News for the Hospitality Executive
ANAHEIM, CA - October 1, 2012 – In a keynote address delivered to the 11th Annual Southern California Transportation Summit, “Mobility 21,” Jonathan M. Tisch, Chairman of Loews Hotels & Resorts, called on transportation and infrastructure policy leaders to reach beyond traditional financing models and partnerships, unite with travel industry and private sector leaders, and build “the world-class infrastructure that America so desperately needs.”
Addressing a packed audience of nearly 1,000 transportation experts, policymakers and business leaders, Tisch said that limited government budgets and Washington gridlock have combined to stall critical infrastructure upgrades around the country. “The old model of relying solely on tax increases or more municipal debt, or a helping hand from the federal government, is broken,” said Tisch.
Echoing the summit’s theme, “We’re All In This Together,” he implored the audience to consider new, innovative public-private partnerships to help finance infrastructure projects, citing notable models from Canada to Chicago. He also applauded innovative ideas such as America Fast Forward – a proposal to leverage local revenues and federal loans to fast-track construction on vital infrastructure.
While acknowledging the great costs of investing in infrastructure, Tisch emphasized that the cost of inaction would be even higher. He argued that unless our country commits itself to making the necessary investments to improve our travel infrastructure – particularly our aviation infrastructure – we will lag our economic competitors around the world, and miss out on the economic benefits and new jobs that infrastructure investments could create.
In closing, Tisch said, “We must join together to meet this challenge,” telling the audience of transportation leaders, “You have allies and partners in the travel industry that are with you every step of the way. We are all in this together.”
REMARKS BY JONATHAN TISCH
CHAIRMAN, LOEWS HOTELS & Resorts
MOBILITY 21 11TH ANNUAL SOUTHERN CALIFORNIA TRANSPORTATION SUMMIT:
“WE’RE ALL IN THIS TOGETHER”
SEPTEMBER, 28, 2012
Thank you all for inviting me to speak today.
For the past four years, Mobility 21 has brought together leaders from Ventura, Los Angeles, San Bernardino, Orange, Riverside, Imperial and San Diego Counties, in an effort to work with one purpose and speak with one voice, in both Sacramento and Washington, DC. I appreciate your leadership and I welcome the opportunity to speak to your distinguished group about a issue so critically important, to our nation’s future.
Everyone in this room has been engaged in the debate over America’s infrastructure for years or even decades.
We all know the data. We’ve all seen the statistics. In fact, we’ve all been to this movie before – and we don’t need Carmageddon II or Return of Carmageddon, or whatever they’re calling the latest shutdown of the 405, to remind us.
Our nation’s infrastructure is falling apart and we can’t find the money to fix it.
Chicago Mayor Rahm Emanuel may have put it best: When it comes to financing infrastructure investments, he said, “I can’t get from here to there on the old model – it’s broken.”
The Mayor not only understands Chicago politics … he also knows a thing or two about how Washington works. That old model of relying solely on tax increases or more municipal debt, or a helping hand from the federal government, is indeed broken.
The hard truth is … when it comes to coming up with the money to fund a long-term plan to modernize and upgrade America’s aging infrastructure, Washington can be almost as gridlocked as our nation’s roads and airports. If you think the 405 is bad, visit Capitol Hill!
In recent years, the once-strong political consensus behind the need for infrastructure investing, has collapsed.
It seems like ages ago … but as recently as 2005, congressional support for infrastructure spending, was broad and bipartisan. In those days, infrastructure investments were deemed so critical and so urgent, that even a $280 billion transportation bill – the largest in our nation’s history – won near-unanimous support in Congress.
Today, infrastructure projects are more likely to generate political attack ads, than bipartisan cooperation. Even desperately needed infrastructure spending, now gets tarnished by the image of a single “Bridge to Nowhere.”
After the 2005 transportation bill expired, we limped along through nine temporary extensions.
Fortunately, due to Senator Barbara Boxer’s steadfast dedication and commitment, Congress finally passed a new, $120 billion transportation bill to fund infrastructure projects for the next two years. Our sincere thanks to Senator Boxer for her leadership – and also to Mobility 21, which prominently represented Southern California in Washington.
This is a significant victory and we should all applaud her leadership. But I’m sure Senator Boxer would be the first to tell us … there’s much more that needs to be done.
According to the American Society of Civil Engineers – the people who actually build our roads, bridges, tunnels and airports – upgrading our infrastructure to world-class status requires a five-year, $2.2 trillion investment.
That’s $2.2 trillion Washington simply isn’t going to spend right now – and the fiscal environment isn’t getting any easier or better.
In 2012, Medicare, Medicaid, Social Security and other entitlement spending will consume 62% of all federal expenditures. And as more and more of America’s Baby Boom generation hits retirement age, the pressure on these automatic spending programs will inevitably increase, squeezing discretionary spending on infrastructure even further.
