Fitch Rates Opsimex ‘BBB-‘; Outlook Stable

MONTERREY, Mexico & NEW YORK, Jun 29, 2015 (BUSINESS WIRE) — Fitch Ratings has assigned the following ratings to Operadora de Sites Mexicanos, S.A. de C.V. (Opsimex):

— Long Term Local Currency IDR at ‘BBB-‘;

— Long Term Foreign Currency IDR at ‘BBB-‘;
— National Scale Long Term Rating at ‘AA(mex)';

The Rating Outlook is Stable.

The ratings are supported by Opsimex’ significant operational scale within Mexico, provided by its large tower portfolio which provides critical passive infrastructure to America Movil S.A.B. de C.V. (AMX; rated ‘A’ by Fitch) and eventually to other mobile operators. The company operates in a low competitive environment and has low technology risk. The ratings also incorporate predictable revenues and cash flow generation; along with strong and sustainable operating performance, supported by extensive coverage, geographic diversification in Mexico, scale and favorable demand.

Fitch incorporates an implicit support of the controlling shareholder and the strategic linkage of Opsimex to AMX operations, both controlled by the same shareholder, into Opsimex ratings. The ratings also reflect Fitch expectations of solid cash flow generation that will drive the credit ratios lower. The ratings also consider that leverage measured as total debt-to-EBITDA should trend to 5.0x in the medium term from over 10x as of March 31, 2015. Failure to achieve this would pressure the ratings and could result in negative rating actions. The company has a commitment to avoid paying dividends for the next three years.

KEY RATING DRIVERS

Strategic Linkage: Fitch sees a strong strategic linkage between AMX and Opsimex. Both share the same controlling shareholder and Opsimex’ passive infrastructure is critical to AMX mobile operations in Mexico. Fitch considers the company’s standalone financial profile as weak for the rating category. The ratio of one tenant per tower offers growth potential in the medium- to long-term, which could accelerate by the time Opsimex reaches its targeted capital structure.

Solid Position: Opsimex operates the largest wireless mobile communication tower portfolio in Mexico with the most complete coverage in the country composed of approximately 11,414 tower sites. Low exposure to economic cycles, long-term leases with high renewal rates, low customer churn in the industry and its position in the value chain as a critical infrastructure provider for mobile operators all result in predictable revenues and stable operating margins.

Land Lease Risk: As of May 2015, Opsimex leases all properties where its site infrastructure is located and it has no significant concentration in a single landowner. The company’s average land agreements are 8.5 years; some have an initial period of five years, with terms automatically renewed for five-year periods. Tower term agreements mirror land agreements.

Operating Results Improvement: Going forward the company’s operating margins and cash flow generation should improve as a result of an increase in the number of tenants per tower, without a considerable increase in costs and expenses. Also the company plans to build new towers for AMX, in conjunction with increased demand for 4G data services in the next few years should provide room for further revenue growth. All of Opsimex’s towers have available capacity for new tenants which should underpin margin improvements. Extensive tower coverage across the country provides other mobile operators with an opportunity to rapidly grow their network coverage.

Low competitive environment: Opsimex operates in an industry with minimal competition, where the growth in demand comes mainly from mobile operators. Wireless operators strategies to bring more value to their subscriber’s data plans have made the demand for data capacity grow rapidly. The growth in 4G LTE devices has also resulted in substantially greater investment in wireless network spending and spectrum by operators in order to support greater density and higher bandwidths needed for 4G networks.

High Leverage to trend down: Pro forma leverage in 2015-2016 is high for the rating category given the company’s business and financial risk profile. Fitch believes organic EBITDA growth will reduce leverage to approximately 5.0x by 2017. Management’s financial goal to de-lever is supported by a positive cash flow generation and no dividend payment during the next 3 years.

Low capital intensity: The company has high operating leases related to the land and low modular capital investments; flexibility in tower allocation allow Opsimex to manage its cash flow generation. An unexpected change in economic conditions or in the regulatory environment that negatively affects Opsimex margins or expected revenue could result in a change or deferral of growth plans.

KEY ASSUMPTIONS

Fitch’s key assumptions within the rating case for Opsimex include the following:

– MXN21.5 billion of debt issuance;

– Committed credit line of MXN500 million;

– A cash outflow of MXN21 billion to parent;

– Revenue growth driven by an increase in towers and tenants per tower;

– Capex of around MXN1.4 billion to build new towers.

RATING SENSITIVITIES

Factors that could result in a negative rating action include failure to approach to a Debt/EBITDA ratio of 5.0x in the next three to four years. Other factors include operating performance that falls short of Fitch’s expectations, revenue and margin erosion due to economic and competitive environment, unfavorable change in regulation and debt financed acquisitions that increase, or maintains leverage levels above 5.0x on a sustained basis.

Fitch does not foresee a positive rating action in the short- to medium-term given Opsimex’ high leverage and the incorporation into the rating that leverage will approximate to 5.0x in the next few years.

