of these areas. How do you think we got in such a difficult place regarding maintenance and quality of our physical assets?
Larry: Yeah. I think, you know, when you look at it, infrastructure has always been a pretty easy thing to kick down the road for some people, and I’m not at all saying that that was the right way to approach it, but I think often, and you see this with elected officials at times, you know, projects that have these new kind of shiny or exciting objects attached to them like a new park, a new building being built, sports facilities, monuments, museums, whatever they may be, those are like shiny, exciting. Lots of people get really, really excited about it. Infrastructure, people don’t really get excited about it, but you have to have it to be successful, again, whether you’re a business or, you know, you’re an individual resident of a community and you count on it always being there. So I think it’s been kicked down the road because it’s not one of those shiny or very exciting objects. And as we’ve talked about, it’s such a key underpinning for economic development, and one, when you make that investment, you need to really focus on the results over a long-term, not look for an immediate return, you know, in 12 to 24 months. That’s just not how infrastructure works.
Rick: It’s a little bit like maybe…sounds like what you’re saying is a little bit like looking around the house here and think about deferred maintenance, things that, yeah, I should have done, but we didn’t do, and, you know, you just get in the habit of letting…well, we’ll push that till later. I guess that’s a little bit about how it happens, and maintenance gets deferred until something goes wrong.
Larry: No question. I think that’s absolutely the case. And, honestly, too, I mean, if you look at governmental entities, they typically have more physical infrastructure assets to take care of than the normal funding would allow for. So you do have to make choices, and if you say, “Well, it’s not really that bad,” whether it’s something in your home or infrastructure in your community, you might say, “Okay, I can put that off a little longer,” and then it becomes a bigger problem.
Rick: Larry, infrastructure development and redevelopment as you’ve defined it, and these are very large kind of macro-level projects, it will be costly. Shouldn’t our communities, our states, our regions, our country, look at these costs as an investment rather than an expense?
Larry: Yeah. I think without a doubt infrastructure is one of those areas like workforce development is where it’s an investment in the future, and we have to recognize that and again not expect short-term results in many cases but look at what it does over the long-term. And it’s become more expensive for us to deal with now because we have kicked that can down the road. Now I do think the reality of it is you have to be able to in a thoughtful way say, “This is how we’re going to pay for it,” but at the same time recognize that it is an investment. Obviously, since the financial crisis of 2008, the U.S. has spent a lot of money on a lot of different things, albeit many things needed in an emergency situation, including now the COVID pandemic. But I think it needs to be viewed as an investment just, again, like workforce development education as…and you measure it on a long-term.
Rick: You know, at a personal level, if you have a long-term investment that you need to make expenditure, you tend to finance that with long-term debt. Now as you match the life of that asset with the debt instrument, our federal government, just listening to you talk a little bit, they tend to kind of roll all this into the annual budget and they may pay for it over time, but it’s still done with the short-term debt, so to speak, or a mix of debt instruments, but the debt is not tied directly to one asset. Seems like that makes it a little more difficult for people to get their head around spending that big amount of money. If you go buy a new house next year, well, that, personally, is a big expense. You really pay for it in monthly payments, and so it seems…
Larry: Yeah, for sure, Rick. I agree with you. I think you need to, again, look at it as a long-term investment just like an individual who buys a home. I think that’s a great analogy. And as a part of that, you know, you realize the return is going to be over a long period of time. But the other thing too is, you know, the federal government, and I don’t care which political party is in charge, doesn’t always innovate or think creatively like they could, and so whether it’s how you finance something like this over the long-term, how you look at public-private partnerships. There’s examples throughout the world, and Asia, in particular, that’s been able to do a lot with their physical infrastructure, and there are a lot of things to create a public-private partnership, so you leverage those public dollars much further by having private partners and creating these public-private partnerships that allow you to do more with your public money because you’re leveraging private investment as well. And I think there are some great opportunities for us if folks in Washington will take the time to think through that.
Rick: We’ve been talking about long-term impacts of long-term infrastructure improvements, but from an economic development standpoint, Larry, aren’t there really some significant impacts that come from just getting all this work done? I can think of material and equipment purchases in addition to the construction jobs that should also prove to be a big boost to local and state and regional and national economies. Isn’t this a big plus?
Larry: Yeah, there’s no doubt about it, Rick. And you’ve touched on a couple of things there. Number one, the construction jobs that will be created, especially when you look at skilled trades jobs associated with major construction projects, rather, tied to physical infrastructure assets. There’s tremendous benefits of that, the earnings the workers have, the very good-paying jobs and construction jobs are tied to, those things are critical. And you’re right. The purchase of raw materials and also construction-related services, architectural and engineering. Other things that happen will happen on a community regional and state basis, especially if we get a federal plan passed and funded, that will be a great benefit. And then finally, just the spending that occurs, you know, the construction workers working on these projects and areas that supports indirect jobs as well as they go out and spend money for meals, or they run into a store during a break and pick up something that their family needs. That creates a lot of economic spend. And as a result of that, that benefits both people who live and work in that area but also governmental entities with tax dollars that they will collect that they can then reinvest in things that are important to their local communities, regions, and states.
Rick: In a roundabout way of sorts, just the process of building the infrastructure, and as you tick through those construction jobs and all those things, the sales tax that comes from this and payroll taxes, it almost funds…don’t fund itself completely, but it does create an economic boost that then would generate additional tax revenues that could help reduce the overall cost of it. It seems to me often like the economic impact that comes after a major disaster as people rebuild.
