Four takeaways from II’s New York Summit

Trump, PABs, water and Canada were on the minds of investors at our conference last week.

What a difference a year can make. At 2016’s Infrastructure Investor New York Summit, the excitement among investors was palpable for what then President-elect Donald Trump could do for US infrastructure. This year, they seem to be moving on, with or without the man with the trillion-dollar promise.

Here are a few key takeaways from the event.

Investors unfazed

An audience poll found 70 percent of attendees remain optimistic about the future of US infrastructure as a private investment destination. Investors don’t seem fazed that the cause for their excitement last year – Trump’s pledge of a $1 trillion infrastructure bill in his first 100 days – is yet to materialise.

“If we’re lucky, we will have an infrastructure bill a year from now,” Martin Klepper, a former DOT official who recently resigned as the head of the Build America Bureau, said in his keynote speech. He added that the Trump effect has been beneficial so far; two executive orders that curb permitting and regulations should move projects along faster. And the discussion about infrastructure Trump has generated has been “very helpful, even if nothing else happens”.

Fate of PABs

Another frequent topic of conversation at the conference – the fate of private activity bonds – may remind investors they shouldn’t count on support from Washington. PABs are a tax-exempt funding tool allowing state and local governments to build and procure projects for less money, and they could be eliminated in the Republican tax reform bill. A version passed by the House of Representatives cuts them, the Senate bill keeps them. The final tax reform bill is currently being negotiated.

Klepper told Infrastructure Investor it’s likely PABs will be saved and that the White House wants them. “If they are eliminated, it places more need for a larger share of federally subsidised financing,” he said.

Will water be the next airport sector?

One sector in particular garnered attention from attendees: water infrastructure. Awareness is growing among investors of the market potential for utilities. “Out of any of the regulated utility sectors, [water] is by far the fastest growing from a capex perspective,” one panellist noted.

Others said the sector will also require government action to unlock assets, but growing demand and maintenance costs will likely drive opportunity: “There were not a huge number of airport deals in the market, but then once LaGuardia got done, it now seems like there are a dozen or more potential transactions.”

Canadian leadership

Political uncertainty was dominating talk about US markets, but Canada was praised for its stable leadership on infrastructure development. Attendees were eagerly waiting to see how Canada’s new C$35 billion ($27 billion; €23 billion) infrastructure bank will function and what effect it will have on the country’s competitive market.

On a panel comparing North American markets, speakers including Mark Romoff, president of the Canadian Council for Public-Private Partnerships, said the clear direction set by Canada’s central government, versus the mixed messages sent by the US, has been a comfort to investors.