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AHRQ And The Essential ‘Both/And’ Of Federal Investments In Medical Discoveries

Congressional appropriators face difficult decisions in a time of imposed national budget constraint. However, the move by the House Appropriations Committee to terminate the Agency for Healthcare Research and Quality (AHRQ) is the wrong way to address these challenges.

In an era of austerity driven by sequestration, the desire to fund new discoveries has once again been placed in direct competition with complementary, equally critical efforts to insure equitable and safe access to these same innovations across America. I believe this is a false choice that put us all at risk by ultimately constraining both aims.

Others have cataloged the diverse activities sponsored by AHRQ and the benefits accrued. I won’t repeat them here, except to say that societal investment in AHRQ specifically, and health services research (HSR) in general, is key to designing, building, and sustaining critical infrastructure and capabilities so that the health system can work better, serving the needs of patients and those who care for them. This is not sexy work — it will not trend on Twitter, nor is it likely to make the front page of USA Today, at least not that you’d notice.

However, the problems and solutions at the heart of HSR and core to the mission of AHRQ—from health disparities to patients gaining reliable access to new discoveries—underlie some of the most compelling medical stories there are. Take, for example, the patient who gets sicker or dies because she doesn’t receive necessary and recommended medical services; the health system innovations that encourage the highest quality care; or changes in medical procedures that reduce costs and save lives.

We do and should hold leaders accountable for the folly and risk of poor infrastructure planning and investment. For example, placing new trains capable of higher speeds on tracks and control systems from the last century is unacceptable. We systematically upgrade highways and communications infrastructure as invention progresses, and we couple discovery of exciting and life-changing new technologies with assurances around broad access and safety. Innovation in health care is no less deserving of robust infrastructure investment, improvement, and spread. Yet, the move to eliminate AHRQ cripples our ability to plan and upgrade our health care infrastructure and puts our national ability to realize the full benefit of care discoveries at inappropriate risk.

Decades have been spent balancing the portfolios of the agencies that comprise the Department of Health and Human Services so that they can provide the country with an integrated approach to discovery and delivery of care improvement and innovation. This includes the identification of the causes of disease at Centers for Disease Control (CDC), the development of cures at National Institutes of Health (NIH), and the identification and dissemination of the best strategies for delivery and organization of those innovations at AHRQ.

Unlike its peers, AHRQ research is not focused on a single disease or treatment, but on the cross platform and multidimensional aspects of care delivery. AHRQ and the HSR it fosters work to make the health system function better. As such, it is charged to work with its sister agencies to “produce evidence to make health care safer, higher quality, more accessible, equitable, and affordable, and to work within the U.S. Department of Health and Human Services and with other partners to make sure that the evidence is understood and used.”

AcademyHealth President and CEO Lisa Simpson said in her official statement, “Investments in discovery and development will fall short if we don’t have research on how best to deliver them to the right patients, at the right time, and in the right setting.” That is where AHRQ makes its greatest contributions.

In a resource limited environment, we have to make tough choices, but eliminating funding for AHRQ is short sighted and places patients and their families at inappropriate risk. AcademyHealth and our partners in the research community look to the Senate to restore funding for AHRQ and maintain a balanced portfolio of investment in research that protects and improves the health of individuals and communities across America.

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A security checklist for SCADA systems in the cloud

Given the critical nature of operations that supervisory control and data acquisition (SCADA) systems manage, an article containing the words “cloud,” “SCADA” and “vulnerabilities” together should raise the hair on the necks of information security professionals.

Traditionally, SCADA applications used to control critical infrastructure have been hosted within an organization’s IT infrastructure and have relied on the protection offered inside the infrastructure perimeter. In some cases, organizations have “air gapped” their SCADA applications from the broader network and particularly from the Internet.

Today, organizations have recognized the advantages of cloud-based computing and are migrating their SCADA applications into the cloud environment to reduce costs, gain efficiencies and increase reliability. Because it is still relatively new, we have yet to see many cyberattacks on cloud-based SCADA systems, but that is sure to change with time. More troubling, however, is that attacks against cloud-based SCADA applications can be disproportionately harmful because of their criticality.

Considering the risks

Before moving SCADA applications to the cloud, the security risks must be considered with eyes wide open. Although cost reduction and increased efficiency are significant business drivers, so too is security. The impacts of data loss/compromise, loss of organizational control and denial of service should be balanced against the advantages of cloud-based SCADA hosting. Organizations must establish their risk tolerance and their level of comfort with giving up the control they may currently exercise through internal IT infrastructure hosting.

The importance of vulnerability management with cloud-hosted SCADA systems is paramount. So is consideration of the security flaws inherent in current SCADA protocols. For instance, Modbus and DNP3 – today’s most common SCADA protocols – do not support or perform authentication and encryption. Consequently, organizations must be able to continually monitor vulnerabilities in security controls protecting SCADA applications and ensure their ongoing remediation. SCADA systems need to be treated differently than most other IT systems, and the timeframe for mitigation of vulnerabilities is much shorter. Acceptance of risks in SCADA system controls should approach zero.

