Rural Communities Can Benefit From Infrastructure Funds—if Rollout Is Done Right

The Infrastructure Investment and Jobs Act (IIJA) might be remembered as the act that, quite literally, rebuilt America for the 21st century. With collective expenditures of upward of $1.8 trillion, the act emphasizes public works and private investments in what has been called a generational down payment on the nation’s infrastructure.¹ IIJA, the Inflation Reduction Act (IRA), and the CHIPS and Science Act also reflect a profound change in federal infrastructure policy: All three are part of a broader policy goal to simultaneously rebuild domestic supply chains for national competitiveness and resilience, build a clean energy system to address the climate crisis, and ensure investments produce an inclusive and just economy.

Realizing these goals will require rebuilding America’s electrical grids, bridges, telecommunications, and other infrastructure on a scale not witnessed in decades, and many infrastructure projects will be built in rural communities. In particular, IIJA addresses long-standing shortcomings and underinvestment in broadband² and water and wastewater facility development³ that have systematically left behind rural areas with low population density. Infrastructure improvements necessary to transition away from fossil fuels—such as wind and solar farms, transmission lines, battery manufacturing facilities, and mining for critical minerals—will likely be concentrated in resource-producing regions and rural areas.⁴ And stabilizing supply chains will require scaling up domestic resource production and transporting goods to manufacturing centers along reliable shipping corridors.⁵

Since the 1980s, major infrastructure investments were often designed to enable and subsidize industry while communities accepted the risks in terms of financial costs, pollution, and impacts to community character and cohesiveness. This extractive model of infrastructure investment has increased geographic inequality by which rural economies disproportionately exhibit socioeconomic distress⁶ and small-town local governments struggle to maintain basic public services without fiscal support.⁷ Because rural resource-producing communities have historically received little local benefit from projects beyond short-term job creation,⁸ they may be skeptical when new infrastructure projects and investors come to town.⁹

The IRA and IIJA could be transformational and reinvigorate remote regions of the country if this round of infrastructure development is implemented in ways that rebuild trust¹⁰ and provide long-term benefits to the community.¹¹ Effective implementation can repair the inequity of past infrastructure investments and position communities to feel as if they are being engaged and included in the economy again.

The Biden administration should embrace the following four principles, first discussed in an academic journal by the authors,¹² to help communities fully access and benefit from historic levels of infrastructure funds:

• Emphasize procedural justice practices to deliver infrastructure investments that respond to a community’s concerns and needs, thus reducing community opposition and delay.
• Use fiscal policy reform or other measures to ensure that communities and local governments benefit from infrastructure developments.
• Build up local staff, services, and other technical assistance so that communities have the ability to apply for and access federal funding and to engage meaningfully in planning and investment decisions.
• Make federal programs easier to access by removing barriers and coordinating delivery.

By expanding community voice in infrastructure planning and investment decisions, the United States can deliver more inclusive outcomes and greater community acceptance of infrastructure projects. Procedural justice focuses on an agency’s interaction with the public, recognizing that the way decisions are made shapes how communities feel about the outcomes.¹³ Processes that are transparent, treat all participants with respect, and provide space for local voices and stories can yield outcomes that meet multiple goals and help avoid community backlash to a project.

Besides opposition, federal infrastructure projects also risk superseding or overlooking local needs if community voices are not included and considered. Risks are heightened in communities of color that have experienced federally sponsored infrastructure developments that steamroll local cultural and sovereignty values or neglect local need.¹⁴ Duane Sherman Sr., former chairman and CEO of Hoopa Valley Tribe, shared an example at a recent briefing event hosted by the Environmental and Energy Study Institute: His Tribe received federal funding for electric vehicle charging infrastructure, yet homes on his reservation remained unelectrified.¹⁵

Federal agencies must therefore actively engage with communities in ways that enable residents to voice and advocate for their needs and find pathways to honor local values. Programs within the Federal Interagency Thriving Community Network demonstrate how agencies can align national program goals to local and regional development needs.¹⁶ The National Environmental Policy Act also provides important procedural justice safeguards to ensure local interests are taken into account.¹⁷ Maintaining such standards will be crucial for rural communities hosting clean energy projects and other infrastructure builds that would primarily serve outside markets or investors.

