Charles Davidson for TAI: We have with us today Manny Diaz, the former mayor of Miami, who is well-known nationally, having been the president of the United States Conference of Mayors. Perhaps more importantly, as a boy, Manny hit a winning two-run homer for his team to become Boys Little League world champions. Manny has done many things in his life and is famous, among other things, for the topic of our conversation today, which is infrastructure. Of course, infrastructure has become a big issue—everybody talks about it now—it’s been an issue in most recent presidential campaigns. And there is a general consensus that our infrastructure is in dire need of repair and renewal. So, Manny, how did things get so bad, and why are we so far behind other prosperous liberal democracies in this regard?
Manny Diaz: Well, we just don’t get it. It reminds me, in this current era we’re living in, of the government being so unprepared for the pandemic. It’s related to this in the sense that—well, for openers, we don’t have a capital plan, which is absolutely unbelievable. Every city, or at least most cities in America, every year, we adopt a capital improvement plan in our cities for capital projects. And yet you don’t have that at the federal level.
I always like to put things into a historical perspective by looking at cities and what cities have been since the beginning of time. They have been the center of commercial exchange. They have been the focal point—the hub—for the movement of people and goods. It’s where people went in search of economic opportunity and a better way of life. And when cities began to develop, they would allow residents to use less energy, make use of multiple modes of transportation—just walking or cycling, or even in some cases, riding a horse. And that’s how our country, and really that’s how the world, developed.
We’ve come to a point in time today, where after the rise of suburban sprawl, there has been a massive rush to move back into cities. 50 to 60 percent of the world’s population is living in cities.
If you look at America, at the end of the day, it’s all about investments and it’s all about returns. And both of those are to be found in our cities. So if you understand the fact that 92 percent of our economic growth in the United States is in the metro areas, and the metro areas produce 90 percent of the jobs—the income contribution to GDP—then you begin to realize that cities are the economic engines of this country. And I would argue that this is true of most countries.
Now, what happened after World War II? We came to falsely believe that upward mobility—social mobility—meant moving to the suburbs. And that put a tremendous strain on cities because now we had to get all of this infrastructure—from pipes and sewers to building schools and everything else that goes with it—we had to get all that out to the suburbs, to accommodate people who wanted to have the 2-3 car garages, and dogs running around, and barbecues every weekend. So we have traffic congestion because you don’t have for the most part public transit that gets you out to the suburbs and back. So what do politicians do? They build more highways, they build more lanes for the highways. But study after study has shown that the more lanes you add, the more congestion—it doesn’t really address the problem.
Overall, the federal government has contributed only 25 percent to the cost of infrastructure. Water and wastewater management has become almost strictly a local expense, 95 to 98 percent of all dollars spent on water and wastewater are spent at the local level. The last figure that I had, between the late nineties and the mid part of the last decade, was close to a trillion dollars spent by local governments.
The other perspective that has been damaging and has put us in the position that we’re in today is this notion that it’s a local problem. Now, remember I said that cities are the economic engines of America, therefore contributing to federal coffers. And yet it doesn’t come back. It doesn’t come back because, thank you for your money, thank you for all the economic output that comes out of your city, but we’re not sending you money back. And infrastructure is clearly one of those areas—only 25 percent of all infrastructure spending is federal. And yet look at the return that they’re getting.
So what has this produced? Well, obviously congestion and traffic and all the other things, but it’s also had a very serious impact on business. Now let’s talk about business, from airport delays to bottlenecks and freight, and road congestion. Because this is two things. This is about moving people. And it’s also about moving goods. And that’s what keeps our country moving forward. And we are losing hundreds of billions of dollars and millions of jobs every year as a result of poor or inadequate, or improper infrastructure investment. From a personal perspective, the average American household spends $10,000 a year on transportation, spends more on transportation than on food and health, combined. That’s a huge number, $10,000. I mean, if you think about it, if you’re making minimum wage, after-tax dollars, look at what a high percentage is going to just getting you around. As the Harvard study says…
CD: So do you want to give us a snapshot of the Harvard study, and then go on to your experiences as mayor of Miami—and Miami’s infrastructure development during your tenure there.
MD: Sure. The Harvard study looks at this annually over a very short timeframe, to keep updating it. And the point of the study is that commuting is the single strongest factor in the odds of a person’s ability in America to be able to escape poverty. There’s a direct correlation between transportation and social mobility—interestingly enough, a stronger correlation than with crime. People think if you come from a family where there’s crime, or a neighborhood where there’s crime, what test scores you got in your elementary school, the percentage of two parent homes—all those normal social issues that you would think would create problems for upward social mobility… No, it’s transportation. It’s being close to a job (where you might make minimum wage) without having to spend $10,000 a year to get you there, that strongly correlates with better outcomes.