The results of this risk assessment should provide the data needed for a sound decision about moving SCADA applications to the cloud. If information security risk is evaluated the same way as cost, efficiency and reliability needs, then a cloud migration decision will be on solid footing.

After an organization decides to proceed to the cloud, it will need to identify a service provider.

Any cloud provider must be able to satisfy security controls requirements. For SCADA applications, there must be high assurance that the provider can demonstrate the ability to provide and maintain strong security mechanisms and processes. The following areas should be considered when evaluating cloud provider capabilities.

1. Data separation. Confirm that the provider can segregate customers’ data and applications from each other.
2. Infrastructure control. Determine how much control customers have over changes to the provider’s infrastructure. For instance, clients should be alerted when updates to the back-end infrastructure are made and when new third-party connections are initiated.
3. Encryption. Ensure the cloud provider can encrypt data at rest.
4. Patching. Determine the provider’s ability to automatically patch known vulnerabilities at a rate consistent with organizational policy.
5. Reporting. Determine if the provider is able to provide standard and ad hoc reports that satisfy business needs.
6. Continuous monitoring. Confirm that the provider has a continuous monitoring capability that includes automated and manual near-real-time assessments of the effectiveness of security controls.
7. Situational awareness. Ensure there is a capability for capture and analysis of all log data and real-time detection, response and analysis of events, incidents and suspicious or abnormal activities.
8. Remediation. Understand the provider’s commitment to immediate corrective action of all vulnerabilities identified.
9. Staffing. Determine the availability of sufficiently trained, dedicated security staff.

The most effective means of ensuring the protection of a cloud-based SCADA application is to negotiate an effective, measurable service level agreement that covers the above areas. Paying a premium for delivery of secure cloud-based services at this level is probably justified, considering the risks involved.

Migration of SCADA applications to the cloud is a relatively new business strategy that warrants caution. While increases in savings and efficiency are undeniable, the criticality of SCADA systems justifies a “go slow” approach until there is assurance that the cloud provider can secure critical business data.

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Governments, agencies, utilities better prepared after crippling 2012 derecho

The 2012 weather system now known as a derecho dealt parts of West Virginia a crippling blow as high winds knocked down trees and power lines, leaving as many as 1.6 million without electricity. This unidentified motorist on South Hills’ Louden Heights Road was one of many who found tough going in the storm’s aftermath.

Three years after a rare storm wreaked havoc on West Virginia, officials say the state has learned its lessons, and counties and state agencies are better prepared for future calamities.

The June 29, 2012 derecho caused about 1.6 million West Virginia residents to lose electricity at some point. The National Weather Service issued severe thunderstorm warnings for counties all along the storm’s path, but the weather system, fueled by triple-digit temperatures, was much more intense than a regular thunderstorm. Wind gusts as high as 78 mph toppled trees and tore down some power transmission towers; damages to the state’s power transmission infrastructure exceeded $170 million.

Some were without electricity for more than two weeks. Some cellular communication towers and landline telephones lost service and 27 of the state’s 50 911 centers were affected. Some broadcasters that typically relay emergency information were knocked off the air. In the days that followed, gasoline became scarce as residents flocked to fuel up, making it difficult for officials to keep emergency generators running.

Terrance Lively, public information officer for the West Virginia Department of Homeland Security and Emergency Management, said the state has since invested in about 50 generators. They can be put into place to power critical facilities, such as 911 centers or hospitals, in the event of an emergency.

“These generators have been repaired (when needed) and checked for proper working order by the West Virginia National Guard,” Lively said. “We have these assets available for critical infrastructure during power outages from disasters. Some of the individual facilities have also worked with the local emergency management offices to apply for federal mitigation funds for generators.”

Lively said the storm and its aftermath was a learning experience for the state and has helped officials respond better to other emergencies. Lively said members of the public should now be aware that they ought to have enough emergency supplies — including food, water and necessary medication — to be self-sustaining for at least 48 hours because help may not show up right away. That said, he also noted that response times have improved since then.

Breakdowns in communications were one of the many issues highlighted in an after-action review ordered by Tomblin and released in 2013 — in particular, poor communications between emergency officials and utility companies.

Complicating matters, 20 generators were stolen from Frontier Communications after the storm and only five were recovered. Generator theft “dropped significantly” during the Hurricane Sandy emergency response later in 2012 because police patrols were coordinated near utility companies’ generators.

Phil Moye, spokesperson for Appalachian Power, which serves one million customers in West Virginia, Virginia and Tennessee, said his company and its parent company, American Electric Power, have established an incident command that coordinates power restoration efforts in the event of a widespread power outage. He said that model is much like the emergency response protocols used by state and local governments, and it allows for a better flow of information between the power company and emergency agencies.

