Editor's Choice

TOLL-ROAD TITILLATION

Infrastructure has an image problem: most think it on the grey side of dull. And we’d like to salute Pennsylvania Governor Ed Rendell for trying to change that. Rendell has of late been quoted saying that infrastructure “is the sexiest word in the English language” – a bold assertion, given some other words we can think of but daren’t print.

In fact, most Americans tend to glaze over when political talk turns to privatising toll roads and updating the power grid. They’d rather debate how best to fi let AIG executives if they’re talking about fi nance. But Rendell’s rhetoric is just the marketing exercise that infrastructure needs to get the public behind some important policy initiatives.

We certainly prefer his approach to Rick Bosetti’s. In a recent speech, the mayor of Redding, California, highlighted the importance of investing in assets that underpin economic and social progress. But then he blew it, by adding that “we’re talking about infrastructure – and I know that isn’t the sexiest word in the English language.”

MANY HAPPY RETURNS

While Ed Rendell attempts to sell infrastructure as being “sexy”, California governor Arnold Schwarzenegger has a more family-friendly message: infrastructure makes you happy.

More specifically, Schwarzenegger, appearing last month on NBC’s “Meet the Press” alongside fellow infrastructure investment advocates Rendell and New York City mayor Michael Bloomberg, said that public-private partnerships lead to pandemic felicity. Responding to a question about private equity and hedge funds potentially helping municipalities build infrastructure, Schwarzenegger said, referring to the Canadian province with a history of PPP: “When you look at British Columbia or other places where they have a public-private partnership… everyone is happy. Businesses are happy, the people are happy, labour is happy, the politicians are happy. I mean, everyone is happy. We want to do the same thing. The United States should copy that kind of a principle so that you can go out there and build.”

SNIFFING NONSENSE

The UK’s Liberal Democrats have always tried to hog the middle ground,
as you might expect of a centrist party. And until recently that was their policy over the private finance initiative. Jolly useful, they admitted, but we do need to make sure it’s value for money.

That all changed at the start of March, when their Shadow Chancellor Vince Cable went on the attack, sniffing blood as PFI schemes stalled for lack of credit. “It is now very clear that PFI has largely collapsed as a mechanism for funding infrastructure,” he stormed. “This was a dishonest system of accounting, designed to hide taxpayers’ liabilities… Rather
than trying to give the kiss of life to PFI, the Government should simply accept that these are core public investment commitments.”

So Mr Cable thinks the government should give up on PFI and fund infrastructure projects directly through taxation. He also thinks the fi scal defi cit is out of control, and so the government should spend less. Is there a contradiction there, or just a bit of political opportunism?

A DIG AT 'SHOVEL-READY'

Unlike infrastructure projects, political spin moves at lightning speed, as evidenced by the rise and fall of the term “shovel-ready”. This policy jargon was brought to the fore by President Obama. He began using it to denote projects that could start construction within 90 days, and therefore merited some of the $90 billion set aside for infrastructure. Talking heads began repeating the term ad nauseum when discussing infrastructure investment. But now the backlash has begun.

Many engineers and other advocates for infrastructure development say the 90-day screen may end up killing important, long-term projects while green-lighting moribund patch-up jobs. Political pundits seem already to be sensing the rising cynicism. Jared Bernstein, an economic advisor to Vice President Biden, recently appeared on MSNBC to respond to a tirade from market commentator Jim Cramer. He called Cramer’s argument “shovel-ready nonsense”.

Further evidence of cynicism – when told that we would be launching a magazine about infrastructure, one wag said: “They’re handing out so much cash for infrastructure these days, I’m thinking of standing on the sidewalk with a cup and a sign that says ‘shovel-ready’.”

HOLLYWOOD MEMORIES

Babcock & Brown, the Sydney infrastructure specialist founded in 1977, is now in voluntary administration. Its demise is still under scrutiny, but according to our sources (see p. 33), Babcock enjoyed a partnership culture that encouraged creative thinking but lacked a rigorous risk-assessment infrastructure.

A little-remembered Babcock joint venture now seems indicative of a fairly adventurous company culture. In 1986 the firm struck a joint venture with Japan’s Nomura, largely to syndicate deals to Japanese investors. In addition to pursuing US real estate and equipment leases, Nomura Babcock & Brown launched a fi lm financing platform. This syndicated to Japanese investors. These investors had an early hit with 1992’s crazed-nanny classic “The Hand That Rocks the Cradle”. The four other fi lms fi nanced by the joint venture (according to IMDB.com) are not as celebrated. “Terminal Velocity” stars Charlie Sheen as a maverick skydiver up against the Russian mob; of “The Gun in Betty Lou’s Handbag”, one critic wrote, “Death by mediocrity”; “The Air Up There” is a “mildly entertaining” tale starring Kevin Bacon as a white basketball recruiter searching for talent in Africa; and “Roommates” stars Peter Falk as an ageing Pittsburgh baker who, according to one reviewer, is “smothered in a mutating makeup job that calls ghastly attention to itself”.

Babcock’s ties with Nomura were dissolved in 1998. By 2008, it was clear that Babcock’s harshest criticism was not going to be confined to its brief Hollywood career.