Community benefits plans (CBPs) and community benefits agreements (CBAs) are another powerful tool for resource communities to gain leverage and negotiate for local employment, services, and investments that capture and retain some of the benefits of public and private investments locally. Currently, the U.S. Department of Energy (DOE) requires a CBP from all developers seeking agency grants and loans to build energy projects. The CBP must detail how the applicant will engage with local stakeholders around four priorities: 1) community engagement; 2) quality jobs; 3) diversity, equity, and inclusion; and 4) the Justice40 Initiative, which has the goal of directing 40 percent of the Biden administration’s climate and clean energy investments to disadvantaged communities.

A CBP, though, is not an official agreement and might be formulated before community engagement begins. The ultimate outcomes from the CBP requirement are uncertain, and early evidence suggests that companies may not know who to engage with and that communities are not prepared to negotiate and advocate for local needs or fear negotiations may drive a company away. Initially, companies are likely to work with a trusted entity, such as a community college or labor union, which may or may not reflect the community’s actual needs and strategies.¹⁸

At present, CBPs are detailed frameworks outlining how developers will engage with communities. For CBPs to be a more effective tool, communities will need capacity to engage in a process that is transparent and occurs early enough to effect project design and outcomes. Companies also would require capacity and guidance on how to engage effectively with communities. A CBP would be strongest if it were leveraged to create a contractually binding CBA, project labor agreement with a union, or other commitment between community leaders, labor, and the government to adhere to the CBP.¹⁹ Using the CBP’s leverage, community leaders can advocate for investments in residents, such as workforce training and support services (e.g., apprenticeship and pre-apprenticeship opportunities, child care, and housing) and profit-sharing agreements (e.g., co-ownership and investments in community endowments).²⁰

The DOE’s efforts to rebalance power dynamics between resource communities and companies can lead to meaningful agreements. Its solar workforce initiative, for example, awarded grants to Tribal governments and other entities that specifically address both access and job quality through partnership with unions.²¹ Bolstering CBP procedures and maintaining existing public engagement requirements within the environmental permitting process will be critical to delivering more equitable outcomes through IRA and IIJA investment.

Infrastructure investments must benefit communities over the short and long run and mitigate the risks characteristic of economies dependent on a dominant industry. One primary benefit of energy and supply chain investments is public revenue to pay for schools, public safety, parks, trails, and public libraries. Fiscal policy has failed many rural communities, however, by creating a dependence on a single, dominant industry, such as fossil fuels, and by limiting the ability of local governments to diversify their revenue sources or save and invest to stabilize revenue over time.²² That dependence creates a “fiscal trap”²³ that makes it harder for communities to manage when they must shoulder the direct and indirect costs of an infrastructure investment over the long run²⁴—particularly when industry exists or transitions from fossil fuel to renewable energy systems, for example.²⁵

Communities that are financially reliant on power plants, coal plants, or other energy-related industries illustrate this fiscal trap. Direct public revenue dependency on resource production reinforces boom-bust dynamics at the local and regional levels and constrains a community’s capacity to adapt to impending changes to energy infrastructure. In eastern Montana, for example, the retiring of local coal mines and a power plant threatens local governments’ fiscal capacity to sustain critical public services in the communities of Colstrip and Crow Agency.²⁶

Fiscal reforms that stabilize public revenues and shift risk from communities to larger entities, such as corporations or the federal government, are needed to translate infrastructure investments into long-term, equitable benefits for the region. The oil and gas sector, for example, has successfully shifted risk onto public entities by providing direct revenue-sharing payments and severance taxes to state and local governments, avoiding long-term regulation or accountability for transition and benefits sharing.²⁷ Shifting risk away from the communities where the activity is located and onto larger entities is critical to ensuring communities can capture long-term benefits from the federal government’s investments in infrastructure and helping the government avoid local backlash that might slow or block investments needed to meet national goals.