So it’s completely upside down. And all of this to me, it goes back to the practical—the return on investment. This is not a partisan issue. Look at the costs of not investing from a business perspective and from a personal perspective. And the money that could otherwise be generated and put into our economy, that is going now to deal with inadequate transportation. So that, by the way, is not American exceptionalism.
CD: That sure isn’t. We don’t rank very highly on infrastructure now.
Manny, could you go into your personal experiences in Miami as mayor in terms of infrastructure development? Because we know you did a lot there, and that’s where your knowledge of all this was collected and experienced. It would be great to hear that story briefly, and then we can go back into more general national issues.
MD: Well, it’s interesting because to me, Miami is sort of a microcosm of the predicate that we just established. Miami had suffered like other cities in America with regard to suburban sprawl. In fact, we were probably a poster child for suburban sprawl. So in the sixties, the seventies, the eighties, the people in Miami that could afford to move out to the suburbs, they got out and moved into the suburbs. That obviously has begun to change. But studies show that lower-income families were spending 72 percent of their income on housing and transportation. That doesn’t leave a lot for anything else.
So what is the context that created? Miami was number one in practically everything bad, from riots, to murder, to poverty. Our unemployment rate was terrible, the city was under financial oversight from the state of Florida. Our educational system was a mess. Our infrastructure was a mess. You name it. And I could go on and on. And by the way, this was the Miami of only 19 years ago. So it wasn’t that long ago.
So when I developed my agenda, I focused on five investment areas that I thought were the drivers of growth. One is to deal with poverty and job opportunity, which includes things like education and affordable housing and homelessness. Public safety—obviously you have got to have a safe city. Infrastructure, which is the one that we’ll talk about in detail. Environment and sustainability. And arts and culture.
So on the infrastructure side, I ran a campaign that was based primarily on grassroots, which is where I came from. Door to door, I knocked on over 10,000. I remember walking down a particular street in our city where after a couple of homes, I noticed that there was no furniture of any kind in either the porch or the foyer, or somewhere entering the house. And I asked the homeowner, I said, why does no one have anything—any furniture? And they said, well, because when it rains—and I mean a mild rain, not a hurricane—water comes into our house and ruins whatever we put out there. These memories kind of stuck with me.
And so I get to City Hall, and like for the federal government, I find out that there’s no capital plan. There’s no long-term capital plan. So we developed the first of its kind in the city. By the way, since there was no capital improvement plan, there was no capital improvement department. Nobody could do it. The only capital projects that were being done were occasionally public works. You know, we’re coming to your neighborhood, to your block, and we drop some asphalt on the pothole in front of your house. And that was the extent of it. There was no study that had ever been done. We commissioned that, knowing that our infrastructure was in horrible shape.
And then we went out and started identifying funding. And we started reaching out to all kinds of sources—from cities, state, federal, private sector, private-public partnerships. And the capital improvement plan that we developed was 700 projects. The net result was that we spent about $10 billion in total.
CD: Regarding the financing, when we hear about these big infrastructure projects, be it one or a whole series like that, is the issue of funding. And this can be very confusing—the municipality provides some of the funding, the state often provides some of the funding and the federal government… How does this all break down in terms of what you experienced in Miami, and more broadly what you observed nationally—this issue of federal, state, and local funding for infrastructure because it sounds complicated? How does that all work?
MD: It is complicated. For openers, when I got elected, we actually approved a general obligation bond issue that was about a quarter of a billion—$250 million. That was sort of the base. Now what happened is that the city just decided to put it on the ballot. They did it on the basis of back of the napkin type calculations.
I’ll give you one example. We had a park called Grapeland Park, which they had listed at a million and a half, and we ended up spending $40 million on. These were just arbitrary figures. A million and a half may have been too much for this park—who knows!—or it may be totally inadequate. In this case, it was totally inadequate, as we later found out. For example, we had to find $9 million of monies that weren’t budgeted for environmental remediation, because the city in years past had used that as a toxic dumping ground.
So we started with that base of our own funds. We collected other infrastructure funding to deal with flooding, money that was not being properly used. We went to the County, which also had pending bond issues. So we sat with them. We worked with the state and the department of transportation. We built a tunnel in our city to get us to the port of Miami—the port of Miami tunnel.