The company has also developed an outage notification system that allows the company to disseminate critical information directly to customers via email or text message in the event of an outage.

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Critical Infrastructure Protection Act Passed By House Homeland Security Committee

The Critical Infrastructure Protection Act (CIPA), legislation to protect the nation from an electromagnetic pulse (EMP) — a threat experts consider one of the most serious risks to our national security – was passed this past week by the House Committee on Homeland Security.

“The electric grid is fundamental to our modern way of life and is a vital component of nearly every other critical infrastructure in America. Reducing its vulnerability to naturally occurring or weaponized electromagnetic pulse is a matter of national security,” said Rep. Trent Franks (R-Ariz.).

“Most notably, CIPA directs and empowers the Department of Homeland Security to harden and protect our critical infrastructure including power production, generation, and distribution systems. I’m encouraged by this movement and expect my colleagues in the House of Representatives to take this decisive step to protect our nation when CIPA comes to the floor for a vote.”

“Experts have warned us about the threat of EMP events to our critical infrastructure. Such an event could severely disrupt all Americans’ way of life. The impact could cause serious damage to the nations’ critical infrastructure making this vitally important to our homeland security defenses,” said committee chairman Rep. Michael McCaul (R-Texas). “The Critical Infrastructure Protection Act, which passed through my Committee, is a huge step forward in our resiliency and preparedness from an EMP event.”

Rules committee chairman Pete Sessions (R-Texas), added that the “passage of the Critical Infrastructure Protection Act is an important first step towards protecting our nation’s critical infrastructure … I wholeheartedly support this bill so that we can secure our electrical grid, educate the public about this potential threat, and implement effective measures to protect our nation’s critical infrastructure.”

Homeland Security Today reported earlier this month that, an emergency spare transformer program is a key part of the preparation for and rapid recovery from a high-impact, low-frequency (HILF) event which the Department of Homeland Security announced in its long awaited report, Considerations for a Power Transformer Emergency Spare Strategy for the Electric Utility Industry.

For over a decade, Homeland Security Today recently reported, national security and energy experts have warned America’s power grid has grown increasingly vulnerable to natural factors, such as weather-related outages and subversive action. With power outages 285 percent more likely to occur today than in 1984, it is critical that the nation ensure its electric power system is reliable, according to a recent study by Johns Hopkins University (JHU).

Published in the Journal, Risk Analysis, the study, Who’s Making Sure the Power Stays On? said the nation’s electric power distribution systems are so haphazardly regulated for reliability that it’s nearly impossible for customers to know their true risk of losing service in a major storm. The study, which was designed to analyze how reliability is measured, led the researchers to propose new regulatory measures to accurately identify weaknesses within the system.

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Federal infrastructure fund spending favoured Conservative ridings

A federal infrastructure fund aimed at fixing up arenas and community centres was spent disproportionately in ridings represented by Conservative MPs, a Globe and Mail analysis shows, as the governing Tories prepare to roll out a nearly identical fund in the months before the fall election.

Ridings that elected Conservative members of Parliament in 2011 received, on average, 48 per cent more money from the $150-million Community Infrastructure Improvement Fund than ridings that elected opposition MPs, a Globe tally of more than 1,600 projects across Canada shows

Under the program, on average, Conservative ridings received $561,332 and had six projects funded. Opposition ridings, on average, received $379,337 and had four projects.

Some of the most-funded ridings in each region are held by cabinet ministers, including Infrastructure Minister Denis Lebel in Quebec, associate minister of Defence Julian Fantino in Ontario and Health Minister Rona Ambrose in Alberta.

And a new program with nearly identical terms, along with another major infrastructure fund, is scheduled to provide a new volley of funding announcements from government MPs in communities across the country in the weeks before the Oct. 19 vote.

A Globe and Mail analysis of Community Infrastructure Improvement Fund projects found that they were most often delivered in ridings that elected Conservatives in the 2011 election. A list of more than 1,600 projects was compiled from disclosure notices on government websites and news releases, as agencies did not provide lists when contacted. Locations of those projects were then matched with their federal ridings and party affiliations.

Along with almost every one of those projects came a government announcement, where MPs had the opportunity to hand out big cheques to community leaders and get favourable coverage in local media.

George Szanto, who helped write a successful CIIF application for a community kitchen on Vancouver Island, said he was told to keep the grant secret for more than a year until the government had a chance to announce it.

“It was very odd because the board of trustees knew where the money was coming from, but they weren’t allowed to tell anybody,” Mr. Szanto said.

Gabriola Commons, on Gabriola Island near Nanaimo, B.C., was given $35,000 from the CIIF in the spring of 2013. The funding was finally announced in September, 2014, by Conservative MP Cathy McLeod, along with a few other projects. Jean Crowder, the NDP MP for Nanaimo-Cowichan who represents the area, said she is not invited to such funding announcements, even in her own riding.

