Unpacking the Nation’s Capacity Challenge

by Bruce Katz, Colin Higgins and Karyn Bruggeman · January 21, 2022


As the euphoria of enacting the $1.2 trillion Infrastructure Investment & Jobs Act fades, the challenges facing implementation of this complex and sprawling legislation have come into sharp relief. First among them is the lack of sufficient capacity among many cities and counties to design and deliver projects that have the transformative impact that has been promised by bipartisan Congressional sponsors.

The focus on capacity is welcome and long over-due.  As we have written before, the United States faces a Delivery Crisis of monumental proportions:

The capacity of localities is not sized to the scale of federal funding or the tasks at hand. City and county governments (and many public authorities or quasi-public entities) have been degraded for decades, the long tail effect of President Reagan’s depiction of government as the problem. Many non-profit intermediaries that focus on supporting local entrepreneurs or delivering community housing are similarly understaffed and under-capitalized. This means that most communities do not have the personnel with the capabilities, competencies, bandwidth or muscle memory to plan transformative projects, apply for disparate federal sources, do the capital stacking necessary to make catalytic projects happen and coordinate multiple investments for synergistic effect.

Capacity matters. Infrastructure money doesn’t spend itself. Knowledgeable people move projects from concept to execution, which is easier said than done given the myriad of overlapping federal rules and guidelines which have accreted over time. The federal government is among the most demanding of investors, particularly because there is no harmonization or consistency across disparate programs and agencies around definitions, deadlines, reporting requirements and beyond. Deploying federal funds, in short, is not for the faint of heart; but it is a challenge well worth undertaking, since getting deployment right can transform the fortunes of places large and small.

However, failure to resolve the capacity conundrum will have multiple implications. It will, first and foremost, slow the expenditure of funds, frustrating many in communities across the country who will expect “rescue” funds in particular to be allocated and implemented quickly. Whether it’s a tax credit or direct transfer for their family or high-profile infrastructure projects for the community, many people evaluate the success of policies by results they directly feel in their lives.

But the capacity deficit has broader political and substantive implications. Without a surge in capacity, the nation could see:

  • A worsening of spatial disparities, given that many smaller communities and weak market regions, already struggling, are the places with the least ability to access and implement federal resources;
  • A deepening of the climate crisis, as places fail to mitigate carbon emissions or adapt to the rising mainfestations of climate change in favor of projects that have been “on the shelf” for years;
  • Missed opportunities to reduce racial and ethnic disparities on income, health and wealth; and
  • A dissipation of confidence in the ability of American institutions to deliver much needed help to get our country “going in the right direction.

“Capacity” sounds like a simple problem to solve. “If we don’t have enough hands-on deck, simply hire more people in the institutions which matter.” And the country is replete with organizations and initiatives that do that well.

Yet the capacity deficit has multiple dimensions, each of which warrant uniquely targeted solutions. Without a clear understanding of the problem, we run the risk of devising and implementing cures that address only one part of the challenge.

Here is our initial effort to “unpack” the nation’s capacity challenge. In our view, capacity predominantly operates on four different levels.

1. Capacity to Design Shovel Worthy Projects. Projects that are “shovel worthy” and not just “shovel ready” require planning. Due to decades of deferred maintenance, many larger metros have long lists of projects that vary widely in their ability to drive climate, equity and economic goals and build on each other; many smaller metros may lack even an actionable list. Both need planning capacity, either in-house or from a trusted source, to design projects that meet the ambitions of this moment.

The planning capacity deficit, therefore, exists both at the individual project level and the district or corridor level, i.e., the geographies where multiple investments will come to ground. At the project level, planning for climate resilience in 2022 is what road building was in 1956, when the Interstate Highway Act was passed. We need norms and models to drive what essentially are different classes of climate projects, so that routine designs can be quickly replicated and scaled.

At the district or corridor level, planning requires aligning a series of renovation, removal, and construction projects in one place over time. This takes work. For example, a planning effort underway in the core of Erie, PA, shows that a relatively small bayfront needs aligned investments in the re-configuration of streets, the construction of pedestrian bridges, the modernization of the energy grid, the burying of utility lines, the remediation of brownfields and the upgrading of broadband and water/sewer infrastructure. Each of these is critical to transforming the waterfront — and can happen on different time frames; but the bottom line is that a big-picture district plan is needed to see and organize the full panoply of infrastructure investments, which ultimately flow through different distribution channels.

