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Betting Big On Infrastructure

This article is more than 6 years old.

When it comes to America’s infrastructure, however much we spend never appears to be enough.

On one level at least, that’s understandable. If you’ve ever been frustrated by flight delays, or if you’ve ever taken your life in your hands on Interstate 95 — the East Coast ‘dodge-em’ track judged to be among America’s most dangerous highways — you’ll agree with those who want to boost spending significantly.

One of those is the American Society of Civil Engineers (ASCE), which issues a “report card” every four years detailing the “condition and performance” of America’s infrastructure, ranging from the national aviation network, which earns a grade of “D” in the 2017 report, to municipal water treatment facilities, which earn a D-plus.

The only category given a high mark in 2017 was rail (B). America’s bridges, ports and solid waste facilities did okay, earning C-pluses. But U.S. dams, inland waterways, levees, public parks, roads, schools, transit systems and drinking water, energy, and hazardous waste facilities all received D grades — some plus, some minus, some solid Ds.

ASCE believes it will take an additional $2 trillion in spending over ten years to expand, replace and repair everything that needs expanding, replacing and repairing. This is above and beyond the significant amounts we already spend.

In fiscal 2016, for example, the federal government spent about $54 billion on transportation-related infrastructure alone, according to Washington, DC’s Eno Center for Transportation. Add in other categories of federal infrastructure spending — as well as state and local expenditures — and the numbers increase significantly.

The White House has indicated it wants to increase infrastructure spending by about $1 trillion over 10 years — half the amount ASCE advocates. But details are sketchy, even in the new fiscal 2018 budget plan, which, according to The Hill, relies on “four key approaches: leveraging private sector investment, ensuring federal dollars are targeted toward transformative projects, shifting more services and underused capital assets to the private sector and giving states and localities more flexibility.”

Of course, the devil always is in the details. As I’ve pointed out before, there’s generally been far too much emphasis in the past on how much is needed and not enough emphasis on how the money is spent. Whether the administration’s four-pronged approach signifies a departure from this, or represents more of the same in new rhetorical packaging, remains to be seen.

Besides, presidential budget proposals may signal what the White House has in mind, but it’s Congress that authorizes the spending and appropriates the money. We have a long way to go before America’s airports, air traffic control system, highways, ports and transit systems are in tip-top shape. And the question still remains: White House wishes aside, where will the additional funding come from with the federal government already some $20 trillion in debt and tax cuts likely on the agenda?

The good news is: We can count on some of it coming from private investors — and I’m not just talking about the handful of companies that build and operate toll roads.

Most Americans probably don’t think of infrastructure as a financial investment, the way they might view a chemical, hotel or soft drink company, but serious investors do—especially institutional investors — and they’re making big bets on infrastructure.

The Blackstone Group, for example, recently announced the establishment of a $40 billion infrastructure fund. The $40 billion funding pool “could lead to $100 billion in total infrastructure investments on a leveraged basis,” Forbes’ Antoine Gara reported.

Another large company, MetLife, already has more than $40 billion invested in infrastructure, according to a recent company presentation to the Federal Advisory Committee on Insurance. Other institutional investors also are betting big on infrastructure.

The reasons are understandable: Infrastructure is a long term investment. Buildings, roads and bridges are built to last. Many of the highways, bridges, airports and other facilities that now need to be updated or replaced were built 50 to 100 years ago. As Dirk Kempthorne, president and CEO of the American Council of Life Insurers, explained last year, speaking for his industry: “Life insurers make long-term promises to our customers and their beneficiaries. Our promises are financed by long-term investments that align with the long-term financing that accompanies most infrastructure investments.”

This is why infrastructure is an attractive investment and why public-private partnerships will help pave the way forward.

Sure, there are pitfalls ahead. But if we get it right, we create a more-efficient economy, a better quality of life, and, as several of my colleagues pointed out recently, millions of new jobs. There’s a lot riding on this big bet.