“I usually find out about [infrastructure projects] when I read about it in the local newspapers,” Ms. Crowder said. “Occasionally, someone will actually call me from the community and invite me to come, but I never get invites from government, ever.”

Infrastructure is shaping up to be an important issue in the fall election, with all parties introducing plans for how to spend federal money ahead of a campaign that is expected to focus heavily on issues such as traffic congestion and public transit.

The Conservatives introduced a new fund for public transit in the April budget, and the federal government is set to unroll a series of announcements over the summer for winning projects under the $14-billion New Building Canada Fund. At the same time, they also launched a fund aimed at smaller projects to celebrate Canada’s upcoming 150th anniversary – with terms nearly identical to the former CIIF program.

The Canada 150 Community Infrastructure Program, like its predecessor, is split between regional agencies and will deliver $150-million over two years to community halls, sports arenas, theatres and other centres.

“The Community Infrastructure Improvement Fund was a tremendously successful program,” said Michele-Jamali Paquette, director of communications for Mr. Lebel, the Infrastructure Minister. “We believe that improving Canada’s community infrastructure is a great way to celebrate the 150th anniversary of our country.”

The new fund has a tight timeline and gave organizations and municipalities only weeks to submit applications. For example, in Ontario, submissions were due less than a month after the program was announced. Projects, too, must be completed within two years. While deadlines vary by agencies, generally most give funding to work done between the spring of 2016 and the spring of 2018.

One of the dangers of rushed deadlines is that projects might not be finished in time, allowing the government to make a funding announcement without having to hand over the money if the timeline isn’t made.

The Town of Georgina, Ont., in York region, received approval for $990,000 from the CIIF to convert a decommissioned school into a community hub, which would include a kitchen and employment training.

But the town ran into difficulties, and interior work on the centre continued past the March 31, 2014, deadline. In the end, the municipality received only $70,000, with town coffers making up the difference.

The town has since applied for the new Canada 150 infrastructure fund, in partnership with the Ontario Water Centre, for $340,000 for exterior improvement to the community hub and work on a nearby farm.

“We’re very happily surprised that there’s new infrastructure dollars,” said Phil Rose-Donahoe, Georgina’s manager of cultural services.

Winning projects for the new fund are expected to be announced later this year, according to regional agencies.

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Civic infrastructure to get an IT push

The infrastructure in the city and its surrounding areas is likely to get a boost with the state government declaring that it wants IT companies to develop amenities like roads, water supply etc surrounding their offices against concessions in taxes.

The state’s new IT policy, announced on Tuesday, has been welcomed by city-based developers and the business class. The state aims to attract an investment worth Rs 50,000 crore and generate employment for 10 lakh people.

The apex bodies of business and developers – the MCCIA and CREDAI Pune — have welcomed the move saying that IT Parks will take care of roads and other amenities surrounding their offices without depending on the municipal corporations. The cash-strapped Pune Municipal Corporation (PMC) is happy because it already requires an estimated Rs 25,000 crore to develop and improve basic infrastructure in the old city areas.

The new policy proposes that companies can develop ‘critical infrastructure’ like approach roads connecting to highways besides providing basic amenities like water, sewage etc. In lieu, they will be given rebates in property tax and premiums paid to the government for higher FSI.

The ‘critical infrastructure’ includes physical facilities like supply chains, information technologies and communication networks, besides water supply, health facilities, communication, transport, banking etc.

“We had repeatedly asked the state government to come out with a new IT policy if it wants to compete with Bangalore and Hyderabad (to attract IT companies). We welcome the change. It will bring IT companies to Pune and help generate employment. Because of high land prices, a majority of IT firms prefer taking buildings on lease. Now with the new policy and higher FSI, developers in Pune will make maximum effort to give a boost to the IT sector and develop civic amenities for the city,” said Shantilal Kataria, president of CREDAI Pune metro.

The city-based developers, however, sought more clarity on the policy. The government must ensure that the developer, who is building the infrastructure exclusively for the companies, gets all benefits the IT firms are proposed to get.

Satish Magar, president of MCCIA, said the clause will help IT companies develop civic facilities like roads for their employees. “The policy is already in place. With the state government coming out with more sops, the IT businesses will benefit,” said Magar.

Apurva Chandra, state industry secretary, said the state’s IT policy is now in line with the policies of Karnataka, Andhra Pradesh and Tamil Nadu.

“The state government’s move is a step towards involving private players in the development process. The PPP and BOT models are already in place. The IT companies’ involvement will benefit themselves and employees as well. Besides, more talent will be attracted to the city,” said urban planner Ramchandra Gohad.

It’s good news for the civic bodies as well. The IT companies have been repeatedly asking for a long-term solution to traffic problem in and around the Rajiv Gandhi Infotech Park in Hinjewadi, besides demanding good roads, hospitals, police stations etc for the safety and health of their employees. However, the Pimpri Chinchwad and Pune municipal corporations have so far failed to find a solution to a basic problem like congestion on roads.

