With Congress back in Washington, taking action on a long-term
transportation bill is now at the top of the agenda. But when it comes to
fixing our nation's crumbling infrastructure, Washington is "just out of
money," House Majority Leader Eric Cantor explained in delaying a recent
vote on the $109 billion legislation. But what if the answer -- and the
dollars -- could be found outside the Beltway? Across America, innovative
public-private efforts are showing our nation's leaders not only how to
upgrade aging infrastructure, but, more importantly, how to pay for it.
No component of our infrastructure has suffered more than aviation.
Consider New York City.
Last summer, the Port Authority, which owns the region's three major
airports, delayed plans to rebuild LaGuardia's Central Terminal Building
due to budget constraints. When that terminal opened nearly 50 years ago,
it was designed to handle 8 million passengers per year traveling on a
generation of smaller airplanes. In 2011, the terminal was flooded with
over 24 million passengers on larger jets that struggle to navigate its
tight gates.
Rather than bow to an empty checkbook, the Port Authority issued a bold
call for cost-effective financing solutions to this $3.6 billion
infrastructure challenge. To the surprise of many, 15 bidders lined up
with new ideas, including proposals by investors, airport construction
firms, concession developers and several international companies.
The Port Authority is already planning on seeking similar ideas to upgrade
Newark's terminal -- a move that could ease delays nationwide and spur
economic growth in the region. Today, a traveler arriving at any of the
region's three major airports stands a greater than one in three chance of
being late. These delays cascade through the air transportation system; in
fact, nearly 75 percent of delays nationwide are attributable to problems
originating in New York airspace.
Flight delays don't just inconvenience travelers, they also impose huge
economic costs. A study by the Partnership for New York City found that
delays at JFK, LaGuardia and Newark cost the regional economy $2.6 billion
in economic losses due to airport congestion and delays. By 2025, the
study projects a cumulative loss of $79 billion, including 5,600 full-time
jobs that will not be created, $16 billion in lost output and $5.5 billion
in lost wages.
Can innovative thinking and creative private sector involvement overcome
partisan politics, wary taxpayers, and over-stretched government budgets?
There is some reason for optimism.
Private capital is a largely untapped source of infrastructure funding.
One study released in August 2011 estimated $250 billion in private capital
is available for infrastructure investments, including funds from some of
America's most prominent investment banks and private equity firms.
Through public-private partnerships, these funds could be leveraged to a
very promising $650 billion -- about $225 billion more than President Obama
proposes in his 2013 budget.
In Chicago, government and business leaders have teamed up to establish the
Chicago Infrastructure Trust, recently launched by Mayor Rahm Emanuel and
former President Bill Clinton. Private investment firms have made an
initial pledge of $1 billion for public infrastructure projects, which
could serve as a model for future infrastructure modernization efforts.
In addition to private investment firms, nearly 50 pension funds with $38
billion in capital have also expressed an interest in infrastructure
investment.
Attracted by low volatility and steady returns from big assets, the
California Public Employees' Retirement System (CalPERS) recently announced
it planned to invest $4 billion in domestic infrastructure projects. Other
funds are establishing new infrastructure allocations or adding to existing
investments, including the Oregon Investment Council and Alaska Permanent
Fund.
The urgent economic need to invest in infrastructure, as our competitors
have been doing for decades, has united the strangest of bedfellows -- the
U.S. Chamber of Commerce and the AFL-CIO -- behind a plan for a national
infrastructure bank that would leverage traditional public funding with
private investment to pump billions into infrastructure.
When it comes to meeting America's infrastructure challenge, it's time to
look beyond the Beltway. While China currently invests about 9% of its GDP
in transportation infrastructure and Europe about 5%, government spending
on infrastructure is just 1.7% in the U.S.
In order to catch up to our competitors we need to stop waiting for federal
funds that may never come. Instead, government and the private sector
should explore solutions that can address urgent infrastructure needs and
drive economic growth. By relying on public-private collaboration,
innovation, and investment, America may still be able to meet this
challenge -- and even pay for it.