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.
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 percent of its GDP in transportation infrastructure and Europe about 5 percent, government spending on infrastructure is just 1.7 percent 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.
Jonathan Tisch is chairman of Loews Hotels and chairman emeritus of U.S. Travel Association.