As the IRA and the IIJA reinvest substantially in infrastructural networks that support energy production as well as both secure supply chains and climate resilience, federal agencies also need to ensure host communities receive adequate public revenues and are insulated from long-run fiscal risks.

In rural and disadvantaged communities, where local public revenues are inadequate to address long-standing infrastructural deficits, the IIJA represents a needed course-correction.²⁸ This is particularly evident in the broadband, water and wastewater, and transportation sectors. For example, through a direct $1 billion federal appropriation for rural regional water system development in the West, the IIJA provided money to communities with chronic histories of water hardship, preventing them from turning toward more risky funding schemes.²⁹ Similar rural regional water systems in arid Western states have been financed directly through oil industry revenues, producing long-run risks to fiscal sustainability of local institutions and exemplifying fiscal and resource dependency traps characteristic of resource-producing regions.³⁰

Rural communities need a new fiscal framework that decouples local budgets from volatile and time-limited revenue.³¹ At the federal level, reforms are needed to replace revenue-sharing agreements that contribute to local dependence and risk with stabilized revenue in permanent assets. Creating a federal resource endowment that benefits rural and Tribal communities would enable them to leverage local assets to make their economies more diverse and resilient.

State and local governments also need to align tax structures with economic opportunities and goals within the changing landscapes of rural industry. For example, as Montana’s economy has diversified, revenue generated as a share of state gross domestic product (GDP) has declined.³² That is because the state’s tax structure is narrowly specialized to generate revenue from the old economy, leaving fewer taxpayers to pay for needed services and limiting options for economic development in Tribal and non-Tribal contexts that remain dependent on natural resources to pay for infrastructure and services.

Federal infrastructure reinvestments must reach their intended beneficiaries to be effective, but this is not a given in rural communities, which face known disadvantages to successfully competing for and winning federal awards.³³ One issue is a demonstrable gap in local administrative and technical capacity, meaning rural areas have fewer individuals to carry out key local institutional functions, increasing the burden on volunteers.³⁴ At the same time, narrow local tax and population bases may be inadequate to support the institutional capacity necessary to compile and successfully apply for federal assistance programs.³⁵ For example, municipalities within rural counties may lack a full-time professional planner, making capital improvement planning and infrastructure asset management difficult.

Given the rapid rollout of money from the bipartisan infrastructure law and the IRA, “shovel ready” projects—namely, those that have already gone through intensive engineering, stakeholder engagement, and environmental review processes—are well-positioned to take advantage of the funds.³⁶ This puts rural communities, which disproportionately lack planning capacity, at a disadvantage.

Addressing capacity shortfalls within rural communities will therefore be critical to both delivering the program effectively and meeting national social equity imperatives behind the infrastructure legislation. Communities will need to be equipped with adequate resources—to pay for staff, training for local leaders, technical assistance, and wraparound services such as child care—in order to help ensure meaningful participation and to bolster local autonomy in decision-making.

Federal agencies and public-private partnerships offer promising initiatives. The Environmental Protection Agency and the Department of Energy are delivering $177 million to establish 16 regional Environmental Justice Thriving Communities Technical Assistance Centers throughout the country to improve environmental justice outcomes by helping underserved communities navigate and access federal programming.³⁷ Earlier this year, the Economic Development Administration and the nonprofit International Economic Development Council partnered to launch the $30 million Economic Recovery Corps program, which places fellows within local institutions to bolster economic development planning and administrative capacity.³⁸ Such efforts to build embedded technical capacity by investing in community residents are a step toward ensuring rural and disadvantaged communities can successfully access and leverage federal funds to meet locally determined needs.

Infrastructure investments, community engagement, and community benefit policy must be coordinated to make the most of this historic shift in industrial and infrastructure policy. Reducing systemic barriers to federal program access in rural communities will also require expanded federal government capacity to coordinate program delivery.

