North Carolina's Infrastructure Politics-- and How Public Banks Could Restore Local Control

It's one of the most beautiful of the United States, and some of the smartest and most beautiful people I know dwell therein. But its politics are messy these days. And it's not only people's bodies, identities, or legal statuses that state legislators want to play politics with. June and July appear to be strong months for infrastructure haters in North Carolina. 

i77-us21-kerr.jpgToll roads politics have taken their toll. With citizens rightly sour on paying tolls, and businesses often unwilling to relocate to locations where their workers will have to pay the road to get to work, there's been a legislative revolt against a major project in the state. By an overwhelming and bipartisan 81-27 margin, the House of Representatives has passed a bill terminating a contract to build a section of I-77 as a toll road.

To be fair, deals like that deserve to die. As Yves Smith of Naked Capitalism wrote in 2013, these kind of public private infrastructure partnerships suck:

. . . these schemes are simply exercises in extraction. Investors in mature infrastructure deals expect 15% to 20% returns on their investment. And that also includes the payment of all the (considerable) fees and costs of putting these transactions together. The result is tantamount to selling the family china and then renting it back in order to eat. There is no way that adding unnecessary middlemen with high return expectations improves the results to the public. In fact, the evidence is overwhelmingly the reverse: investors jack up usage fees and skimp on maintenance. And their deals are full of sneaky features to guarantee their returns.

So fine, the NC House has cold feet on a bad deal. The Senate will probably not pass the measure anyway, meaning more wrangling over the toll road.  But wait until you see how the state legislature is gambling with people's lives (when bridges collapse, people die) in order to implement other parts of the majority's agenda--having nothing to do with contracts or infrastructure. 

And just to be clear--you might agree or disagree with the policies in question, but what this post is ultimately about is whether it's a good idea for state legislatures to use the threat of withholding infrastructure funds to local government as a way to enforce policy decisions they may not agree with-- and what we in the public banking movement already know to be a solution for that kind of heavy-handed centralism. 

HB 100 is over the top. The House also recently passed that bill, essentially an illegal immigration check law, banning alternative forms of identification to check residents' legal status, and requiring court clerks to record (and, curiously, to make public) the legal status of those asking to be excused from jury duty. The interesting and nefarious part of the bill is that if cities, counties, and law enforcement agencies don't comply with its monitoring and identification requirements, those entities will lose their infrastructure funding--lose it fast, hard, and potentially for years. 

After finding that "the General Assembly's power over the appropriation of State funds can be used to create additional incentives for cities, counties, and law enforcement agencies to comply with duly enacted laws" -- municipalities and counties found to be in noncompliance will lose all their infrastructure repair dispersals "for the fiscal year following the first date of noncompliance with the State law related to immigration. If within 60 days of the Attorney General's determination, the city, county, or law enforcement agency fails to demonstrate to the Attorney General's satisfaction that the city, county, or law enforcement agency is in compliance with all State laws related to immigration, the period of ineligibility shall be extended for an additional fiscal year."

. . . and on and on . . . as a legislative and ordinance-drafting guy, I have to say that the language of the entire bill has a sort of nasty, strict-parent feel to its rhetoric.

It's hard not to feel bad about this kind of legislative approach. Charlotte and other communities in North Carolina have tried to stay ahead of the curve on anti-discrimination and immigration issues. The state legislature, having apparently forgotten that "conservatism" is supposed to be respectful of local control, has followed the path of other state legislatures in red states, simply banning or punishing local decisions.

But politically messing with various jurisdictions' infrastructure is even worse. According to the Infrastructure Report Card site, the state's 1,150 miles of inland waterways make it the 7th most active water-transportation state in the country, Over 2000 bridges in North Carolina are in need of repair. There re 46 miles of levees there. Responsibility for the majority of maintenance and repairs lies with cities and counties. The state's population growth will put a further strain on that infrastructure.

Local governments in North Carolina are thus stuck between a rock and a hard place. Repairs and construction are already too expensive because of unnecessarily high interest rates and financing fees. Privatized infrastructure in general is bad policy, to be sure. So why go a step further and play with people's lives, and municipalities' budgets like that?

For public banking advocates, there's an answer to both the threat to withhold funds on unrelated political grounds AND to the fiscally dangerous practice of high-interest public private infrastructure investment: Municipal banks could make those repairs. Whether these were essentially public banks with a portion of their capitalization and investments done privately, or full on public banks requiring no private investors at all, city banks can fund infrastructure. And, of course, a state-owned bank could fund larger-scale construction (and be administered by an independent body rather than what appears in North Carolina to be an oft-troubled legislative body). The reasons for having public banks keep piling up, and in this case those reasons don't just involve fiscal responsibility, but also the potential for the balance of political power between state legislatures and local control.

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