When the U.S. Congress in December passed its first long-term transportation bill in 10 years, business leaders and mayors thought of it as win for the country. U.S. Transportation Secretary Anthony Foxx, a former mayor himself, noted there was “more left to do” – but the renewed support for infrastructure was still praiseworthy.
This past week we saw in a new report by the American Society of Civil Engineers that there is indeed a lot of unfinished work. Our nation, the report tells us, is still running a substantial infrastructure deficit. Our national investments in infrastructure through 2025 are now on pace to fall $1.4 trillion short of what is needed.
{mosads}ASCE’s calculation includes more than our transportation system – it also factors in our power grids and water systems. Yet it does not include other aging assets such as our industrial base or buildings.
Meanwhile, as our population grows and more people move into urban areas, cities are honing in on smarter infrastructure. Mayors are looking towards the future and envisioning transportation systems, electric grids and buildings that exploit the latest technologies and advances in software. All of these, they are seeing, are ways to lower carbon footprints, get more reliable power, solve traffic nightmares, or increase rail and bus services.
Infrastructure matters to companies, too. Without our road and rail connections, Siemens would have no way to get our goods and services to our customers. In fact, in recent years, Siemens has often had to build critical infrastructure ourselves so we could open up new U.S. facilities, from rail spurs in Fort Madison, Iowa, and Charlotte, N.C., to new off ramps in Hutchinson, Kan.
But companies must do more in the 21st century than lay down concrete and steel or build new transmission lines. The private sector should also increase its role in supplementing public expenditures.
One option, especially, is to execute more public-private partnerships. P3s, as they are often called, can offer difficult projects a path forward. They do this by creating agreements where companies and governments work together to finance the endeavor, with the additional benefit of ensuring public dollars are invested efficiently.
But compared to countries such as the United Kingdom and Canada, the United States isn’t leveraging nearly as many P3s to fund projects. The sticking point has been that, until recently, many states did not even allow P3s, nor was there any type of center of excellence in the federal government. These factors and the uncertainty surrounding federal infrastructure investment created an atmosphere in which potential private lenders saw these projects as too complex and risky to invest in.
But now more states are authorizing P3s. And the federal Build America Transportation Investment Center now serves as a single point of contact for states, municipalities and project sponsors to explore how to access private capital in P3s. Specialist financiers, in turn, are providing risk analysis and solutions that can help lenders commit to an investment decision. The foundation now in place, according to Moody’s, gives the United States the potential to be the largest market for P3s in the world.
P3s, at the outset, are like puzzles. Project sponsors and lenders have to put the pieces together. But the more of these P3s we successfully assemble, the more we can set our sights on closing the investment gap and building the infrastructure we need tomorrow. All of us – including private sector companies – have a role to play in making this work.
Eric Spiegel is the President and CEO of Siemens USA.