The final word

After three years covering the US infrastructure market, our Senior Reporter takes stock of the progress made and lessons learned in her last Week in Review.

Watching a classic 1980s movie featuring the streets of New York, I was reminded of an old joke: “You know you’ve crossed the state line into New York by the potholes in the road.” I also realised that the state of New York highways hasn’t changed much – certainly not for the better – in these last 30 years. The same can certainly be said of the city’s subway system as well as Penn Station – one of the busiest commuter hubs in the country, where dumpsters are strategically lined up on rainy days to catch the water seeping through the ceiling.

While these examples are specific to the Empire State, they could just as easily apply to other parts of the country. Last week, Fitch issued a note warning that “US transit woes will continue until funding is clear”. The ratings agency went on to say: “Maintenance problems that halted two of the US’s largest transit systems will likely spread to other systems unless funding needs are addressed and adequately managed,” adding that long-term planning will help manage maintenance and capital requirements. The two systems are Washington DC’s metro and Philadelphia’s transit system.

What has changed since the 1980s are public finances that are more constrained and public-private partnerships being increasingly used to deliver infrastructure projects. When I joined Infrastructure Investor in May 2013, one of the comments that I heard repeatedly was what an exciting time this was to be covering US infrastructure, with investors and developers alike waiting for P3s to take off. Over the past three years, we’ve regularly reported on the progress – or lack of – in the US market. As my tenure at the magazine comes to a close, I believe the two most important obstacles that need to be overcome, and which are in fact related, are politics and education.

Back in 2013, Infrastructure Investor recognised Virginia as the leader in the US P3 market. At the time, Virginia had an impressively robust pipeline of projects and since then has successfully delivered a number of them, including the I-495 and I-95 express lanes. Today, Virginia, in our opinion, is a leader not for the projects it has lined up, but for the reforms Governor Terry McAuliffe and his administration have put in place.

Virginia’s governor along with the Commonwealth Transportation Board and the state’s department of transportation have established criteria based on actual needs in determining which projects take priority and ensuring that the list isn’t subject to change depending on who’s in office.

The redevelopment of New York’s LaGuardia Airport, which at $4.1 billion is currently the largest P3 in the US, is an excellent example of why depoliticising infrastructure is so important. Starting in 2011 when the Port Authority of New York and New Jersey issued a Request for Information, procurement has taken five years to complete. But as recently as last April, the project’s fate seemed uncertain when the Port Authority’s board members representing New Jersey threatened to withhold their approval unless the agency’s New York representatives agreed to a bus terminal estimated to cost between $10 billion and $15 billion.

Politics have also played a role in North Carolina’s I-77 project, which the state legislature tried to cancel months after construction had already begun. The attempt, which ultimately failed, was misguided not only because it would cost the state more to cancel it than to proceed, but also because it sought to “terminate the agreement for tolling I-77”, a completely inaccurate claim since I-77 is not being tolled. And this is where education comes in. If the public knows and understands how P3s work, there will be no room for useless political posturing.

While the US P3 market has not progressed as quickly as many would have liked or hoped, it will continue to evolve and mature and attract investors’ interest and capital. But how it progresses and at what pace will make all the difference in ensuring that the country stays competitive and that its residents have the infrastructure they deserve.

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