Civic officials admit that the PMC has very little funds to augment and improve the city’s infrastructure. A draft development plan (DP) for Pune city comes with a challenge of raising Rs 25,000 crore — a sum required to improve basic amenities and meet its social obligations.

The PMC had earlier admitted that the implementation of consecutive DPs drawn up in 1966 and 1987 was “pathetic” as a majority of the plans have remained on paper because of lack of funds. In fact, only 40% of the 1987 DP has been implemented so far. The reservations for basic amenities like public urinals, play grounds, hospitals have not been developed. The 1987 DP reservations covered an area of around 1,000 hectare, of which only 134 hectare has been developed.

Sanjay Dutt, executive managing director, South Asia – Cushman & Wakefield, said the higher FSI decision would lead to increased supply in peripheral locations, thereby easing the pressure on congested areas in the city. The tech companies, on the other hand, would benefit if the proposed tax benefits are seriously given. However, he added that the government will have to continue to play an important role in the process. “Apart from extending rebates and subsidies, the government must ensure creation of strong physical infrastructure to enable smooth functioning of IT townships,” Dutt said.

Pune municipal commissioner Kunal Kumar said the PMC will continue to play a major role in developing the city. “The PMC will put all efforts to develop quality infrastructure not only for IT but also for entire the city with an objective to improve quality of life. The corporation has already taken steps to encourage the IT sector and will continue to do so,” he said.

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Robert Krol: Is US infrastructure really crumbling?

Most politicians and transportation interest groups claim that America’s infrastructure is in bad shape. At a recent House Ways and Means Committee hearing, Chairman Paul Ryan, R-Wis., said our roads and bridges are in “a sorry state.” At the same hearing Bill Graves, president and CEO of the American Trucking Associations, reported, “Two-thirds of highways are in poor or mediocre condition.”

These statements are reinforced every time we drive over a pothole on the way to work. So it’s no surprise that many people think most roads in the United States are of poor quality.

However, government statistics tell a different story. U.S. roads and bridges are not falling apart.

Each year state transportation agencies provide the federal government with comprehensive data on highway and bridge conditions. Highway quality is measured by a surface roughness index. The lower the index score, the better the quality of the road. Roads with index scores below 95 are considered to be in good condition, while higher index scores below 170 are acceptable.

The most recent data on highway quality is for the year 2012. The percentage of urban highways classified as either good or acceptable was about 80 percent in 2012, down about 5 percentage points from 10 years earlier. Some of the decline may reflect a postponement of maintenance during the great recession.

Almost 97 percent of rural highways were classified as either good or acceptable in 2012. This is about the same as 10 years earlier. Even with the recent quality drop for urban highways, a high percentage of our highways is in good or acceptable condition.

These figures mask the variation in road quality across states. For example, in 2012, almost 80 percent of Georgia’s urban highways were in good condition—the highest in the country—while about 15 percent of California’s urban highways were in good condition—the lowest in the country. Obviously, highway usage, weather conditions, and the quality of transportation agencies influence these figures. Using state level quality figures, there is no statistical change in average urban and rural road quality over the 10-year period.

Taking a longer-term perspective, economists at the Federal Reserve Bank of Chicago examined the quality of the interstate highway system for the period from 1980 to 2006. Using surface roughness index data provided by the government, they find the system’s road surface has become smoother and less deteriorated since the mid-1990s.

Transportation agencies report bridges as either structurally deficient or functionally obsolete. A structurally deficient bridge is not considered unsafe, but it does imply a potential reduction in its load-carrying capacity and requires maintenance. A functionally obsolete bridge does not mean it fails to meet current design standards. It may simply mean that traffic flows over the bridge are more than expected.

The quality of bridges in the United States has improved. Using the most recent data, in 2014, 4.2 percent of bridges were classified as structurally deficient, down from 5.7 percent 10 years earlier. There has been little change in the percentage of functionally obsolete bridges over this time span.

Once again, there is variation across states. In 2014, for example, less than 1 percent of bridges in Texas were structurally deficient—the lowest in the country—while in Rhode Island, almost 24 percent were labeled structurally deficient. Conditions and management vary across states, but our bridges do not appear to be crumbling.

If you Google “crumbling highways and bridges” you get quite a few hits. Yet government statistics suggest that our transportation infrastructure is not in bad shape. People’s personal experience partly explains the divergence between hype and reality. Another reason is that our elected officials in Washington can capture votes by sending gasoline tax dollars home. They have much to gain by pushing the idea that our highways and bridges are falling apart.

Robert Krol is a professor of economics at California State University, Northridge, and the author of forthcoming research on “Political Incentives and Transportation Funding” to be published by the Mercatus Center at George Mason University.

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U.S. weekly oil rig count decline slows: Baker Hughes

Energy firms pulled three rigs from U.S. oil fields this week, the smallest drop in five weeks, data showed on Friday, a sign the collapse in drilling is coming to an end as crude prices recovered after falling 60 percent from last June to March.

