This may sound a bit blue-sky. But these are achievable outcomes. The question is, with stretched budgets and an unproductive atmosphere in Washington, how do we get there?
Private sector participation is going to be crucial to the future of infrastructure investment, both in the United States and around the world. There is a natural partnership here: most governments simply don’t have enough cash for the projects they need, and investors are looking for new sources of return in increasingly difficult and correlated financial markets.
Local governments will also need to work together to attract investment. One of the most effective strategies is to aggregate projects. Whereas investors might not want to invest in—or even know about—a single wastewater treatment facility, they might be quite attracted to a large-scale, multi-site project across region. Aggregation also helps lower costs by consolidating materials and labor, and by fostering a more competitive bidding process, which will help save governments and increase returns to investors.
I participated yesterday in the Treasury Department’s Infrastructure Investment Summit, where we discussed a range of ideas for how to help jumpstart infrastructure investment. The summit is part of the President’s recently announced Build America Investment Initiative, which is taking some important steps to connect investors with infrastructure projects, and working to improve access to federal credit programs. Credit programs—where government funding is leveraged to fund many multiples of private investment—are key to increasing private investments.
These are important initiatives—but investors should push Washington to do more. An infrastructure bank, which would use a core federal investment of perhaps $50 billion, would be able to leverage several hundred billion more in private investment. It’s a bipartisan idea that has sadly withered in today’s Washington atmosphere. But we can’t let it die. It’s this sort of big and bold initiative—and act of confidence by the government—that investors want and need, and which can help unleash the power of private dollars to help propel our economy for the next hundred years.
The opinions expressed are current as of September 2014, and are subject to change. Reliance upon information in this article is at the sole discretion of the reader.