LOS ANGELES – Infrastructure is the backbone of the nation’s industries, a driver of job creation and crucial for growth. Though reliance on infrastructure is constant, from roads and bridges to ports and power lines, much of the nation’s infrastructure is aging and in dire need of maintenance and upgrading. The need for the work is obvious. Paying for it is the challenge.
Governments at local, state, and national levels are evaluating new projects, and investors are aggressively seeking opportunities that provide solid returns in exchange for the assumption of manageable risks. Attempts to marry investors’ capital to infrastructure projects have been hampered by inadequate policy frameworks and institutional structures at all levels of government.
According to a Milken Institute Financial Innovations Lab® convened earlier this year, solutions exist that can help create effective public-private partnerships to fund work on infrastructure. Among the infrastructure financing solutions explored in detail in the Lab report, “Public-Private Infrastructure Financing Solutions,” released today, are:
- Establishing an infrastructure exchange network
- Creating a national infrastructure council
- Chartering a national infrastructure bank that can move capital into projects
“Based on discussions during and following the Lab, the need for an infrastructure bank remains, despite the creation this summer of the Army Corps of Engineers Water Infrastructure Public Private Partnership Program and other infrastructure initiatives,” says Caitlin MacLean, associate director of Financial Innovations Labs at the Milken Institute. “The new federal initiatives do not fully address the public funding crisis, and they stop short of creating a national infrastructure bank or similar entity that was a focus of the Lab.”
Lab participants agreed that a federal “I-bank” should have a primary mission of attracting capital from the private sector to stretch the decreasing amount of federal dollars spent on infrastructure projects. The government clearly cannot do it alone, and thus the I-bank should focus on leveraging public-sector capital to attract private investment to supplement current budget levels.
“Because infrastructure is one of the most risky investment types, our report highlights the need for a central resource guide for investors, new financing options, and improved clarity around government engagement,” said MacLean. “The momentum toward public-private partnerships is a positive signal for the future of infrastructure financing.”
To read “Public-Private Infrastructure Financing Solutions,” by Caitlin MacLean and Dale Bonner, go to http://www.milkeninstitute.org/publications/view/674.