America won't meet its infrastructure needs unless it undertakes a “major cultural change in how it funds projects”, according to a business-led US consultative body.
In a report released as part of Infrastructure Week in Washington DC, the Executive Council on Infrastructure, a unit of the Bipartisan Policy Center, suggests a roadmap to removing the hurdles that discourage private investment into US projects.
The report indicates that “billions of dollars in private capital” potential are left on the table each year because “very few state laws sufficiently enable [PPPs] despite being a fundamental building block to expanding private investment in infrastructure”. Major barriers to private investment identified in the report include the lack of a project pipeline, political uncertainty and permitting risks.
The Executive Council on Infrastructure was formed a year ago by Doug Peterson, president and chief executive of S&P Global, and American Water chief executive Susan Story. Members include CalSTRS chief executive Jack Ehnes.
“We have an extraordinary opportunity in America to combat pressure being placed on our nation's roads, water systems, and energy grid with private capital investments and public-private partnerships,” said Peterson. “As business leaders we must work together with local, state, and federal government officials and community partners to protect our country's economic vitality.”
Using new methods, the council believes that the US could attract as much as $250 billion in private investment into infrastructure over the next five years. This would address the 66,749 structurally deficient bridges, $78 billion in repairs needed annually for public transit, a $62 billion backlog of US projects identified by the US Army Corps of Engineers and the $571 per driver lost each year sitting in traffic.
The council asserts that by waiting to invest in infrastructure just four years, the US would experience $1.2 trillion in increased business costs, $3.1 trillion in lost gross domestic product, $611 billion in additional household costs across the country and the loss of as many as 3.5 million jobs.
The key tenets of the New American Model for Investing in Infrastructure, as the group has dubbed its approach, state that when considering new project undertakings, public benefit should be identified up front; true life-cycle costs, including all associated risks, should be evaluated and accounted for in transparent processes; and public and private sector partners should share all project risks, costs and benefits.
The report recommends implementation of broad PPP-enabling legislation, followed by listing the inventory of all public assets so that true priorities can be identified. It calls on public officials to consider the full range of options for project delivery that are at their disposal, and for new simplified project development and permitting processes. Additionally, it identifies a need to “increase the variety and strength of financial tools available to support project delivery”.
“The challenge before us is enormous, but we have the resources to address it – if we can overcome the barriers that are pushing those resources away,” the report concludes.