‘Meaningful’ federal incentive key to US asset recycling

Australia’s ambassador to the US, Joe Hockey, touted his country’s experience with its ‘asset recycling’ initiative and urged his host to adopt a similar model, calling the current low-interest rate environment a “once-in-a-generation opportunity”.

Hockey added that the US should provide a 20 percent federal incentive – 5 percent higher than the Australian model – to convince states, counties and local municipalities to sell off or lease government-owned assets. The incentive would amount to 20 percent of the sale proceeds that said government entities would reinvest in new infrastructure.

“Frankly, on an asset in an unlisted case, I don’t see a downside,” Hockey said of the Australian experience. Though he acknowledged the tough political considerations, he added: “You can only build infrastructure through hard decisions.”

Hockey’s comments came at a panel on the initiative hosted by the Eno Center for Transportation, a Washington, DC-based think tank. The panel, which also included Eno chief executive Robert Puentes and Transurban general manager Jennifer Aument, agreed a similar scheme could be successful in the US market.

“If we can get a meaningful incentive at the federal level,” Aument said, then the US is “in a situation where the environment would support and position for success a programme like asset recycling”.

Hockey helped spearhead Australia’s scheme in 2014 as the country’s Treasurer. The government earmarked A$5 billion ($4.0 billion; €3.3 billion) of federal funding for its asset recycling initiative and had paid out A$2.2 billion before the scheme wound down last year (an additional A$1.4 billion was, after much dispute, agreed to for Victoria but did not officially come from the ARI).

In talking to state policymakers, Hockey said he encountered much of the same resistance to privatisation that is likely in the US. Selling off assets would be politically unpopular, he recalled, which necessitated an incentive from the federal government. By requiring that money from the sale be reinvested in infrastructure, states such as New South Whales were able to shift the conversation to the new roads, metro lines and bridges that would be built.

“Politically, if you said to me I'd be able to sell LaGuardia airport and build 100 new schools in the area and build three new hospitals, I could sell that,” Hockey noted.
The possibility of the US emulating Australia gained steam after the election of President Donald Trump, with officials including Vice President Mike Pence reportedly supporting the concept. But prospects of such an initiative took a hit this month when an infrastructure advisory council led by two of its proponents in the administration, Steve Roth and Richard LeFrak, was scrapped.