Push for PPPs Heats Up in 2009
President-elect Barack Obama is laying the groundwork for a giant economic stimulus package - up to $850 billion over two years - in his first test of legislative give and take with Congress, according to the AP. The report states that Obama’s economic advisers are currently assembling a recovery plan and already reaching out to lawmakers in an attempt to avoid a filibuster in the Senate. The AP adds the package should be on Obama’s desk, awaiting his signature, the day he takes office on January 20th. The AP quotes Senate Majority Leader Harry Reid, D-Nev., as saying, “We would hope within the first 10 days to two weeks that he’s in office, that is after Jan. 20, that we could pass the stimulus plan. We want to do it very quickly.”
Obama’s spending plan would attempt to meet his goal of saving or creating 2.5 million jobs over two years. Obama has indicated the features of his plan would include spending on roads, bridges and other infrastructure projects, building and renovating schools, as well as adopting environmentally friendly technologies. And central to the execution of his plan are public-private partnerships (P3s) or PPPs.
“Obama’s Department of Energy will enter into public private partnerships to develop five “first-of-a-kind” commercial scale coal-fired plants with clean carbon capture and sequestration technology,” according to “New Energy For America” on the Obama/Biden Website. The NYT also reported on December 21st, “The president-elect will also propose to direct some money to public and private partnerships for major projects like a national energy grid intended to harness alternative energy sources such as wind power.”
The push for PPPs, however, is not new. A growing number of 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 or PPPs.
Back in 2000, 73 Democrats, including John Kerry, Joe Lieberman, Janet Napolitano, Evan Bayh, Tom Vilsack And Kathleen Sebelius, agreed in The Hyde Park Declaration: A Statement Of Principles And A Policy Agenda For The 21st Century, that “Many public services can be delivered on a competitive basis among public and private entities with accountability for results. Public-private partnerships should become the rule, not the exception, in delivering services.”
More recently, Senators Chris Dodd and Chuck Hagel, introduced The National Infrastructure Bank Act, in August 2007. The legislation would establish the National Infrastructure Bank - an independent entity of the government tasked with evaluating and financing capacity-building infrastructure projects.
The bill would effectively create a public-private partnership agency tasked with expanding the role of the federal government in creating massive public works projects. The bank would encourage local public agencies to “partner” with private for-profit entities to develop projects worth at least $75 million each. The intent is to leverage the investment through bonds and private sector participation.
While in the Senate Barack Obama co-sponsored the bill, which is now Included in his plans for rebuilding the nation’s infrastructure. In a recent Op-Ed, NYT Columnist, Bob Herbert, wrote, “There doesn’t appear to be anything faint-hearted about Barack Obama’s plans to stimulate the economy, which hasn’t come this close to flat-lining since the 1930s. The president-elect’s recovery plan emphasizes job creation, and the path to that end winds through the nation’s long-neglected infrastructure.”
Herbert goes on to say, “The smartest step when it comes to infrastructure would be for the new administration to follow through on the president-elect’s campaign promise to create a national infrastructure bank that would not just raise money and invest in the nation’s infrastructure, but would also bring a measure of coherence to the myriad projects that need to go forward.”
In remarks at the Brookings Institute in June 2008, Sen. Hagel stated, “Public-private partnerships must become a central tenet in our development strategy.” According to Sen. Dodd, “The sheer scope of the problem before us will require the commitment of both the public and the private sector to address … the National Infrastructure Bank will allow the federal government to leverage up to $250 billion from the private sector. Such a partnership between the public and private sectors is the most appropriate way of bringing needed resources to bear to address this national challenge.”
House Speaker Nancy Pelosi also voiced her support for PPPs in her keynote address at the American Public Transportation Association Rail Conference in San Francisco that same month. “Private investment is playing an increasingly larger role in public infrastructure. Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table,” said Pelosi.
Pennsylvania Governor, Ed Rendell who is also Chairman of the National Governors Association, announced in June 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. According to Rendell, the U.S. lags significantly in spending on facilities such as roads, bridges, and passenger rail at 0.6% of GDP, compared with 9% percent in China and 3.5% in the European Union.
Rendell says he 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.”
This past September New York Governor, David Paterson, also made a push for private investment in public infrastructure. In a statement, Patterson said, “I believe the private sector can be a source of innovation, allowing us to increase the value, efficiency and safety of assets like our aging infrastructure system.”
Paterson’s administration announced in October 2008 it would set up a commission to explore ways to privatize public assets, including the lottery system and the Tappan Zee Bridge. The Governor’s office says identifying new ways by which the State finances and delivers infrastructure projects is paramount.
California Governor, Arnold Schwarzenegger, is a staunch supporter of PPPs as a means of urgent economic stimulus. In fact, Schwarzenegger’s administration has now required that Democrats allow an unlimited number of public-private partnerships before he will sign their budget bills. The LA Times reports the projects the administration wants built privately include a $6-billion truck tollway between Los Angeles and Long Beach and the $1-billion replacement of the Schuyler Heim Bridge in the Port of Los Angeles.
Looking ahead…
Executive search firm, A.E. Feldman, contends that Obama’s administration promises to create huge job opportunities in project and infrastructure finance. The firm says infrastructure finance jobs are likely to open up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates have been those with experience in infrastructure transactions and civic engineering. A.E. Feldman also reports the jobs opening up include CEOs and CFOs with proven records of running infrastructure companies.
Are you working in Project & Infrastructure Finance? If you want to grow your career or discuss your company’s talent needs, contact A.E. Feldman’s President, Mitch Feldman today.
