An Urban's Rural View

A few years ago, the local telephone cooperative in our county in West Virginia came calling with a proposal to install cable television and internet. My wife and I signed on, even though we don't watch TV much and had gotten used to the co-op's sluggish telephone internet service. You'd think a mountain home used as a retreat, a place for reading and quiet walks in the woods and getting away from it all, wouldn't need cable.

We signed on anyway because the co-op had a winning argument. Having cable would increase the value of the property, and while we have no plans to sell, this was our one chance to get cable. A federal grant had opened a short window in which the installation could be done affordably. If we missed the window and later changed our minds, the service would cost a fortune, assuming it was available at all. It isn't cheap to lay cable up a long, winding mountain road miles from nowhere.

This experience came to mind as rural infrastructure issues popped back into the news the other week. President Trump has promised to spend a trillion dollars on infrastructure, but he wants much of that to be private money, with the government side of the partnership kicking in as little as a tenth of the total. Rural legislators like John Barrasso, the Wyoming Republican who chairs the Senate Environment and Public Works Committee, doubt these public-private partnerships will solve rural areas' infrastructure problems.

Rural America has typically had a hard time attracting private infrastructure investment. Private investors, quite naturally, expect a return on their investment. Returns from big infrastructure projects serving sparse populations over vast areas can be hard to come by. That's why government took the lead in electrifying the countryside.

It's also why many parts of rural America are, to quote a Wall Street Journal headline, "stranded in the dial-up age" ( http://tiny.cc/…). It would cost hundreds of billions, the Journal says, to bring these places broadband internet. There aren't enough monthly bill payers in rural areas to make this a smart use of private investors' money.

Tolls are one way of generating returns on private infrastructure, but they would not only be unpopular in the countryside; they would probably produce too little revenue. "Availability payments" are another way, but they too are better suited to urban projects.

One success story is the Port of Miami tunnel. It was financed through a public-private partnership that offers investors 30 years of availability payments from Florida's gas-tax revenues. Ananth Prasad, who helped oversee the project as the state's secretary of transportation, told the Journal that a similar arrangement wouldn't work on a reconstruction of I-70 in Kansas and Missouri because "they don't have the revenue to put together an availability payment" (http://tiny.cc/…).

One of the strengths of free-market capitalism is that it allocates a scarce resource -- capital -- to its most productive uses. Investments that are unlikely to generate a return are avoided. If they're made anyway and don't pan out, they're abandoned. By contrast, government is more likely to make investments that won't generate returns and to throw good money after bad rather than admit defeat on money-losing bets.

But if rural America is to survive and thrive, some infrastructure projects that don't produce an economically rational return will have to be built. That means government will have to provide most if not all of the capital. The president's private-public infrastructure partnerships may be just the ticket for urban areas. For the countryside, they are an invitation to stagnation.

According to the Journal, the president has hinted at a willingness to make an exception for rural projects and finance them to some extent through federal grants. Who knows what this means or how serious the president is. So far his vaunted "plan" is all rhetoric and no detail.

When the administration finally gets around to putting some meat on the bones of this trillion-dollar infrastructure idea, rural America will have to hope the president's hint will become a reality.

Urban Lehner can be reached at urbanize@gmail.com

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