The problem is not just in Washington. Resources are limited at every level of government. State tax revenues are still running tens of billions of dollars below pre-recession levels … yet demands on public services keep growing.
California’s budget challenges continue to be top-of-mind and I know that some major decisions on taxes will be made at the ballot box here in November.
In many parts of the country, the traditional well of voter-approved tax increases dedicated to infrastructure, has run dry.
For example, this past July, Georgia voters went to the polls to decide on a proposed one-cent state sales tax increase that would have funded $18 billion in infrastructure improvements.
The measure had the strong backing of Atlanta Mayor Kasim Reed. Business groups – typically not the most diehard proponents of tax increases – provided vocal support. Even the Chairman of the House Transportation and Infrastructure Committee – Florida Republican Congressman John Mica – encouraged voters to approve it.
In the end, it wasn’t even close. Voters in 9 out of 12 multi-county regions of the state turned it down. In the Atlanta metro area, which was slated to get $6.1 billion for road and transit projects, the tax was defeated 63% to 37%.
Municipal governments aren’t in any better shape than the states – and in many cases face far deeper fiscal challenges. We’ve already seen high-profile bankruptcies in some California cities, while others are struggling with red ink and falling credit ratings.
Given the vast fiscal and budget challenges our nation faces, I think it’s pretty clear we will not be able to build the world-class infrastructure America desperately needs, by relying on traditional funding models.
It’s true, as Mayor Emanuel says, that we can’t get there from here.
But it’s equally true that infrastructure investments can’t wait. Our economic competitors certainly aren’t.
Right now, Europe is investing 5% of its GDP on transportation infrastructure. China is investing a stunning 9%. In the U.S., we’re stuck at around 1.7%.
The United States has always understood the importance of investing in infrastructure – dating back to 1792, when Congress appropriated $15,200 to construct the Cape Henry Lighthouse off the coast of Virginia. Some of our greatest presidents have made infrastructure investment a hallmark of their leadership – from George Washington’s obsession with the canal system, to Abraham Lincoln’s commitment to building the transcontinental railroad, to Dwight Eisenhower’s support for the Interstate Highway System.
Today, it is our turn to rise to the challenge.
And the only way to meet that challenge is by looking at new infrastructure financing models, and new sources of funding. We need to be more creative in our planning … more open-minded in our thinking … more entrepreneurial in our decision-making.
A critical starting point is to reexamine our attitude about deploying private capital, for public purposes.
Public-private partnerships allow government leaders to tap into an enormous pool of idle capital. If invested wisely, and under the right conditions, private capital can serve the public good.
According to a study by several major financial institutions, an estimated $250 billion in private capital, is available for infrastructure investments. Four dozen pension funds with $38 billion available, have also expressed interest in investing in infrastructure.
CalPERS plans to dedicate $5 billion to infrastructure investment over the next three years, including $800 million in California alone.
The public-private partnership model has been used successfully for years in other countries.
In Canada, for example, the Ontario Municipal Employee Retirement System has devoted $7.5 billion to infrastructure investments. Ontario has teamed up with various Japanese pension funds, in an effort to raise $20 billion to upgrade roads, build tunnels and expand high-speed rail lines.
In Chicago, once again, Mayor Emanuel stood side-by-side with former President Bill Clinton to launch an ambitious $7.2 billion program to – as he put it – “rebuild Chicago.”
The plan calls for two new runways at O’Hare Airport … the replacement of water and sewer pipes … modernization of schools … news routes for bus rapid transit … and new parks and playgrounds.
A new Chicago Infrastructure Trust – a nonprofit infrastructure bank – has been established to link private funds with public purposes. $1.7 billion in private funding has already been pledged.
Mayor Emanuel calls the program “a tool that takes some of the pressure off taxpayers.” It’s also a smart way to meet the infrastructure needs of his city, in a time of tight budgets and serious fiscal constraints.
In my home city of New York, the Port Authority initially shelved plans to rebuild LaGuardia’s Central Terminal Building at a cost of $3.6 billion, due to a lack of funding. The terminal was opened nearly 50 years ago to handle 8 million passengers per year traveling on that era’s, smaller airplanes. Last year, the building was inundated with over 24 million passengers, on today’s larger jets that have a hard time navigating its tight gates and taxi ways.
Rather than bow to an empty checkbook, the Port Authority issued a bold call for innovative financing plans to meet this challenge. To the surprise of many, 15 bidders lined up with new ideas – including private investors, airport construction firms, and concession developers. Many of these plans rely on innovative public-private partnerships to get the job done.
Here in Southern California … right here in this room, in fact … you have elected officials, and one mayor in particular, who are not afraid to think outside the box, to build the kind of infrastructure system needed to support the local economy, and the region’s world-class destinations.
As most of you know, Mayor Villaraigosa’s idea is called America Fast Forward. I love that name because it really captures the spirit of what we’re all trying to accomplish – a bold, visionary plan to blow past every obstacle, bypass every political objection, and propel the country forward.
