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11.018 Solving the Infrastructure Crisis

 

11.018 - Solving the Infrastructure Crisis: Urban and regional infrastructure development, decline, and rebuilding. (Fall 1998)

(3-0-9) -- Undergraduates only. Monday and Wednesday, 2:30-4:00. Room 1-132.

Roads, bridges, water pipes, sewer lines, electricity grids, and natural gas pipelines are the infrastructure that make up the "veins" and "arteries" that enable a city to exist and to have economic and social interaction with other cities. This course will examine the influence of infrastructure planning and development on cities and regions. We will address the fundamentals of siting and building infrastructure in the first instance, as well as today's pervasive problem of deteriorating infrastructure in American cities.

We will examine how the interplay of various physical, political, and financial forces can work to create the public services necessary for the economic and physical health and well-being of a metropolitan area and how those same forces, in different combinations, can produce the opposite result. The course will investigate how public finance markets work and how they influence the planning and implementation of infrastructure projects. Privatization of infrastructure projects and services will be evaluated, as will methods of pricing infrastructure-related services (including rate design and allocation of costs among user groups). A section of the course will cover how public bidding laws influence the quality and cost of public works projects, and, finally, we will review how to ensure that infrastructure is maintained properly.

The course will include selected tours of infrastructure projects in and around Boston and discussions with people involved in carrying out those projects.

Note: This subject has been accepted as a pilot Communication Intensive (CI) HASS subject. This means that there will be an emphasis on writing and oral commuincation skills.

Instructor: Paul F. Levy. Professor Levy joined the MIT Department of Urban Studies and Planning after serving four-and-a-half years as Executive Director of the Massachusetts Water Resources Authority, a public authority that provides water and sewer service to the Boston metropolitan area and the agency in charge of the Boston Harbor Cleanup, one of the largest public works projects in the history of New England. He has also been Chairman of the Massachusetts Department of Public Utilities and Director of the Arkansas Department of Energy. He is a graduate of MIT, holding an S.B. in Urban Studies and Planning, an S.B. in Economics, and a Masters in City Planning.

Teaching Assistant: Anjali Mitter. Ms. Mitter is an second year graduate student in the Department of Urban Studies and Planning and has taught writing to MIT undergraduates.

Office Hours: Monday and Wednesday, 9:00-2:30 in Room 9-316. Telephone: 253-2053 (office); 969-1985 (home); email <pflevy@mit.edu>.

 

Term assignments:

(1) Individual assignment. Pick a physical problem in your neighborhood related to services provided by the government. Examples might include: a missing sign; a pedestrian or traffic safety problem; a malfunctioning street light; a defective guard rail on a road or bridge. (You may not choose a pothole.) Attempt, during the next few weeks, to get the problem fixed by the relevant level of government. Prepare a ten-page report documenting how you succeed or fail to get the problem resolved. The documentation should include a log of organizations and people you contact to solve the problem and how you figured out who to contact. It should explain the place of each person in the organizations you contact (i.e., their title, general job description, and reporting and supervisory responsibilities.). You should also include recommendations about how the government could do the job better.

A draft of this paper is due on Monday, October 5, and you will have time to meet with Professor Levy or Ms. Mitter and receive comments on that draft in time to complete the final paper which is due on Wednesday, October 14. Class members will be selected at random to make short (5 to 10 minute) oral presentations based on their papers on Wednesday, October 21.

(2) Team project (in groups of 3 or 4): Find a large infrastructure problem in the making in or around the Boston area. (Projects chosen by students in the past have included: redesigning the Fresh Pond rotary interchange; rehabilitating the Longfellow Bridge; designing a north-south rail link; implementing a satellite communications link for MBTA buses; and planning the airspace over the new Central Artery in Boston.) Pretend your team is in charge of making recommendations to the state legislature (or other relevant governing body). Your job is to convince the legislators to approve a capital improvement or maintenance program that you feel is essential to protect the public. You must provide a technical basis for your presentation; you must recommend a mechanism to finance the improvements you are advocating; and you must address whatever political issues surrounding the project that you feel are appropriate.

A written report, in the form of a memorandum (not to exceed ten typed pages, not including charts and other figures) must be prepared. In addition, each team must make a 15-20 minute oral presentation to the class, who will serve as the relevant legislative committee in evaluating the team's request. (Audio-visual materials should be used to supplement your oral presentation.) A draft of the written report is due on Monday, November 23, and you will have time to meet with Professor Levy or Ms. Mitter and receive comments on that draft in time to complete the final paper which is due on Wednesday, December 2. An outline of the oral pesentation, accompanied by any visual aides you intend to use, is due on Wednesday, November 25, and you will have time to meet with Professor Levy or Ms. Mitter to receive comments on that presentation during class on Monday, November 30.