Larry: Absolutely. And, you know, I think what’s interesting is there are some really great things that have been done on a local and regional level or on a state level across the country. You know, our communities and our states often are some of the best laboratories we have to try new ideas and new ways of doing things. And we’ve had a number of states, communities, and regions throughout the U.S. who because they looked at Washington not doing anything with a national plan on physical infrastructure who said, “Okay, we’re going to go out and do these things because we know it’s important,” and they make that investment, and they have seen that return, and you’ve seen a lot of states like Indiana, one that I live in that invested heavily billions and billions of dollars in infrastructure funded through different ways, through leasing of a toll road, through increasing gasoline tax for the first time in a long, long time, and it’s paid tremendous dividends. So again, I think we can look at our communities, regions, states that have done this, approach it creatively, and to your point, have a look at it as, hey, this is a long-term investment and we’re seeing a return on that investment through jobs and tax dollars that are generated that ultimately help pay for the investment you’ve made in that infrastructure.
Rick: Good points. Larry, and matters of public policy and public investment. Sometimes the big question seems to also be what happens if we don’t do it, if we don’t do what’s proposed or recommended? If our infrastructure base is in such need of repair or disrepair, what’s the cost or risk, if you will, of not doing anything now?
Larry: You know, I always think back to a professor I had in college in a business class, and he said, “The easiest thing for government or business to do is to overlook or not pay attention to the risk of doing nothing,” and it’s always stuck with me, you know, and you’ve just brought it up in an important way here. There is great risk at doing nothing. And by that, I mean if we don’t make these investments, view them through the prism of a long-term period of time from a results standpoint, we’re going to see ourselves fall behind in some critical areas. And again, especially when you look at the economy in North America, you know, it’s a lot about service and how goods and products are moved, and also two, just, again, the things we all count on every day, whether you’re a business or an individual, you know, I want to turn the light switch and the lights come on, you know. I turn on the faucet, water comes out.
Those things you need, and I think, again, the most important thing is when you stand still, one, you know, other people are going to pass you by. And we’ve seen some countries pass us by when it comes to physical infrastructure. And then you only deal with it when it becomes a crisis, and often, you make poor decisions, and certainly, you don’t yield the return on investment that you want when you have to react in a crisis, whether it’s infrastructure, it’s a pandemic, it’s a financial crisis, whatever it is, that’s a real challenge. So there are great risks of us doing nothing, and if we can end up with a package from the federal government that is focused truly on physical infrastructure, we’ll be in a very good position to reap the benefits of that investment over the next 20 years, and I think that’s how people need to view it.
Rick: Yeah. You know, Larry, I know you travel a lot in your businesses as I have in my career, and we see firsthand how our major public infrastructure compares to some in other countries. I use airports, for example, and, well, we have some great airports in the U.S. All you have to do is get off the plane in China, and when you get off that plane in China, look around and see some of the huge investments that have been made, or get on the maglev train to go from Shanghai out to the airport that goes over 200 miles an hour to realize that just as you’ve said, the risk of not doing it is that others are doing it, and that’s who we’re going to be competing with going forward.
Larry: For sure, right? I mean, you look at the developed economies, the innovative economies, and whether you point to China, you point to Germany and Europe. I mean, there’s lots of places that have made these investments that have seen return from it but also that positions them well as we look further down the road. And I think one thing that’s important, whether it’s a governmental official or economic development leader to recognize is, you know, not all corporate decision-makers hate paying taxes. That’s just not the case, right? So, I mean, you can’t afford to be an outlier where you have some of the highest tax rates, you know, as a state or as a country compared to other places, but corporate decision-makers are fine with paying reasonable taxes to governmental entities as long as they see that money being invested in a wise manner.
And infrastructure is one of those areas that, time and time again, I talk to CEOs of our clients and other people I interact with. Infrastructure, an area where they say, “Yeah, I’m fine with my tax dollars being invested there because I know the benefits that that’s going to provide to our economy in the long-term.” And that was reinforced in a dinner I had a couple of nights ago with eight CEOs that said, “Hey, this is an area we need to make this happen. These investments in infrastructure is a really smart way to spend tax dollars and much better than some of the other ways we spend dollars at, you know, local, state, and federal government level today.”
Rick: Something to be sad about, you get what you pay for. I think as you…and CEOs are not opposed to paying for something if they get a good value in return. That’s what it seems to make sense. Larry, you’ve given us a lot to think about in this conversation today. What a great discussion we’ve had, but that’s really all the time we have. So, let me say thanks to Larry Gigerich with Ginovus for talking infrastructure with us today on this episode of Site Selection Matters.
Larry: Thanks so much, Rick. Always good to spend time with you.
Rick: Thanks for listening to this episode of Site Selection Matters and a special thanks today to Larry Gigerich, for helping us get inside and better understand how a national infrastructure plan can position the U.S. for long-term economic growth.
What an informative discussion, and one that certainly leaves us with a lot to think about.
Again, I am Rick Weddle, president of the Site Selectors Guild. This podcast episode presents my views and the views of my guests, and they do not necessarily represent the views or opinions of the Site Selectors Guild or its membership.
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Until next time, good day.