With the help Senator Boxer and of so many of you here today, Mayor Villaraigosa helped win congressional approval for America Fast Forward.
The plan is to leverage local revenues with federal loans, to build much-needed infrastructure projects. It makes such obvious good sense that leaders from business, labor, and politics, have all rallied to support it. How often do you see that these days?
Before anyone gets the wrong idea, let me make one thing clear: Public-private partnerships are not a panacea and they should not be viewed as a means to replace government funding.
Government has responsibilities to the public, and it must step up to meet them. But there are challenges today that are too big for any one entity or industry to address alone.
As many political leaders are discovering … in an era where tighter reins on discretionary spending is rapidly becoming the new normal … oftentimes the choice is not between public funding and private funding. It’s a choice between private funding and zero funding at all.
But there are benefits, beyond the capital itself, to teaming up with the private sector.
Public-private partnerships can introduce competition into the mix on infrastructure projects, which can lead to lower costs and more innovative solutions. The private sector can also lend a hand when it comes to justifying infrastructure investment on a cost/benefit basis. In fact, this kind of accountability is exactly what we need to restore public trust in infrastructure spending, and rebuild bipartisan support.
Of course, government must carefully weigh the tradeoffs. Government must engage in partnerships that maximize public benefit, not private profit. But we should not let fear of private resources block potential partnerships, that would allow infrastructure projects to move forward.
Now, I’m sure some of you are wondering … what’s any of this got to do with the travel business? Why would the Chairman of a hotel group come to Southern California, just to talk about infrastructure?
First of all, Loews has strong roots here in California, including the new Loews Hollywood Hotel next to the Dolby Theater, which joins our existing hotels in Santa Monica and on Coronado Island in San Diego.
But I fully recognize that a visit to the Loews Hollywood Hotel doesn’t start when a traveler steps into our lobby – it starts the minute they leave their front door.
Think about a family of four visiting Los Angeles …
First, they’ve got to fight through traffic to reach their home airport.
When they get there, every parking deck is full – so they stash their car in some satellite lot, and wait around for a bus to take them to the airport.
After shelling out $100 in bag fees, they finally make it inside the terminal – only to confront a massive line slowly snaking toward security.
Once through security, and after cramming their single carry-on into the packed overhead bins, they settle in for the flight – only to watch their plane inch forward to take its place in the long line to the runway.
Finally they arrive in LA, where they have to trudge through another terminal … hang out at the baggage claim … find the bus to their rental car company … pack up the car … and get slammed by gridlock on the 101.
After all that … then and only then, do they step into the lobby of our hotel, and try to hit the reset button on what’s been an exhausting, expensive, time-consuming, patience-testing journey, so they can enjoy their [quote] “vacation.”
I’m worn out just describing it!
From my perspective in the travel industry, it’s crystal clear that our future depends on building a world-class infrastructure system to match America’s world-class destinations.
It’s no coincidence that we are talking about infrastructure today at Disneyland. Not only is Disneyland an American icon – it is a magnet for tourists from around the world. In fact, we’ve been living through an international travel boom … a global travel gold rush that shows few signs of tapering off.
Over the next decade, long-haul travel from China, Brazil and India, are expected to grow by more than 100%. That’s a potential market of millions of additional travelers, that is literally up for grabs.
The global travel market holds huge potential to generate economic growth, promote job creation and spur small business expansion. America’s travel industry is responsible for creating $1.9 trillion in economic output annually, generating $124 billion in tax revenue and directly employing 7.5 million Americans.
Yet America’s aging infrastructure system cannot handle the travelers we already have, much less the millions of new travelers, who want to visit destinations throughout our country.
As columnist Tom Friedman put it, arriving at a U.S. terminal after departing from a new international airport is like “going from the Jetsons to the Flintstones.”
For millions of businesses across America, the story is the same. Congested, crumbling, or just plain inadequate infrastructure, represents a major barrier between companies and a more prosperous future.
Tackling the infrastructure challenge will require dozens of innovative ideas like those I’ve discussed today. It will require new partnerships between government at all levels, and private stakeholders. It will require political leaders with open minds, creative ideas and a willingness to forge alliances across party lines. And it will require business leaders who understand that advancing the public good, is also good business.
In speaking with my colleagues in the travel industry, I’ve encouraged them to take a leadership role, because we just can’t sit back and hope someone else solves the problem.
But it will of course take a larger effort. It starts in conference halls and meeting rooms like the one we’re in today – with an understanding that we must join together to meet this challenge.
Mobility 21 is the exact type of regional leadership we need, and a model that should be replicated across the nation.
You are providing an example that Congress and the federal government should aspire to.
Just know that as the work continues, you have allies and partners in the travel industry, that are with you every step of the way. We are all in this together.
Thank you for the opportunity to speak with you today. I applaud your leadership and look forward to partnering with you to get our nation moving again. Thank you.
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