Brookings panel sees some states adopting 'can-do' infra financing models
By Andrea Riquier
States need to chart a new course when it comes to financing infrastructure projects, requiring not just public-private partnerships(P3s), but the willingness to provide political support and educational outreach to citizens about those deals, said panelists at a 12 July Brookings Institution event, Can-Do States: A New Era for Infrastructure Investment.
Robert Puentes (pictured), a senior fellow in Brookings’ Metropolitan Policy Program, introduced panelists by imagining a growth model for “the next American economy” that is fueled by innovation, driven by exports, powered by lower carbon, and rich with opportunity for the middle class.
Infrastructure is critical to all these components, Puentes said, but the federal government is pulling back on discretionary spending. States are now realizing that “there is no cavalry coming,” and they have to fend for themselves. Some are doing it successfully, Puentes said, and the private sector recognizes that there are a few states in which they can easily do business.
Virginia is one of those states, with an Office of Transportation Public-Private Partnerships within the Virginia Department of Transportation (VDOT). Tony Kinn, director of that office, said his mission statement is “close the deals and grow the business.” He currently has USD 6bn of deals out on the street “with more to come.”
Kinn introduced a theme that other panelists echoed: political support is crucial to getting projects done. The most difficult part of a successful P3 is outreach with the public and the legislature, he said, and argued that most legislatures don’t have a full understanding of P3s.
It is critical to get all kinds of stakeholders involved in outreach, specifically in presenting the projects in a manner understandable to the general public. For example, Kinn said, do not tell people a project will cost a certain amount; explain how much money or gas it will save per day.
Larry Blain, chair of Partnerships BC, a British Columbia organization collaborating with Washington, Oregon, and California to create the West Coast Exchange, an integrated P3 marketplace, agreed with that. All the states participating in West Coast Exchange have political support, which gives comfort to the private sector, he said.
Another common theme addressed by panelists was the need for governmental leadership. Kinn said that in Virginia, the governor and legislature have a belief that infrastructure is key to growing the economy. That enables his office to run as a business and develop projects completely, including by doing all the upfront work such as environmental mitigation, so that when a project goes out to the street, the private sector knows it will get completed.
Margaret Tobin, executive director of the New York Works Task Force, said that Governor Andrew Cuomo had been right to push for the new Tappan Zee Bridge to be built under a design-build structure. While it took longer to get enabling legislation, Tobin said, the bid awarded was USD 1bn under initial engineer’s estimates, and the final project may come in even lower than that.
There are no new sources of revenue for infrastructure, Tobin said. All infrastructure has always been financed by “taxes, tolls, fares, and fees” and always will be. The new innovation is to channel those fund sources via new financing mechanisms. The municipal bond market functions well, she said, but it is a financing tool, not a source of funds.
Kinn echoed that sentiment, saying that there is no more federal funding available, and that citizens need to be educated that there is no free money anymore. For that reason, he views his work as “public private political publicity partnerships,” he said.