It was the 29th straight weekly decline, bringing the total down to 628, the lowest since August 2010, oil services company Baker Hughes Inc said in its closely followed report.

In the latest week, drillers removed two rigs in the Permian, the biggest U.S. shale oil play in West Texas and eastern New Mexico, and three in the Bakken centered in North Dakota.

Experts expect the rig count to bottom out soon.

“We expect the rig count decline to remain lumpy in the coming weeks and expect to see a few weeks with some rig additions, offset by larger declines in subsequent weeks, before we reach an absolute bottom,” analysts at Evercore ISI, a banking advisory firm, said in a report this week.

The Evercore ISI analysts said that bottom will most likely come early in the third quarter.

With U.S. crude futures averaging around $60 a barrel since the start of May – up 40 percent from a six-year low in March – several drillers, including most recently WPX Energy Inc in the Bakken, said they plan to return to the well pad due in part to lower drilling costs.

U.S. drillers eliminated thousands of jobs and idled more than half of their oil rigs since the total peaked at a record 1,609 in October in response to a 60 percent fall in crude prices from last June to March.

Prices fell from around $107 a barrel last June to near $42 in March as producers in the United States, the Organization of the Petroleum Exporting Countries and elsewhere continued to pull near record amounts of oil out of the ground despite lackluster world demand.

OPEC has continued to produce oil to retain its market share by driving out more expensive producers like U.S. shale oil drillers and to keep prices low enough to encourage demand growth.

And OPEC’s plan worked, sort of.

U.S. energy firms did slash spending but those cuts have not yet cut into U.S. crude production, which has averaged 9.6 million barrels a day for the past five weeks, its highest level since the early 1970s, according to government data.

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This could be the tipping point for oil prices

Record oil production meeting a wave of surprisingly strong demand has reined in world oil prices, creating a delicate balance that could be tipped either way—and the most immediate catalyst may be Iran’s nuclear talks.

The market has been awaiting the outcome of the negotiations ahead of a June 30 deadline, as an agreement could put 1 million barrels of Iranian crude back on the market eventually. U.S. crude futures have been locked between $57 and $62 per barrel—since late April.

On Sunday, officials on all sides were quoted as saying the talks would need to continue beyond the deadline. Disagreement was reported to remain on inspections and other key issues.

A preliminary agreement was reached two months ago, but since then it had appeared not enough progress was made. The market had expected an extension.

Should negotiators reach a deal for Iran to end its nuclear program, in addition to the increase in production, Iran could unleash an estimated 30 million to 40 million barrels of oil it now stores on tankers. Oil prices could immediately fall by several dollars if a deal were reached.

“It’s a substantial amount of oil. It could potentially move the market out of this range to the upside, or downside,” said Michael Cohen, head of energy commodities research at Barclays.

Strategists say there could still be a deal, but later this year. If so, Iranian oil would not hit the market immediately, but traders still anticipate some additional crude from Iran by the end of the year.

The market view has been that a deal would still get done. Yet talk from Iranian hardliners raised doubts about progress last week.

Iran’s top negotiator was headed back to Iran sunday to consult with top leadership while U.S. Secretary of State John Kerry rejoined talks this weekend—for the first time in weeks.

“There’s a lot of political capital invested at this point in getting a deal,” said Cohen. But the pushback has come from both sides. Five former advisors to President Barack Obama sent a letter of concern that the U.S. could fail to reach a “good” agreement and that it risks making concessions that would weaken international inspections, a cornerstone of the earlier agreement.

Earlier this week, Iran’s supreme leader, Ayatollah Ali Khamenei, saidmost sanctions should be lifted even before Iran dismantles nuclear infrastructure or allows international inspectors to verify it is keeping its commitments. He also ruled out freezing nuclear enrichment for as long as a decade and reiterated a refusal to allow military sites to be inspected.

Complicating the situation, Iran’s parliament this week passed a bill banning access by International Atomic Energy Agency inspectors to those sites.

Again Capital analyst John Kilduff said if talks actually fell apart altogether, the price of oil could immediately jump $10 a barrel.

“The knee jerk is going to be higher (prices). Also, I would assume relations will deteriorate between the U.S. and Iran, and maybe others, and that will raise the security premium for potential military action that Israel will push for,” he said.

A complete breakdown in talks between Iran and the U.S. and five other countries is so far seen as unlikely, but the odds have clearly increased.

Meanwhile, the Iran negotiations are causing barely a ripple in oil prices. The market is so well-supplied that a bombing attack on a mosque in Kuwait on Friday served only to add some support to prices in a weak market.

A surge in crude supply and bingeing by consumers has been keeping U.S. oil futures in the $60-a-barrel area. While strategists see higher prices for crude this year, many see the potential for a dip back into the $50s in the second half of the year if demand drops.

