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 administration plans to announce an infrastructure package shortly, targeting a $200 billion federal direct funding injection to leverage approximately $1 trillion in total investment over the next 10 years.
- Project scope includes transportation, energy, water, broadband, and veterans hospitals, with a specific emphasis on rural areas and non-urban regions like the heartland, Midwest, and Sun Belt.
- Eligibility for federal funds requires state and local entities to demonstrate secured own-funding, while public-private partnerships (P3s) are positioned as an alternative funding mechanism rather than the sole recourse.
- Current U.S. infrastructure spending stands at 2.4% of GDP, significantly lower than the 5% seen in European countries or China's 9% peak, with an estimated $4 trillion to $6 trillion gap requiring immediate attention.
- The administration aims to reduce permitting timelines from over ten years to two years or less to eliminate billions in added costs and address modern infrastructure issues rather than historical ones.
- Regulatory reform and risk transfer mechanisms are central to the plan, including the potential transfer of construction, operating, and maintenance risks from the public to the private sector via P3s with concession periods typically lasting 25, 30, or 40 years.
- Financing strategies involve asset recycling, repatriated profits from tax reform, and potential government asset sales, while avoiding direct funding models that could crowd out private capital or increase the deficit.
- Specific mechanisms like TIFIA low-interest loans are utilized to attract private equity, though only 1% of U.S. infrastructure is currently funded through P3s compared to 10% in other advanced nations.
- Institutional investors, such as pension managers, prioritize brownfield assets and jurisdictions with high regulatory transparency, though current mandates often exclude social infrastructure like hospitals due to return constraints.
- The initiative includes workforce development through vocational retraining to prepare workers for hundreds of thousands of good-paying jobs, alongside a commitment to creating transformational projects that drive GDP growth.
- Future operational models may include a non-profit co-op for air traffic control transitioning from radar to GPS, subject to independent governance similar to proposed Canadian infrastructure banks.
- Scalability remains a key driver for investors, who are expected to eventually enter the greenfield space as brownfield risk-return dynamics shift, with a focus on bundling projects to attract capital.