May 7, 2004 - From the May, 2002 issue

Keston Endows State Infrastructure Institutes Within USC's Lusk Center

California's existing infrastructure network is in dire need of maintenance and repair. At the same time, an expected influx of over ten million more people to California by 2010 signals a need to focus on the infrastructure required to accommodate the growth and maintain a high quality of life. Additionally, our political system provides a disincentive for politicians to invest time and energy to the solution of long-range infrastructure needs. To that end, Michael Keston and his wife have provided an endowment to the Lusk Center at the University of Southern California to create an institute solely dedicated to the infrastructure policy and solutions in California. MIR was pleased to sit down with Michael Keston to discuss the Keston Institute and the state of infrastructure planning in California.

Michael Keston

Michael, why don't you give us some background into your interest in infrastructure and how that translates into your decision to endow USC with the finances to create a California Infrastructure Institute.

From 1991 to 1999 I served on the California Regional Water Quality Control Board for L.A. and Ventura Counties and in 2000-01 I served the city of L.A. on the DWP Board. In both instances, I learned a lot about issues related to infrastructure-water and power, roads and highways, etc.

After learning about infrastructure, I realized that there is really no organized effort focused on dealing with those issues in this state. There are no plans to target roughly $200 billion that must be spent over the next 10 years to maintain our collapsing infrastructure. And there is no one focused on building new infrastructure to deal with the forecasted influx of approx. 10 million people.

To that end, my wife and I have provided an endowment-as well as an annual gift for operating expenses-to create an Institute whose sole purpose is to deal with infrastructure on a continuous basis. This Institute will foster the creation of a constant vision and interest toward incentivizing government to address infrastructure throughout California.

Michael, you've been active in the real estate community and the civic community in Los Angeles and California for some time. What's the evidence that the universities in Southern California have contributed to the ideation and the implementation of the things you're talking about? Why bet on them?

The university environment is one where you get an extraordinarily high level of people developing great ideas and concepts that are not mired in the issues of politics. Academics merely want to study an issue and report on how to solve a problem.

Finding that kind of environment in the private sector is impossible. And the investigations we want to be able to undertake cannot be handled by someone with a self-serving purpose. If we had located the Institute anywhere but at a university, I believe the results of the studies we will undertake would be questioned. USC has the academic freedom and broad view to really look at issues of infrastructure and devise effective means for addressing them across all political constituencies.

Now, you attended the USC Lusk Center's recent retreat where Assembly Speaker Emeritus Robert Hertzberg spoke about the dynamics and forces that now shape-among other things-infrastructure decisions in California. What did you take from that presentation? And what can you apply to your plans for this Institute?

The Speaker Emeritus made it very clear that-because of term-limits-there is little incentive for politicians to take risks to reach resolution on long-term issues affecting California. The only reason they do so is because of their inner voice telling them to "do the right thing." That paradigm has created enormous, long-term structural problems statewide. And, because there is no way of changing the current term limit structure, we're going to have to find some way to work within its structure.

To do that this Institute will focus on-among other things-raising the visibility of infrastructure. To truly change the way that we deal with this problem we must create a way to incentivize California politicians and policymakers to really learn the importance of understanding infrastructure. So the Institute will begin to award those policymakers and politicians who take risks, make infrastructure a priority and begin to reinforce the notion that infrastructure is essential to quality of life.

You mention politicians and policymakers. What's the view of politics and politicians from your colleagues in the real estate industry? As of late both the real estate and business communities have become cynical about the political process. When you talk to your peers about what you're trying to influence, what's their reaction?

When I talk to my peers in the real estate industry about infrastructure they say, "Hallelujah!" In their view, no one is dealing with infrastructure. Wherever they develop and whatever they develop, they see an enormous void and complete lack of attention to schools, highways, transportation systems, power, etc.

That deficit is only further compounded because the press isn't covering it either. You can't find the real story until you turn to page 34. And even then the headline will be about who's to blame rather than what the problem is.

You allude to the discussion of growth and real estate. For the last half-decade part of the discussion has been under the rubric of Smart Growth. Does the term mean anything to you anymore? Has the debate that has taken place around it been valuable? What's your reaction?

To me, Smart Growth is merely a phrase. What it really should be called is "Common Sense Growth." The way it is currently depicted is that all growth should be focused in the inner cities because, presumably, the infrastructure is already there.

The problem with that rationale is that the infrastructure in those inner cities is deteriorated and it simply can't support additional units. If anyone tried to bring density back to most inner cities the roads, the sewer lines and the water lines would simply collapse.


"Common Sense Growth" on the other hand stipulates that one must do something for everyone. Inner cities must be targeted, first tier suburbs must be targeted and infrastructure must be provided to the second tier so that it does not hinder the growth and viability of the others. The only thing that one should not do is focus on "leap-frog" development. All the rest is "Common Sense."

Again the Speaker Emeritus mentioned the relationship between school facilities and development. There's a $25 billion school bond going to be on the ballot starting this November. How does that influx of state money and the accompanying local bond monies affect the real estate business as you know it? What impact is it going to have?

In order to have a vibrant state filled with educated workers we need schools and we need a better education system.

However from a demographic point of view, only about 25 percent of our families are "standard"-husband, wife and 2 kids. And that demographic shift has made incorporating a school into a real estate project a lot less important than it was just 25 years ago.

Today, there are so many niches in the market that schools are no longer prioritized in most projects. The big infrastructure issues in today's real estate market are: 1) Traffic; and 2) Open space. I see those two as the most important issues in the market.

So the problem becomes how do we balance the priority that the real estate industry puts on reducing congestion and improving access to open space while still incentivizing the development of schools and a better education system. Both are crucial to the continued sustenance of our state. And perhaps that paradigm can be one of the infrastructure questions this new Institute begins to look at.

Well, the natural follow-up question would be, how do you blend the experience and knowledge that you've outlined into a potential candidate to lead this Institute? How do you link those threads? And what would be the ideal candidate for Executive Director?

We're looking for somebody who knows the practical side of public works and can work within a legislative process. We want somebody who can manage research as well as write papers. So basically we want somebody with a halo on top of their head, who can walk on water. That would be the perfect solution.

All kidding aside, this position may attract a former-politician, a former-Chief County Administrative Officer or even a university professor. Those particulars are still up in the air.

Let's go back and blend your answers with the focus of this Infrastructure Institute. Five years from now, what's the benchmark from which you want to be judged?

We believe that this Institute should be looked upon as a three-legged stool.

The initial leg will of course be research. We must first understand what the current issues are and how wide their scope extends to truly begin to address this topic. If we simply try to deal with everything contained in the standard definition of "infrastructure" we'll get buried. If we are to be effective, we must find the most important aspects of "infrastructure" and do it within the next 6 months.

The second priority will really be creating public awareness and teaching the public about the issues. If we can do that we can begin to help the public encourage the policymakers to find short- and long-term solutions to our infrastructure problems.

And the last priority is to remain open-minded. We don't expect that we're going to be able to solve all of these problems immediately. But we do hold out hope that we can begin to discuss options with various stakeholders and begin to really deal with these issues statewide. On a modest level, I believe that the short-term focus will be to deal with the large and looming issues of water and transportation. After that we can continue to move forward and add other key infrastructure issues to our mission and continue growing.



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