CD: The tunnel was built during your tenure?
MD: Yes, it was approved and started to be built. It was completed after I left office.
An interstate that runs through the heart of our city—the closest I can come to describing it would be to compare it to the Boston bridge, in the North End, by the basketball arena. So those were state monies.
The tunnel, by the way, the tunnel was a P-3—what everybody refers to as a public-private partnership. One of the hardest issues with infrastructure is finding the money today. The tunnel was a billion-dollar project, with a very significant contingency plan, because obviously you’re going a hundred feet underwater and you never know what you’re going to find there. So we worked on the basis of a billion dollars.
The city didn’t have a billion dollars. But the city had potential future revenue streams to tap. There were communities that stood to benefit greatly from the tunnel. Before the tunnel, 5,000 to 10,000 18-wheelers were driving through the heart of downtown Miami in the middle of the day. As a result, you could forget about certain neighborhoods ever being developed! I mean, no one’s going to sit and have a cappuccino in a sidewalk cafe while you have all these trucks blowing smoke your way. So we took money from that. It’s a long-term commitment from the tax increment that is generated in that redevelopment area, with which I can pay you back.
So what do I do? I go to a private company, a private company develops it, builds it, manages it, and operates it. And I pay them availability payments over a period of 30 to 40 years. It’s like a mortgage, right? And they take care of everything. They gave me the key to the house. And they rely on their security—the continuing revenue stream that the city is going to have for the next 30 to 40 years, plus-plus. Because now remember, that whole immediate neighborhood benefiting from the tunnel is now part of a $4 billion project. So not only did I have X amount of revenues the day we cut the deal but now look at all this additional revenue that I have down the road to pay you with.
I-395 is another interesting example of how our transportation system works, because—I actually tried to bury it. This is one of those interstates that they ran through the inner city. What was once a vibrant Black community called Overtown was completely destroyed by being chopped into four pieces by I-95 and I-395. And so like many other mayors who wanted to reclaim a city, one of the things we started fighting was these overhead monsters that run through our cities—by the way, built just to get you from Miami Airport to Miami Beach. That’s basically the purpose of it.
And so I started trying to do a number of other things, and here’s what the response was from the Department of Transportation was: They tell me if you change the project—because this project has been approved, and it’s in the pipeline, which may be 10, 15, 20, 25 years—if you change it, you go to the back of the line again. Right? So think about this: a project that somebody’s designed 15 years ago today is probably obsolete now, not workable, and a lot more expensive than it was 15 years ago. But I still have to build that, because that’s what the federal government approved. It’s absurd.
CD: That makes me think of the Big Dig in Boston. Can you tell us about that? It’s known that the cost overruns were huge. But would you still rate it as a success? And then my understanding also is that there was a lot of federal funding that ended up going into that—a huge amount—and the cost was mind boggling. I forget, three, five, seven . . . however many times over budget. Do you have a take on the Big Dig?
MD: I do. That’s one of the things that inspired me about a tunnel down here. And look, yes, it was over budget, it was delayed. It was a massive undertaking. Thank God for Tip O’Neill in Boston, who was able to keep funding the project despite all that.
What people need to understand is that in America, we can’t think beyond next week. I was in Boston many times before the Big Dig. And it was a city that was ready to explode. You couldn’t get around. I mean the movement of people, the movement of goods, a lack of infrastructure—when all that becomes impossible, your city falls apart. They had to do it. They opened up that entire area, reconnected the North End, which was previously a very bad area. I love the North End now—one of my favorite places. And I can walk there. I can walk over on the Rose Kennedy Greenway.
We yell and we kick and we scream because it’s too much money. But think about this: it’s also a 100-year investment. I’ll give you another example that we had down here in Miami: forming our performing arts center. A lot of people don’t like mayors that are artsy, because they don’t think that there’s value in it. When I was getting into one of those moments where people were criticizing some decision about that project, I had my staff go back and look at the tax profile of that neighborhood for the five years preceding, and for the five years after we had broken ground. The tax base had only grown by $45 million over the preceding five-year period; and in the five years since we started, it grew by a billion.
So I ask again, is that an investment that you would make? The answer is, yes, of course it is. And so again: it’s that issue of what is the yield, what is the return on the investment that you’re making.
