By Justin Hirsch, Senior associate, CBRE Land Services
Earlier this month, infrastructure throughout the state of South Carolina was put to the test. While there were a lot of failures with impactful consequences, successes were evident as well.
Several years ago the town of Mount Pleasant made significant investments in its infrastructure to help facilitate the quick dispersion of water from the community. Despite receiving some of the highest rain totals in the state related to Hurricane Joaquin, the impacts on Mount Pleasant were a non-story, as the town’s well-funded infrastructure did its job.
When you compare the Mount Pleasant story with that of much of the rest of the Midlands and Lowcountry, the lesson that emerges is clear: Strong infrastructure is critical. It is critical to protect property. It is critical to protect lives. It is critical for the economic success of a community.
So, what is meant by infrastructure? It includes the water management systems that were sorely tested by Joaquin, but it also includes things we often take for granted like roads, power, sewer, gas and data management systems. While the costs of managing infrastructure are high, the aftermath of a hurricane, where losses are measured in the billions, exposes the fact that inadequate funding is even more costly.
The Upstate economy is doing very well. While we all see construction projects throughout the region, it is easy to take all this growth for granted. In fact, with the exception of a noticeable increase in road traffic, most of us don’t put much thought into infrastructure. But for those looking to facilitate further growth – public officials, economic development entities and developers – infrastructure keeps them up at night.
Infrastructure is expensive and the costs have long-term ramifications, meaning every infrastructure decision made needs to be as well planned as possible. When infrastructure is insufficient, new development cannot occur and existing development is put at risk.
In the absence of adequate funding through normal tax revenue, communities have had to look for alternative funding methods.
One funding source widely used by local governments is tax increment financing, or TIF districts. This tool provides a means to fund infrastructure improvements with the increased tax revenue created by new development. A few years ago, South Carolina changed the law regulating TIF, which now requires all taxing districts to consent to special tax allocations. This ability for taxing districts to “opt out” makes it more difficult to establish new TIF districts going forward.
Last November, a penny sales tax referendum was defeated in Greenville County that would have helped address some infrastructure issues – mainly traffic. With that being said, a simple sales tax in one jurisdiction would have been a bandage on a wound that is proving to be much more nefarious. Strong infrastructure requires more than just adequate funding; it requires careful coordination among the myriad of utility providers and governmental jurisdictions throughout the Upstate. Anything short of that places the current quality of life at risk and eliminates our region’s competitiveness.
With inadequate funding and all this new growth in the Upstate, local governments are increasingly dependent upon private developers to fund infrastructure improvements on an ad hoc basis. While private developers can often bear the cost, this approach has a negative impact on affordability, which is a growing concern. More importantly though, funding infrastructure through stopgap measures is trading short-term economic gain in exchange for long-term economic sustainability. This occurs because pay-as-you-go measures typically only provide for the demands of current development and not for the needs of the community over the lifespan of that infrastructure.
The challenge of infrastructure is not unique to the Upstate or the State of South Carolina. Every community is presented with challenges placed on them by their infrastructure demands. Great communities figure out a way to solve them that sustains future growth while simultaneously protecting quality of life. It’s a balancing act.
The provision of infrastructure is arguably one of the most important functions of government. Its provision, or not, has significant impacts on quality of life, the value of property itself and the long-term viability of a community. Adequately funded infrastructure can become an economic recruitment tool. And as Hurricane Joaquin demonstrated, the failure of infrastructure can be much more expensive than effectively funding it along the way.