Existing federal infrastructure and rural development programs are siloed, complex, and expensive to access.³⁹ Elements of program design and eligibility requirements built for urban norms may unintentionally exclude rural areas hoping to be awarded funds. For example, fiscally distressed rural regions may struggle to meet matching fund requirements,⁴⁰ and standard benefit-cost analyses used to allocate grant money often disadvantage rural regions with low population density.⁴¹ At the same time, formula funding may sideline low-population, rural areas: Regions and counties that fall below the U.S. Department of Housing and Urban Development’s Community Development Block Grant program population thresholds must compete for pass-through funds from states, rather than receive direct transfers.⁴²

Because the IRA and IIJA’s equity and economic goals hinge on delivering funds to rural and disadvantaged communities, implementing agencies should assess elements of their program design and delivery process and correct any that may exacerbate rural-urban disparities. Initiatives such as the U.S. Department of Transportation’s Rural Opportunities to Use Transportation for Economic Success (ROUTES) initiative—which was expanded under the IIJA—offer a roadmap for department-level coordination to improve equitable access and outcomes for rural and Tribal communities.⁴³ In addition, the White House’s Bipartisan Infrastructure Law Rural Playbook and Tribal Playbook provide helpful summaries of available resources within the IIJA to help rural and Tribal stakeholders identify opportunities within the complicated landscape of federal programming.⁴⁴

In addition, agencies must coordinate efforts and offer resources to help applicants navigate the suite of available programs. Doing so will require reducing silos across federal agencies and having meaningful engagement with community residents. Two federally sponsored efforts exemplify the benefits of coupling interagency collaboration with a regional approach: the Rural Partners Network and federally authorized regional commissions and authorities.

The Rural Partners Network⁴⁵ is an ambitious interagency effort let by the U.S. Department of Agriculture to coordinate federal rural programming across agencies and to deliver technical assistance at the state and territory levels.⁴⁶ The Appalachian Regional Commission (ARC),⁴⁷ and other federally authorized regional commissions and authorities similar to the ARC, received expanded appropriations through the IIJA to achieve multiple goals, such as providing technical assistance to help communities learn about and access federal resources, offering an institutional venue to coordinate and deliver infrastructure funds to economically distressed regions.⁴⁸ Both the Rural Partners Network and federally authorized regional commissions and authorities warrant continued investment. By delivering strategic and local technical assistance, both should be considered as models for the within-government efforts needed to reduce barriers to federal program access in rural and disadvantaged communities.

The IIJA represents a profound change in the resources available for infrastructure investment and an intentional effort to link infrastructure more closely to equity and environmental justice goals. This approach reinvests in public infrastructure, empowers labor, and implements place-based policies to work toward building a clean energy system.

Much of the IIJA infrastructure investments will be made in rural places. Getting implementation right means ensuring that rural communities can access the suite of resources available to them and delivering meaningful, long-run, and locally responsive community benefits when investments are made.

Delivering on that goal will require paying attention to procedural justice and designing community engagement processes that enable communities to voice and advocate for their needs in the federal program delivery process. Ensuring communities retain long-run benefits from incoming federal capital improvements will also require fiscal reforms that shift risk away from local institutions, build local assets, and expand the opportunity to benefit from economic diversification and growth. Finally, effective implementation will require reducing a remote region’s barriers to accessing the program by building local capacity to identify, apply for, and manage federal resources—and by tapping into federal capacity to improve program coordination and technical assistance.

Although the IIJA provides needed reinvestment in America’s crumbling infrastructure,⁴⁹ the insights outlined here should be taken as a point of caution: Infrastructure development alone cannot improve economic development in rural and distressed contexts. Deliberate and strategic implementation practices will be needed to ensure the nation’s changes to infrastructure mitigate—rather than reinforce—structural dependency traps. Promising initiatives across multiple agencies demonstrate that the Biden administration understands and takes these issues seriously.