Infrastructure investors curious about how to crack open the nascent US infrastructure market were today given a simple, four-step path to victory by a veteran of the US Department of Transportation and infrastructure powerhouse Macquarie.
David (“DJ”) Gribbin, a managing director at Macquarie Capital Advisors, with a focus on government relations within its infrastructure business, outlined the strategy in front of about 100 delegates gathered at the New York State Infrastructure Summit.
The first step, Gribbin said, was for market participants to refocus their efforts on counties and municipalities. He commended cities like Milwaukee, Pittsburgh and Los Angeles for their efforts in pioneering public-private partnerships (PPPs), and said that “growing positive examples of PPPs” will be key in getting others to follow so that the market develops critical mass and becomes a viable business.
The US PPP market has been “a series of one-off transactions instead of a business”, Gribbin said. Many of those transactions, like the $3.8 billion lease of the Indiana Toll Road and the $12.8 billion attempted lease of the Pennsylvania Turnpike, have been highly visible state-level transactions with hundreds of decision-makers – a factor which makes them difficult to pull off, Gribbin said.
Secondly, he advised the market to “refocus our pitch from the money to improving scope, faster delivery and improved service”.
He said the strategy of putting money on the table and pushing for legislative approval – successful in Indiana – didn’t work very well in Pennsylvania. Pitching benefits other than money could serve as a remedy since the true value of PPPs to the public sector resides in their ability to save time through efficient delivery, Gribbin said.
Thirdly, the market needs to prevent federal overreaction to concerns over the use of PPPs. In recent weeks, for example, senators Jeff Bingaman and Charles Grassley unveiled dual legislation that would cut subsidies for roads that have been leased by private investors and the states that lease them, effectively disincentivising those kinds of transactions.
“I think that’s the wrong direction to go. We should provide incentives,” Gribbin said.
Finally, he said the market needs to “educate, educate, educate”. PPPs are difficult transactions, and the market needs to do its part to teach the public sector how to successfully execute them.
“These are not cookie cutter transactions,” Gribbin said, likening PPP deals instead to individual dinners tailored to clients’ palettes.
Gribbin rejoined Macquarie in February after a two-year post at the Department of Transportation, where he served as general counsel to the Secretary of Transportation under former President George W Bush.
Gribbin also served in the department from 2003 to 2005 as the chief counsel to the Federal Highway Administration prior to joining Macquarie for the first time.