Renewed Push for P3s to Repair U.S. Infrastructure
As prices at the pump continue to soar, funding for U.S. infrastructure is falling. That’s according to the latest report from the U.S. Department of Transportation. A separate report by the American Association of State Highway and Transportation Officials (AASHTO) also finds that at least $140 billion is needed to make major repairs or upgrades to one of every four U.S. bridges. The “Bridging the Gap” report was released just days before the first anniversary of the August 1st bridge collapse in Minneapolis that claimed 13 lives. These reports come as New York Mayor Michael Bloomberg and Pennsylvania Governor Ed Rendell announced they are expanding the “Building America’s Future” coalition - an organization they co-founded back in January with California Governor Arnold Schwarzenegger with the goal of making funding infrastructure projects a national priority.
Rendell says public-private partnerships (P3’s) and imposing tolls on roads are essential to repairing the nation’s infrastructure. While governments around the world, particularly in Europe and Latin America, have shifted the operation and maintenance of public facilities, including airports, roads, ports and bridges, to private entities for decades, such privatization efforts emerged in the U.S. in recent years… and they are expanding rapidly. 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 civic engineering. Additionally, legal jobs are opening up for attorneys with expertise in global project development and complex financial transactions.
Rising Gas Prices Threaten Infrastructure
An unparalleled decrease in driving is crippling the funds available to rebuild the nation’s aging highways and improve mass-transit systems, according to the U.S. Department of Transportation (DOT). A new DOT report shows that over the past seven months, Americans drove nearly 10 billion fewer miles in May 2008 compared to a year ago, continuing a seven-month trend that amounts to 40.5 billion fewer miles traveled between November 2007 and May 2008.
The DOT says facing high gasoline prices Americans drove 3.7% fewer miles in May than they did a year earlier – that’s more than double the 1.8% drop-off seen in April. The rapid shift away from gas-guzzling vehicles means consumers are paying less in federal fuel taxes, which go largely to help finance highway and mass-transit systems. Complicating matter, surging costs for asphalt and other construction materials already are straining state and local transportation budgets, making it more expensive to maintain the nation’s roads, bridges and rail networks. As a result, the DOT says many such projects may have to be cutback or eliminated.
“Less driving means less money for the Highway Trust Fund,” said Acting Federal Highway Administrator Jim Ray. “The status quo cannot and will not work in the 21st century.”
“Bridging the Gap”
The AASHTO “Bridging the Gap” report outlines America’s critical infrastructure challenges. Among the key findings:
- Though typically built to last 50 years, the average bridge in this country today is 43. As age and traffic increase, so does the need for repair.
- According to new data from the Federal Highway Administration, the cost to repair or modernize the country’s bridges right now is $140 billion
- Traffic congestion is a growing problem and a drain on the nation’s economy. The top 10 highway interchange bottlenecks result in an average 1.5 million truck hours of delay each year.
- As construction costs soar, nearly every state faces funding shortages. The price of steel, asphalt, concrete, and earthwork has risen by at least 50% in the past five years, forcing delays of bridge improvements and replacements.
State officials say bridge repairs are just the tip of the iceberg. There is a broad, pressing need for more federal funding to improve America’s crumbling transportation infrastructure. The AASHTO report, however, also points to several solutions to this problem, such as increased investment in transportation at all levels of government, commitment to research and innovation as well as support for a wide range of revenue options such as tolls, tax increases, annual road user fees, bonds…and private investment.
Politicians Pushing for P3s
Pennsylvania Governor Edward G. Rendell, New York City Mayor Mike Bloomberg and California Governor Arnold Schwarzenegger, co-chairs of the Building America’s Future coalition, announced they are urging the Republican and Democratic national committees to adopt pro-infrastructure planks in their party platforms when the national party conventions convene in Denver and Minneapolis-Saint Paul.
Governor Rendell also recently became the new Chairman of the National Governors Association and announced that the organization’s annual “Chair’s Initiative” (which addresses one of the nation’s most pressing public policy challenges) will focus on strengthening infrastructure investment.
“If America is to continue competing in the global economic marketplace, we need an efficient and sound infrastructure. For the past two decades, state and local governments have been picking up more of the tab for infrastructure repair, but we can’t keep it up. America’s infrastructure urgently needs attention. From outmoded ports to crumbling bridges to underinvestment in public transit, we must begin a new era of investment in the systems that support our prosperity and our quality of life,” said Rendell.
He also plans to work with other states to design and implement strategies for smarter, environmentally friendly, more cost-effective infrastructure investment at the state level, including forming what he calls “groundbreaking public-private partnerships.”
In fact, in an effort to help fund an estimated $80 billion in infrastructure repairs in Pennsylvania, Rendell is already evaluating a bid to lease 500-miles of the PA Turnpike system. A consortium led by Spanish infrastructure company Abertis has offered $12.8 billion to lease the PA Turnpike for 75 years. Although the consortium has already named the winning bidder, the Pennsylvania state legislature has yet to approve the deal. Abertis says the contract would make it the largest infrastructure operator in the world with assets in the United States, France, the UK, Latin America and Spain.
A.E. Feldman’s infrastructure finance division is constantly researching industry trends and developments. To inquire about existing and future job opportunities in infrastructure and project finance, the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert infrastructure recruiting team here.
