Opportunities Growing for Experts in Infrastructure Finance
Hillary Clinton has announced a plan to create three million new jobs through investments in the nation’s infrastructure, according to MarketWatch. Speaking at the Pennsylvania AFL-CIO Convention in Philadelphia, Clinton called for a $10 billion emergency repair fund. “I’ll fight for every single job in America and create millions of new, high paying jobs that can’t be outsourced,” said Clinton. “We’re trying to run today’s economy on yesterday’s infrastructure and we’re jeopardizing tomorrow’s prosperity. So I will rebuild America by rebuilding, repairing and modernizing our infrastructure.”
Unfortunately, current federal financing methods do not to meet the demands of repairing and renewing the nation’s crumbling infrastructure. But politicians and investors alike are pushing for new methods in which the federal government can finance infrastructure more effectively, with a combination of public and private capital. Already, investors around the world are seeking out opportunities in infrastructure. As a result, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates are those with experience in infrastructure transactions and environmental engineering.
Chris Dodd and Chuck Hagel, introduced The National Infrastructure Bank Act, back in August 2007. The legislation establishes the National Infrastructure Bank, which as an independent entity of the government tasked with evaluating and financing capacity-building infrastructure projects.
In the summary of their bill, Dodd and Hagel cite the following stark statistics:
- The American Society of Civil Engineers says the current condition of our nation’s major infrastructure systems earns a grade point average of D.
- The Federal Transit Administration says $21.8 billion is needed annually over the next 20 years to maintain and improve the operational capacity of transit systems.
- The Department of Housing and Urban Development reports there are 1.2 million units of public housing with critical capital needs totaling $18 billion.
- According to the Texas Transportation Institute, the average traveler is delayed 51.5 hours annually due to traffic and infrastructure-related congestion in the nation’s 20 largest metropolitan areas.
- The Federal Highway Administration says $131.7 billion and $9.4 billion is needed respectively every year over the next 20 years to repair deficient roads and bridges.
- The Environmental Protection Agency says $151 billion and $390 billion is needed respectively every year over the next 20 years to repair obsolete drinking water and wastewater systems.
Felix Rohatyn, Senior Adviser to Lehman Brothers, and Warren Rudman, former U.S. Senator from New Hampshire are proponents of the National Infrastructure Bank. The FT published a report by the two which concludes that infrastructure is America’s best investment.
The report contends that facing a troubled economy, a program to improve the country’s decaying infrastructure could not only add jobs, but restore a general sense of confidence in the economy. Rohatyn and Rudman suggest treating the renewal of roads, bridges, schools, water pipelines, ports, air control systems, dams and railroads as investments - not just budget expenditure.
According to their plan, Congress would adopt a capital budget for infrastructure financing. In the meantime, Congress should create a federal entity such as Dodd and Hagel’s National Infrastructure Bank - that would more effectively finance infrastructure projects of substantial national or regional significance using public and private capital, including international capital.
Rohatyn and Rudman state, “The American Society of Civil Engineers forecasts a total infrastructure investment need of $1.6 trillion over the next five years. The infrastructure bank could be an important factor in support of such a program. To compete in the global economy, improve our quality of life and raise our standard of living, we must rebuild public infrastructure.”
Renewed government confidence in privatization and could create new avenues for committed capital waiting to be invested in infrastructure, according a recent study conducted by Ernst & Young LLP. The report states that there is more capital available to invest in infrastructure deals than there are projects, but that imbalance could soon reverse and build to nearly $1 trillion a year in new and secondary market infrastructure transactions worldwide. Ernst & Young also projects $240 billion to $360 billion annual private investment in new infrastructure projects.
Dale Anne Reiss, Ernst & Young’s Global Real Estate Director, concludes, “Governments with the political will and a coordinated approach to building and preserving key infrastructure will attract the most attention from private investors and be offered the best terms, according to the report. “In many cases private investors bring tremendous experience in managing large scale projects, potentially at lower costs than public agencies.”
