Conference Presentation, Panel
The Coming U.S. Infrastructure Boom
Milken InstituteMichael Burke, André Bourbonnais, Reed Cordish, Susan Gray, Terry McAuliffe, Elaine Chao, Mike Milken
- The Trump administration's infrastructure proposal aims to leverage $200 billion in direct federal funding to catalyze $1 trillion in total investment over the next 10 years.
- Current infrastructure spending is composed of 16% federal funds and 84% state, local, and private investment; the administration intends to use federal dollars as an incentive rather than a direct replacement.
- To access new federal investments, state and local entities must demonstrate they have secured independent funding for their projects.
- The administration plans to include energy, water, broadband, and veterans hospitals within the scope of the infrastructure package, moving beyond traditional transportation.
- A critical component of the proposal involves regulatory reform to shorten the project approval process from over 10 years to 2 years or less.
- Secretary Chao stated that the regulatory process is responsible for delays that add billions in extra costs and that streamlining it could also improve environmental outcomes.
- The proposal envisions an increased role for public-private partnerships (P3s) by removing legal bans that currently prevent their use in many municipalities and states.
- Governor Terry McAuliffe noted that 30 states have P3 legislation, but only 10 have executed projects, with Virginia, Florida, Texas, and California leading the sector.
- Virginia's current transportation funding gap is $10 billion, as the state collects $45 billion from gas taxes but spends $55 billion.
- McAuliffe highlighted a $2.4 billion project for Virginia's most congested road (Route 66) where the private sector bid under the state's estimate, resulting in the state paying the private sector $500 million with zero taxpayer cost for construction.
- The Atlantic Gateway Project in Virginia secured $165 million from the federal government, $700 million from the state, and $530 million from private equity to fund 18 miles of express lanes and new railway.
- McAuliffe reported that the U.S. spends 2.4% of its GDP on infrastructure, compared to 5% in Europe and up to 9% in China at peak levels.
- Reid Cordes (White House) emphasized that fixing the permitting process is a prerequisite to attracting global innovators like Elon Musk for future infrastructure solutions.
- Susan Gray (S&P Global) cited a Pennsylvania model where 500 structurally deficient bridges were bundled into a single transaction to attract private financing and lock in long-term maintenance contracts.
- Andre Bourbonnais (PSP Investments) noted that institutional investors currently hold only 1% of U.S. infrastructure assets funded via P3s, compared to 10% in advanced countries like Canada and Australia.
- PSP Investments prioritizes brownfield projects over greenfield developments due to their mandate to maximize returns without undue risk and their reliance on transparent historical cash flows.
- Bourbonnais and Gray suggested that an infrastructure bank must operate independently from government direction to be effective, with a clearly defined mandate regarding risk transfer.
- The administration is exploring multiple revenue streams for infrastructure, including tax reform proceeds, repatriation of foreign profits, and the potential sale of government assets.
- Secretary Chao clarified that the Department of Transportation already functions as an infrastructure bank through TIFIA and RRIF loan programs, though these are not universally recognized as such.
- The proposal includes a workforce development component to retrain American workers for advanced manufacturing and infrastructure jobs, aligning with the President's goal to return manufacturing to the U.S.
- The administration rejected the "shovel-ready" approach of the 2009 stimulus in favor of a "fast-track" permit process designed to enable both immediate and long-term transformational projects.
- Secretary Chao advocated for the privatization (or restructuring as a non-profit co-op) of the air traffic control system, separating operational management from federal safety regulation to modernize from radar to GPS.
- The President's plan faces political challenges regarding "pay-for" mechanisms, requiring careful strategy to address opposition to tax hikes or spending increases.
- Rural infrastructure projects will rely heavily on federal funding because they lack the user-fee revenue streams necessary to attract private capital in high-density urban environments.