“There’s not too much conviction in the market in terms of where we’re going, and you have big support to the downside and big resistance to the upside,” said Citigroup energy strategist Chris Main. He said also at play were macro factors like Greece, the U.S. dollar and volatility in the Chinese stock market, which plunged another 7 percent Friday.

Citigroup expects WTI to average $61 per barrel in the third quarter, and fall to an average $54 per barrel in the fourth quarter. It forecasts Brent at $68 in the third quarter and $63 in the fourth quarter. Barclays, on the other hand, sees lower prices of $55 per barrel for WTI in the third quarter, and then a $63 per barrel price in the fourth quarter.

Strategists and other experts who answered a CNBC survey this month predicted an average price of $60.81 per barrel for WTI—right in the middle of the current range. West Texas Intermediate crude futures have also held just below the 200-day moving average, at $62.35.

Oil industry experts surveyed earlier this month by CNBC forecast an average $60.81 per barrel price for West Texas Intermediate, right in the middle of the range.

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2015 State of National Preparedness

In 2011, President Obama put forth the Presidential Policy Directive (PPD-8) that dealt directly with the all-encompassing issue of national preparedness. The president recognized that every facet of our society (whole community) was needed to accomplish such a daunting task; strengthening the security and resilience of the United States.

A number of initiatives and products have resulted from this Directive; one being the National Preparedness Goal. This document highlights a number of core capabilities, those distinct, critical elements that are essential for the execution of each of the five mission areas (prevention, protection, mitigation, response & recovery). To get a finger on the pulse of how progress is being made (or not) concerning this Goal, PPD-8 also required the production of a National Preparedness Report on an annual basis.

Recently, the 2015 version of this Report was released by the Department of Homeland Security (DHS), one that highlighted a number of issues that outline both national trends and additional findings for each of the five preparedness mission areas. The following offers but a brief review of some of the initiatives taking place in these areas.

Prevention
It should be noted that this mission area is the only one of the five that deals solely with issues related to terrorism. To that end, various initiatives have been undertaken in order to enhance collaborative efforts of the public/private sector partnership. For instance, DHS’s Homeland Security Information Network (HSIN) disseminated numerous situational awareness and current situation reports to thousands of its critical infrastructure partners.

Protection
The Framework for Improving Critical Infrastructure Cybersecurity was released by NIST to assist organizations in managing cybersecurity risks. To aid in this effort, DHS created the Critical Infrastructure Cyber Community (C3) Voluntary Program, a DHS effort designed to assist governments, businesses, as well as academia with both implementation and development of sector-specific guidance for using the framework.

Mitigation
Effective mitigation begins with risk identification, in which a community identifies the threats it faces and the likelihood of such occurrences. One initiative seeks to promote and prioritize green infrastructure due to its potential economic, environmental and risk-reduction benefits. As an example, in accordance with recommendations from the Hurricane Sandy Rebuilding Task Force, steps are being taken to determine how this infrastructure can be used to protect and enhance the resilience of our Nation’s communities, particularly in coastal areas.

-Response. The increase in both frequency and levels of violence of mass shooting incidents has prompted whole community partners to take action aimed at managing active shooter events. One example is the document, Incorporating Active Shooter Incident Planning into Health Care Facility Emergency Operations Plans, a joint effort of the Department of Health and Human Services, the FBI and FEMA.

-Recovery. Federal and nongovernmental organizations are collaborating to develop new information-sharing resources for recovery efforts. These include the Disaster Assessment and Assistance Dashboard: an online platform intended to be used by citizens, businesses and governments alike. It maps nearby environmental hazards, shared resources, as well as the ability for state and local governments to access various local resources in order to promote local economic recovery while rebuilding after a disaster.

These examples offer but a thumbnail sketch of the many steps taken by those within the homeland security enterprise. The full 2015 National Preparedness Report, as well as overviews related to each mission area can be accessed at www.fema.gov. For more information concerning the many homeland security programs at AMU that relate to these issues, you can visit AMUonline.com.

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BART general manager: “I’m proposing a $3 billion funding package” to board

Bay Area Rapid Transit Agency General Manager Grace Crunican told a Commonwealth Club gathering in San Francisco Friday she’s proposing a $3 billion funding package to deal with critical infrastructure upgrade projects.BART had earlier indicated it would likely seek billions in new funding, but hadn’t disclosed a proposed amount.

She made the comment in a panel on the nationwide need for more federal investment on public transit, roads, highways, bridges and other key transportation-related infrastructure.

In a followup interview, Crunican told me that could mean a huge bond measure, going to San Francisco, Alameda and Contra Costa counties for more sale tax revenue or some other combination of funding sources. BART’s publicly elected board “is going to have to weigh the needs” and vote on a plan, she said.

Details haven’t been developed yet. A 3.4 percent fare increase is set to take effect Jan. 1, but won’t provide nearly enough to do the trick. Nor will other planned fare increases in coming years.

During the panel discussion, she joked that after making the $3 billion funding proposal to her board, she “might be a former general manager” at the Oakland-based transit system.

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