Private equity 'ready to do its part' to fix US infra

The American Investment Council said private investment can help address a $4.6trn financing gap for revamping the US's ageing infrastructure.

With infrastructure legislation looming, the American Investment Council, a Washington DC-based advocacy group for the private equity industry, has called on US lawmakers to incentivise private investment in infrastructure.

In a report, the AIC said private funds “flush with capital” can help address the $4.6 trillion financing gap cited from the American Society of Civil Engineers as needed to repair the US’s ageing infrastructure.

With Secretary of Transportation Elaine Chao expecting an outline of infrastructure legislation to be revealed within the coming weeks, the advocacy group said politicians should enact a framework that encourages private investment.

“Given the limitations on federal, state and local spending, the American Investment Council believes that incentivising private capital is the most feasible path to achieve large-scale infrastructure upgrades,” the report stated.

President Donald Trump has proposed a $1 trillion infrastructure plan and has pointed to the private sector part of the way to fund his proposal. Last year, Peter Navarro and Wilbur Ross, two advisors to Trump at the time, released a plan relying heavily on tax credits to encourage private investment.

According to the AIC, capital raised by private infrastructure funds has more than doubled since 2009. In 2016, infrastructure funds in North America raised over $30 billion, increasing the amount of capital available for investment by 33 percent from 2015.

The group said that the private investment model has “demonstrated much success” improving existing infrastructure and developing new projects, and that potential for more investment will increase with new technologies in energy storage, water systems and transportation.

The use of public-private partnerships can also be an effective model for financing US infrastructure, AIC said. P3s support the construction and maintenance of projects without adding to public debt obligations, provide private-sector expertise and reduce public-sector responsibilities around maintain the service.

“With our nation’s debt approaching $20 trillion, the public sector can’t do it alone,” AIC president Mike Sommers said. “That is why private equity is ready to do its part to help solve America's infrastructure needs with smart investments that stimulate economic growth and job creation.”