{"id":303,"date":"2024-12-05T16:12:21","date_gmt":"2024-12-05T17:12:21","guid":{"rendered":"https:\/\/durkins.net\/?p=303"},"modified":"2025-01-08T17:33:50","modified_gmt":"2025-01-08T17:33:50","slug":"change-leader-opportunities-in-u-s-infrastructure-funding-the-massive-capital-gap","status":"publish","type":"post","link":"https:\/\/durkins.net\/index.php\/2024\/12\/05\/change-leader-opportunities-in-u-s-infrastructure-funding-the-massive-capital-gap\/","title":{"rendered":"Change Leader: Opportunities In U.S. Infrastructure: Funding the Massive Capital Gap"},"content":{"rendered":"

Americans who believed we solved our infrastructure problems with the 2021 Bipartisan Infrastructure Law are in for a rude awakening.<\/strong><\/em> The fact that Congress is being asked for billions to rebuild the collapsed bridge in Baltimore makes it clear that this downpayment makes only a small dent in the impending safety and logistics crisis facing the United States. <\/p>\n

With trillions of dollars of repairs and upgrades needed to address critical project demands and governments at every level gasping for financial resources, it\u2019s a good time to look at private capital as a major part of the solution. <\/p>\n

Some Context<\/strong><\/p>\n

The United States didn\u2019t create its infrastructure with long-term maintenance in mind. While the federal government financed the construction of the interstate highway system, it failed to establish a mechanism for its long-term maintenance. The Highway Trust Fund offers some money toward repairs, but through time it has repeatedly run dry, proving itself insufficient for the scale of the need. <\/p>\n

While other countries have developed sinking funds to maintain roads, bridges, schools, government facilities, water and power utility systems, and other infrastructure, the United States largely lacks any cohesive funding effort. Americans perceive their use of infrastructure as largely free. Therefore, a critical component driving the growth of our economy, our basic needs, the intelligence of our students, and our connectedness as a nation is taken completely for granted\u2014and is completely without funding. Instead of dedicating a portion of the economic gains from past infrastructure investments to its maintenance, the United States has allowed this infrastructure to decay significantly. Coming into our second full century of mass automobile ownership, our finite systems have been treated as if they\u2019ll last forever.<\/p>\n

A Major Crisis<\/strong><\/p>\n

The funds simply don\u2019t exist in our current government to fix the scale of problems with our infrastructure. Despite the considerable attention and praise given to the infrastructure bill in Washington, it\u2019s not surprising that many believe the issue has been resolved. However, the spending undertaken falls far short of what\u2019s needed. Of more than 600,000 U.S. bridges, roughly a fifth need significant repair. With repair costs that average $1.5 million to $10 million or more, fixing every bridge in the United States would require billions of dollars. The latest infrastructure bill allocates less than $100 million per state per year for the next five years for bridge repairs\u2014a significant amount, but insufficient to solve the problem. It\u2019s not just bridges. There are roads, port facilities, school buildings, electric grids, wastewater facilities, freshwater delivery systems and more all facing similar states of disrepair. Just bringing all U.S. school buildings up to modern building codes, for instance, would take an estimated $568 billion.<\/p>\n

Governments Need Capital Infusions<\/strong><\/p>\n

This is where private investors have been stepping in to help. Private infrastructure is increasingly becoming the most-viable option for states and localities to rapidly address their infrastructure needs without miring their own governmental unit in debt. <\/p>\n

Private infrastructure capital allows governments to utilize funds from private investors to cover the costs of the repair or replacement of infrastructure projects, shifting their scarce resources to other community needs. Similar to private equity taking ownership in a business, private infrastructure purchases or leases ownership of an infrastructure asset and allows investors to charge user fees or rents to earn a return on their capital; in effect asking those who use the assets to pay for them.<\/p>\n

The big difference from private equity, however, is that the goal of private infrastructure isn\u2019t maximal return or growth by any means necessary. There is generally an option for a future governmental buyback of the asset, and parameters around future user fees and tolls. <\/p>\n

Structured correctly, private infrastructure is a win-win for governments and investors. Communities get safe, updated community buildings, electrical grids, schools and bridges. Communities experience a renewed level of local investment and job creation with the modernization of their infrastructure. And investors earn a steady return. Upgrade quality and costs are managed to exacting standards to minimize risk\u2014albeit of different types\u2014for users and investors alike. <\/p>\n

Certainly, whenever you talk about private capital flowing toward public goods can bring some level of controversy and pushback from the public and special-interest groups. That\u2019s caused wariness for many municipalities in their engagements with private investors. Nobody likes paying user fees (though modern tolling systems remove the irritating delays from the process), but safety, choice and convenience of modern infrastructure have a way of ameliorating those concerns in private infrastructure projects.<\/p>\n

Other than our citizens themselves, nothing\u2019s more vital to the efficient functioning of America\u2019s economy than our infrastructure. And we\u2019re up against a growing crisis without the financial means to solve it. For savvy investors and effective government bodies, private infrastructure offers a win-win solution that will grow in acceptance and volume in coming years.<\/p>\n

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About Bob Hellman<\/a><\/h3>\n

Bob Hellman is the CEO of American Infrastructure Partners; email: bhellman@american-infrastructure.com.<\/p>\n

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