Grades: The course grade will be based on class participation (35%); the individual assignment (25%); and the team project (20% written report, 20% class presentation). Note: Grading of papers will be based on content, organization, and clarity (including sentence structure, grammar, and spelling).

Readings: There will be a number of references listed for each class session, which are included in the reader available for purchase from Graphic Arts or are on reserve at Rotch Library (Denoted by an "R"). These will form the basis for the class discussion. Therefore, they should be read before the class.

Course outline: September 9 -- Introduction to the class. What are we trying to do here? We hope to answer the following questions, among others, in this course: Does infrastructure lead development or follow it? Who decides what should be built and where it should go? How is it financed? Who pays for it? Should infrastructure be public or private? How does it get built? How does it get maintained?

 

Part I: Planning Infrastructure -- The relationship between infrastructure and regional physical and economic development.

September 14 --

We will use the history of the Boston metropolitan water and sewer system as a case study of the interaction between infrastructure decisions and the development of metropolitan areas. During the course of the semester, we will return to it as an example of all that is bad and good about infrastructure planning, development, and maintenance in the United States. Here is your introduction to the topic.

Readings: Bowers and Carolan, "The Water Supply System of Metropolitan Boston, 1845-1947", Louis Berger and Associates, Inc. Wellesley, Mass. 1985. Chapter II, "Historical and Administrative Context."

Clarke, Main Drainage Works of the City of Boston, Rockwell and Churchill, City Printers. Boston. 1885. Chapters 1 and 2. An interesting, short contemporary account.

"Sewage Disposal in Cities," Harper's New Monthly Magazine, Volume LXXI. June to November, 1885. A period piece on issues surrounding the handling and treatment of sewage.

R - Tarr, Technology and the Rise of the Networked City in Europe and America, Temple University Press. Philadelphia. 1988. Chapter 8, "Sewage and the Development of the Networked City in the U.S., 1850-1930." A longer, retrospective account.

September 16 -- Tour of parts of the metropolitan Boston water and system, probably the Sudbury Reservoir and other Southboro facilities. Plan on returning by about 5:00 pm.

September 21 -- Read about the issues facing another water system, New York's. We will then contrast this with the Boston experience. How do the topography, climate, population, and settlement patterns influence infrastructure development? How do the decisions concerning infrastructure influence social and economic development in and around a metropolitan area?

Readings: Kolbert, "The Drink of Millions," New York Times Magazine. Vol. 139. March 4, 1990.

Herman, "Upstaters shouldn't pay for New York City's Drinking Water," New York Times, letter to the editor, August 6, 1993.

Revkin, "Reservoir Towns and New York City Reach Agreement," New York Times, October 27, 1995.

Revkin, "City Watershed Plan Will Cost Average Customer $7 a Year," New York Times, November 1, 1995.

Revkin, "Chasing a Deal on Water With a Few Pitchers of Beer," New York Times, November 5, 1995.

September 23 -- Tour of parts of the metropolitan Boston sewer system, probably the Chelsea Headworks and East Boston pumping station. Plan on returning by about 4:30 pm.

 

Part II. The siting process.

September 28 -- How do you decide where to put infrastructure? Is this solely a technical decision? How do you weigh various competing criteria in a selection decision? How should the public be involved? Should there be compensation for host communities? How should that compensation be determined? We will look at a case study relating to the Boston Harbor cleanup, the siting of the secondary sewage treatment plant.

Readings: R - O'Hare, Bacow, and Sanderson, Facility Siting and Public Opposition. Read Chapters 4, 5, and 9.

MWRA/Town of Winthrop Memorandum of Understanding.

September 30 -- No class. Yom Kippur.

Part III. Financing Infrastructure.

October 5 (draft of first paper due), 7, and 13 (Tuesday) -- The municipal finance market (structure, players, regulation). How are public projects financed? What are the competing and coincident interests of the borrowers, the lenders, and the various players in the financial community? How do these influence decisions about infrastructure planning? After a general overview, we will perform a detailed review of a specific public offering, learning the importance to the capital markets of terms such as flow of funds, coverage, and additional bonds test, and the influence these esoteric terms have on the decisions of public agencies.

We'll also review the rating agencies. Standard and Poor's, Moody's, and Fitch rate the bonds issued by public entities. These ratings determine, to a great extent, the cost of borrowing that is ultimately paid by the public. How do the rating agencies do their job? For whom do they work? To whom are they accountable? We will have a guest lecture from Phil Shapiro, regional manager of Standard and Poor's.

Readings: Public Securities Association, Fundamentals of Municipal Bonds. PSA. New York. 1990. Chapter 1, "The Basics of Municipal Securities."

