Infrastructure investment is near the top of the list of effective forms of economic stimulus. It creates jobs in construction and supply companies, and those workers support restaurants, shops and other local businesses. This is the best time to invest in public works to expand the supply of affordable housing, improve transportation, and tackle a host of projects that add to health, safety, and environmental sustainability.

The return on investment for infrastructure spending is always high. However, during economic downturns the economic benefits are magnified. Every $1 spent on infrastructure during the Great Recession resulted in between $1.50 and $2.50 in GDP growth. In addition, construction projects will be most competitively priced for public projects when private investment is scarce. Through investments in infrastructure, government can provide a means to stimulate the economy. At the same time, government would be laying the groundwork for a better tomorrow.

Capital Investment Priorities

Hawai‘i has many potential targets for infrastructure investment. The Hawai‘i Executive Conference (HEC) reported a need for significant investment in infrastructure in its 2019 report, Troubled Waters: Charting a New Fiscal Course for Hawai‘i. It noted that infrastructure investment has a positive effect on job creation and benefits residents and businesses. The HEC estimated infrastructure needs as follows:

  • Affordable Housing: $3.2 billion;
  • County Water and Wastewater: $5.7 billion;
  • Transportation: $14.7 billion;
  • Public Schools: $12.6 billion;
  • Public Safety: $1 billion;
  • Deferred Maintenance of Public Facilities and Improvements: $8.9 billion;
  • New Public Facilities: $1.1 billion;
  • Other Private Infrastructure: $909 million; and
  • Preparing for Natural Disasters and Climate Change: $15.3 billion.

The need for increased capital investment was underscored in the American Society of Civil Engineers’ 2019 Hawai‘i Infrastructure Report Card, which assessed the conditions of transportation, water, coastal management, and energy systems. The report card rated the state’s dams, roads, schools, and systems for drinking water, storm water and wastewater a D+ grade or poorer.4

Key Role for Government

While state and local governments have to maintain balanced operating budgets, they can borrow money to pay for large capital projects. The federal government effectively subsidizes state and local infrastructure projects by exempting from federal income taxes interest earned on the government bonds that pay for them. As of March 15, 2010, federal interest rates for borrowing dropped to nearly 0 percent.

Capital projects must be shovel ready in order to improve the economy. Immediacy has been a challenge for Hawai‘i. The state and counties need to identify the highest priorities on their infrastructure lists and develop a process to expedite the funding, permits, and approvals needed to get them done.