2. Capacity to Apply for and Match Discretionary Grants. Applying for discretionary grants requires state and local grant writing capacity. Smaller and mid-sized cities often contract out grant-writing capacity, meaning they must pay to compete, curtailing their ability to do so. Cities of all sizes are uncertain about their ability to meet matching requirements for most discretionary grants, especially if relying only on their city budget to do so. State and municipal budgets are being formulated now, and without specific set-asides (for discretionary grants that are not yet open), these places may forgo competition for needed investment.

3. Capacity to Operationalize in a Timely Manner. Once they have funds, state, metro, and city leadership must quickly turn money into projects. This requires the ability to blend different public sources of money, add on private financing, navigate through a dizzying array of permitting, zoning and community input sessions, and then comply with reporting requirements. Each task slows down project deployment and burdens even larger places with higher budgets to deal with cost overruns; in many places they will stop projects altogether.

4. Capacity to Collaborate Outside with Private & Civic Actors. The ability of cities or regions to partner with outside stakeholders for proposals and projects and leverage and access outside funding is vital to scale the impact of federal infrastructure spending and drive broader inclusive and sustainable outcomes. Being able to do so requires either preexisting working relationships between sectors (and layers of government) or a locality’s ability to forge new financial partnerships in time to deploy. Our earlier recommendations around Stimulus Command Centers (written in anticipation of the American Rescue Plan) are even more relevant today, given the plethora of entities that are likely to receive infrastructure and other federal funding.

These forms of capacity all connect to each other. But they require different skill sets and implicate different stakeholders. By extension, galvanizing a surge in capacity requires different levels of government and sectors of society to engage fully.

Here is just the beginning of a Capacity Solutions Map, to inform the local and the national, the retail and the wholesale.

Starting with the local level, mayors and county executives should task the prime recipients of federal infrastructure funding — general purpose local governments, local agencies, public authorities and school districts — to ascertain the readiness of different delivery entities to design, deploy, apply for, finance and deliver the priority infrastructure projects that have the potential for transformative impact. Deficiencies in capacity should be named, bucketed and costed. This assessment should be conducted in close concert with local philanthropies, particularly community foundations, universities and business leadership groups. Ultimately, corporations and civic institutions should both participate in the assessment process (both of priority projects and capacity gaps) and be the “first-in” money to hire the right talent for the right purpose. An investment of millions of dollars upfront in many cities could ultimately leverage billions of dollars in federal investment over the decade.

States play multiple roles, given the fact many infrastructure programs are allocated through the states via block grants and special relationships have been forged with smaller communities through multiple departments and financial instruments. States should consider implementing many of the recommendations we have made for other stakeholders, either alone or in close concert with philanthropies, special constituency organizations and the federal government.

At the national or regional scale, philanthropies or corporations or key constituency organizations (e.g., National League of Cities, National Association of Counties) could fund intermediaries that could be tasked to providing advisory services around common issues and challenges: next generation design of infrastructure projects themselves, innovative practices (including new technology platforms) around supplier diversity initiatives and other desired outcomes of federal legislation and the need for routine capital stacks or financial products that can be leveraged in similarly situated transactions. The enabling features of infrastructure projects, procurement and finance, in other words, need to be deconstructed so they can be replicated and scaled. And all of these solution tools need to be on-line, easily accessible and brought to market.

The federal government has multiple roles to play:

Recognizing and communicating that capacity challenges exist and providing clear examples of how to overcome them;

Writing Notices of Funding Opportunities with an eye towards the limited ability of small communities to compete;

Creating demonstration initiatives with communities that are proxies for larger groups of cities and counties to create an iterative and nimble feedback loop, shortening the distance between local actors on the ground and federal program builders in key agencies;

Streamlining rules and regulations to the greatest extent practicable and statutorily permissible so that the costs and headaches of applying for and deploying federal infrastructure resources are driven down;

Convening key constituencies on a regular basis to unlock local capital and expertise for broader sharing and impact; and

Working with major financial institutions, philanthropies and corporations to establish efforts like the 1990s Welfare-to-Work Partnership, to supplement federal efforts and accelerate and communicate breakthrough successes and practices.

This is just an initial list. History will show that the enactment of federal legislation was infinitely easier than local implementation and execution. Local implementation and execution, in turn, is dependent on having people with the skills, knowledge and authority to get stuff done and mechanisms that can be codified, routinized and scaled.

The United States faces a delivery crisis. Let’s fix it now. Let’s fix it for the future.

Bruce Katz is the Founding Director, and Colin Higgins is the Deputy Director, of the Nowak Metro Finance Lab at Drexel University. Karyn Bruggeman is a Senior Research Fellow at Nowak Lab.

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