Is private investment our only hope? The financial community and even some in the public sector think so.
The Urban Land Institute and firm Ernst & Young just released their fourth annual analysis of U.S. infrastructure, which they consider an “investment imperative.”
They don't say “public-private partnership” or “P3s,” employing instead the less emotionally loaded term “private capital.” But whatever the nomenclature, they say that cities, counties, and states could leverage $190 billion into $475 billion from entities — like pension funds and university endowments — eager to capitalize on the relatively risk-free (all things considered) municipal government market. An extra bonus is that privately funded projects are completed three to 10 years faster than average, so investors enjoy relatively quick returns.
They pointed out how far behind we are in leveraging private dollars compared to, well, the rest of the world. The European Investment Bank facilitates deals for countries ranging from Spain to Lebanon and Mozambique. Despite public resistance, last year England created an arm within its treasury department devoted to structuring infrastructure-related deals.
Earlier this year, KPMG LLP — another firm that stands to profit from the sale and care of public assets — got ammunition, wittingly or unwittingly, from infrastructure managers. According to a global survey, U.S. respondents have more difficulty financing projects than their colleagues in the rest of the world. The Americans reported that the slow approval process, “excessive” regulatory restrictions, and earmarking hampered stimulus spending.
The problem, of course, is that no one wants to invest in the assets that most desperately need it.
Financiers emphasize all the new infrastructure that will be needed to support population growth. Then they use whatever tragic asset failure that most recently made headlines and our industry's own figures, such as the American Society of Civil Engineers' estimated $2.2 trillion to bring roads and water facilities, airports and railways, up to snuff over the next five years, to focus potential investors on this huge, no-lose opportunity.
The public doesn't want the private sector involved in their assets, but — judging from the kicking and screaming going on as more and more of you attempt to charge for stormwater treatment — they don't want to pay for it, either.
The nation is expected to run trillion-dollar deficits for at least a decade. With many states struggling to balance their budgets, 27 allow private investment in roads.
New or improved, someone's gotta pay.
Stephanie Johnston, Editor in Chief