Shapiro, "Entering the Market in the Nineties, " Municipal Finance Journal. Volume 11, Number 3. Fall 1990.

Levy, "Financing the Boston Harbor Project," Civil Engineering Practice (Journal of the Boston Society of Civil Engineers). Volume 9, Number 1. Spring/Summer 1994.

Lamb and Rappaport, Municipal Bonds, The Comprehensive Review of Tax-Exempt Securities and Public Finance, McGraw-Hill. New York. 1980. Chapter 3, "The Rating Agencies."

 

Part IV. Organizing Infrastructure Providers.

In this section of the course, we will examine three different institutional models for the provision of infrastructure services: Statutory state agencies, public authorities, and private corporations.

October 14 (final version of first paper due)-- A review of state agencies and public authorities. We will contrast the creation and management of infrastructure under general state or local appropriations with the way independent public authorities do the job. Public authorities offer a degree of efficiency often not found in "line" state agencies, but are they accountable enough? Who should control the authorities?

Readings: R - Caro, The Power Broker: Robert Moses and the Fall of New York, Alfred A. Knopf. New York. 1974. Chapter 28, "The Warp on the Loom."

MWRA Enabling Statute summary.

October 19 -- Privatization. Privatization of infrastructure is very much in vogue right now. What are the mechanics of privatizing a "public" function? What are the advantages and disadvantages? Which kinds of functions do we want to privatize? How much money should a private firm earn in return for its franchise? To whom should it be held accountable?

Readings: Goodman and Loveman, "Does Privatization Serve the Public Interest?", Harvard Business Review, November/December 1991.

"Monopoly Profits," The Economist. July 24, 1993.

Tombs, Francis, "Return Trip to Familiar Ground," Financial Times, March 24, 1993.

October 21 -- Selected class presentations based on individual projects.

 

Part V. Pricing Infrastructure Services.

October 26 and 28 -- Meeting a revenue requirement through taxes, fees, or tolls. The total cost of building and operating infrastructure has to be paid by someone. How is this cost determined? We will compare the costs included in a public system to those included in private systems.

Allocation of costs and rate design. Once you decide how much money needs to be raised overall to finance infrastructure, you must decide who pays what. These are decisions of allocation of costs among various types of customers, and design of rates structures for each customer group. What criteria should be used for these decisions? Is economic efficiency important? What is the marginal cost of infrastructure? Is equity, or fairness, important in designing rates? How should fairness be defined?

Readings: R - Bonbright, Principles of Public Utility Rates. Columbia University Press. New York. 1961. Chapter 3, "The Role of Public Utility Rates" and pp. 290-291, "Criteria of a Desirable Rate Structure".

November 2 -- A key part of pricing is being able to measure usage of the infrastructure service. We will tour the Boston Gas Company's meter maintenance facility in West Roxbury to see what it takes to carry out this function.

 

Part VI. Building Infrastructure.

November 4 -- The actual construction of a project has a number of interesting dimensions. We will review a few case studies here. First, Chris Barnett, who works on the Central Artery project, will discuss permitting requirements and regulatory agencies.

November 9 -- Visit to the construction of new water supply tanks in Weston, an MWRA project.

November 16 -- Managing a mega-project. Walter Armstrong, project manager for the Boston Harbor Project, will explain how to manage the hundreds of contractors and thouands of workers involved in a multi-billion dollar project.

Readings: Armstrong, Walter, "Controlling the Costs of the Boston Harbor Cleanup Project," Sept. 25, 1990.

November 18 -- Public construction laws. States generally put strict controls over the design and construction of public projects. These laws are designed to protect the public interest. Do they work? What price is paid by taxpayers/ratepayers for the accountability built into public construction laws? Is corruption a problem, and if so, do these laws help eliminate it?

Readings: Ward Commission Excerpts

Note: Friday Class: November 20 -- Tour of Deer Island -- All morning, returning to MIT at about 1pm.

Part VII. Maintaining Infrastructure.

Everyone likes to be involved in building it, but it is just as important to maintain infrastructure. It is often harder than construction, and it is certainly less glamorous. We will look at some local examples.

November 23 (draft of group report due) and November 25 (outline of group presentation due) -- Maintaining sewer and water systems. Charles Lombardi of the MWRA will explain the problems involved in maintaining a regional sewer system. We will visit with sewer maintenance crews of the MWRA as they examine an old sewer line in the Boston area.

Part VIII. Your turn.

November 30 -- Teams meet during class time for final comments from Professor Levy and Ms. Mitter about draft reports and presentations.

December 2 (final version of group report due), 7, 9 -- Team presentations.


 

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