REFILE-Penn. gov. says US infrastructure renewal critical

(Repeats to fix word in first sentence to read "done" insted of "down.")

By Jon Hurdle

PHILADELPHIA, July 14 (Reuters) - The United States should establish a capital budget to pay for about $1.6 trillion in national infrastructure repairs to ensure the work gets done and prevent the risk of becoming a "third-rate" economic power, Pennsylvania Gov. Ed Rendell said on Monday.

In his first speech as 2008/09 chairman of the National Governors Association, Rendell said U.S. spending on facilities such as roads, bridges, and passenger rail is only 0.6 percent of gross domestic product, compared with 9 percent in China and 3.5 percent in the European Union.

Rendell, a Democrat, urged other governors at the NGA's centennial meeting to back his call for a renewal of infrastructure, and warned that the expense of doing so will increase the longer the task is deferred.

Rendell said the establishment of a federal capital budget was the best way of ensuring the work gets done, and argued the repairs should not be paid for out of current expenditure.

"They buy paper clips in the same way that they finance road building," said Rendell, whose has chosen infrastructure as the theme of his chairmanship. "It makes no sense."

According to a 2005 report by the American Society of Civil Engineers, the U.S. has a shortfall of $1.6 trillion in infrastructure funding over a five-year period.

Without those repairs, the U.S. risks becoming a "third-rate" economic power in 50 years' time, Rendell warned.

He argued that a program of infrastructure renewal would bolster U.S. competitiveness and stimulate the economy after six straight months of job-cutting by employers and as the economy has been battered by tighter credit and soaring oil prices.

"It's the best way to get our economy juiced, and in my opinion far better than giving people a $600 rebate check," he said, referring to the federal government's tax rebates as part of an economic stimulus plan

New Jersey Gov. Jon Corzine, speaking at an earlier session during the three-day meeting, also urged increased infrastructure spending as a way of reversing what he called a "scary" economic downturn.

Nationwide, the improvements should be environmentally benign, Rendell said. He argued that rail freight, for example, is less damaging to the environment than its road equivalent.

Federal infrastructure spending must be removed from the political process because it has dwindling public support, he said. Ten years ago, most people supported an extra 1 percent on income taxes to pay for infrastructure repairs but that number has fallen because of a public perception that such work is subject to "pork barrel" programs of federal lawmakers.

Other means of getting the job done would include public-private partnerships and imposing tolls on roads that are currently free to drivers, Rendell said.

In an effort to help fund an estimated $80 billion in infrastructure repairs in Pennsylvania, Rendell is evaluating a bid from a consortium led by Spanish company Abertis (ABE.MC) and U.S. bank Citigroup (C.N) to lease the state's 500-mile turnpike system of toll roads.

Pennsylvania's legislature adjourned for the summer without taking up the bill needed to put that plan in place.

Rendell earlier this year teamed with California Gov. Arnold Schwarzenegger and New York City Mayor Michael Bloomberg to launch a nonpartisan group to campaign for federal infrastructure investment. (Editing by Leslie Adler)