CD: For these infrastructure projects, the benefits are mostly in what economists call externalities, and they’re incredibly hard to measure. It’s very interesting to hear you talk about that sort of thing. And of course, without these projects, we wouldn’t have the city at all.
Let’s take a jump outside our own country for a minute. We certainly are known for having pretty much the worst infrastructure of any of the advanced industrial nations that we compete with. I think that’s almost inarguable at this point, right? So who do you think does infrastructure best? I mean, who should we be looking to, to benchmark how we do things, and maybe different areas where different countries do it better than others?
MD: Well, all you have to do is travel—look at almost anywhere. If you look at the Far East, China spends close to 10 percent of its GDP on infrastructure. The European Union spends about 5 percent, which is over twice as much as we spend.
And it’s not just throwing money at the problem. It’s also a cultural thing—they recognize the value of, and place a priority on, infrastructure. There’s a consciousness, I think, of people in Europe for many, many years, that these are the things that make us great!
They also have a European Union infrastructure bank, which we’ve talked about setting up in this country, but which we can’t seem to do. They’ve been doing three P’s—public-private partnerships— for many, many years. So they have got a whole system in place that we can only aspire to.
And that’s why when you travel, you marvel at the high-speed trains. They’re wonderful. The Chunnel—isn’t it great that you can go from London in a couple of hours on a train, underwater, end up in Paris? Can you imagine if we had proper rail service in America? As mayors, we’ve worked on a lot of rail transportation plans to connect major metropolitan hubs. In Miami we’ve been at the bottom—we’re finally going to get a connection to Orlando. But there should be connections in the Midwest, to get from Chicago to surrounding metropolises. In the Northeast, the Acela is pretty good. But we need more Acelas. We need more of those connections between major metropolitan areas because we all benefit from it.
CD: Of course, our distances are much greater than in Europe and other countries that have high-speed rail.
One of my pet ideas for many years has been the use of technology when it comes to infrastructure. Because we’re way behind. We love technology and politically speaking, Americans like investments in technology. Would there be any way to sell a notion that instead of playing catch-up, we should have some sort of DARPA, an accelerated research program, to try to actually leapfrog some of our industrial competitors in terms of infrastructure technology? Is that a pipe dream, or can you imagine any possibilities there?
MD: It’s really the private sector that is making these investments. Government, what are we doing? We’re cutting research and development grants and monies. We don’t even have enough swabs to get COVID tests! I mean, we just don’t invest in things.
But yes, the answer is that the private sector is doing a lot of that. You know, again, going back to the stimulus bill, we got two things into it that we hoped would become permanent fixtures in America. One is a smart grid. An internet of things in Miami. We got the first of two $200 million grants to build a smart grid.
And now that we have that, people don’t understand what they’ve got. Over the long term, what are we talking about? We are talking about the ability to manage the electric grid and know where there is a problem, sitting in some FPL office somewhere, and getting it fixed quickly. My ability to control the energy usage in my house through the internet, by being able to monitor smart appliances in my home. Those are all things that are massive savings in the long run.
There isn’t an element of infrastructure that I can think of that would not be enhanced in terms of service and in terms of savings by being supplemented by technology. So, yes, absolutely. We need more technological improvements.
CD: One last question Manny. If you were the King of Miami, shall we say, what would be the optimal urban infrastructure that you’d like to see, if you had a few years to build that out? What would be optimal?
MD: Transit is a huge issue. Another one is just simple connectivity—broadband—and making sure that we can connect all our residents. Right now, we could use virtual learning and free internet connectivity.
I was lucky that the cable franchise agreement in the city was up for renewal when I got elected, and I made it a condition of the new contracts that they wire all of our parks and our libraries—where people, adults and children, who weren’t connected at home could at least walk down the street to their park or to their library and have free access.
CD: And what about the transportation infrastructure?
MD: That’s a mess. You know, it’s hard to reverse the decades of suburban sprawl and take rail, or even light rail, out to the suburbs. It really is incredibly expensive. So my view was bringing people back, bring people back to the city. Our urban core is now over a hundred thousand people. We had a huge population increase and it’s still growing. Because in the urban core, we actually have a decent transit system. I forgot what the percentage is, but it’s a very high percentage of people that have moved back. The average age is mid- to early thirties, because they want that urban living. They don’t want to get in a car.
Another thing that COVID has taught us is—productivity gains. You know, if you don’t have to spend two hours or three hours in a car, or even in a subway to go to your office, that’s two or three free hours a day that you now have. You can play ball with the kids or produce some extra work or whatever you choose to do.