As with every inauguration day, a new administration brings with it promise of new approaches to old problems.
For investors eager to see a new approach to infrastructure financing by the US government, it's important to seize the moment.
So it's no coincidence that, a day after President Barack Obama took his oath of office, a group of investment banks, infrastructure funds and law firms published a report claiming that private sector capital could help the government create nearly two million infrastructure jobs in the US by the end of 2010.
The figure is based on very bullish assumptions, but it sends the right message in a recessionary environment: infrastructure investment creates jobs.
The report arrives at the figure by assuming that all that private capital dedicated to infrastructure globally – $180 billion – is geared to 60 percent and invested in the US alongside federal stimulus funds.
Why would everyone in the world want to invest all their money in US infrastructure?
“Part of our mission educating lawmakers is that if we don't find ways to attract and pull-in this capital into the US, it is going to go to other regions in the world, and we will see those jobs go to other regions,” explains Rob Collins, head of infrastructure investment banking at Morgan Stanley, one of the firms that is part of the public relations effort.
Collins sees the study as more than just a theoretical illustration about job creation. He hopes that lawmakers eager to learn about infrastructure's power to create jobs will also learn about how they can use concession proceeds to shore up their transportation budgets – like Indiana did when Gov. Mitch Daniels leased its toll road in 2006 for $3.8 billion dollars.
“Governor Daniels has the only fully-funded transportation program in the US,” Collins explains. The lease also created 60,000 new jobs in Indiana.
He admits that, with the project finance markets frozen, the 60 percent gearing assumption is overly bullish. But it's there to send the message to lawmakers that the more capital flows to infrastructure – debt or equity – the more jobs are created.
Perhaps it's a subtle hint to them to expand tax-exempt government infrastructure lending programs, such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) for both brownfield and greenfield projects – a move Collins strongly supports.
Overuse of leverage has been one of the key worries of politicians and regulators opposed to PPPs and long-term concessions, such as House Transportation and Infrastructure Committee chairman Jim Oberstar.
No matter what direction the debate ends up taking, Morgan Stanley and its partners are using a smart strategy of evangelising about the power of infrastructure capital to power job creation at a time when the US employment picture keeps getting bleaker.
It may also have the added benefit of encouraging politicians to learn more about PPPs, concessions and privatisations in general so that we can have a more informed debate. Stephen Harris, an expert on the subject, did his part by writing an guest article for InfrastructureInvestor about it this week.
With a new year, a new administration and a new public relations strategy in place, will 2009 be the year when the US finally opens its doors to infrastructure investors?
One can only hope.