Obama Shifts to Urge Private Investment in Roads, Bridges
July 17, 2014 | Bloomberg Businessweek
Stymied by Congress in passing a multiyear solution for transportation funding, President Barack Obama is looking to private-sector companies to help fix roads.
Speaking beside a project to repair a closed interstate highway bridge in Wilmington, Delaware, Obama called for making it easier for states and local governments to access private capital for roads, bridges and other infrastructure.
“So far Congress has refused to act,” said Obama, who criticized lawmakers for failing to fully fund federal infrastructure projects through the Highway Trust Fund . “I’m going to do whatever I can to create jobs rebuilding American on my own.”
Obama briefly addressed at the start of his remarks the crash of a Malaysian Airlines plane in eastern Ukraine, calling it a “terrible tragedy” and saying U.S. authorities are in touch with their counterparts in Kiev. He made no mention of reports in Ukraine that the aircraft was shot down by pro-Russian separatists.
The focus on private money for road projects marks a shift for the administration, which had previously resisted efforts to seek commercial resources for highways and other pieces of the country’s transportation system. The result may be more tolls for drivers as companies look to make profits by operating roads and bridges.
“There are lots of investors who want to back infrastructure projects because, when it’s done right, they then get a steady, long-term investment,” Obama said. “They get a steady return.”
States and local governments will benefit by the U.S. government playing “matchmaker” between them and private-sector investors, he said.
“If there isn’t really much hope of getting a significant increase in the fuel taxes at the federal level, the least Congress and the administration can do is give the states more tools with private financing,” said Bob Poole, director of transportation policy at the Reason Foundation, a free-market research group based in Los Angeles.
In the past five years, the 30 largest infrastructure investment firms have raised a combined $148 billion, he said in a March report citing data from “Infrastructure Investor.”
According to the same analysis, last year around the world, investors put $33.6 billion into infrastructure investment funds. That’s down from the 2007 peak of $39.7 billion, before worldwide credit access shrunk and the U.S. economy entered a recession.
“We have trillions of dollars on the sidelines internationally that could be put to work,” U.S. Transportation Secretary Anthony Foxx said today on a conference call with reporters.
The president’s trip today coincides with an announcement that the Department of Transportation that open a center to expand public-private partnerships, strengthen relationships between state and local governments and investors, and improve access to federal credit.
Economic conditions are ideal in the U.S. to revive a push for private-sector investment in transportation, said Tyler Duvall, a principal with McKinsey & Co. Inc. who was a U.S. assistant secretary for transportation policy during the George W. Bush administration.
“They’ve probably done a lot of outreach to a lot of investors who say they want to get into the U.S. market,” Duvall said in a phone interview. “It’s exactly what these long-term investors have wanted for years.”
He cited access to credit, the demographics of the U.S. and a stable economy and legal environment.
Obama made today’s announcement less than three years after his administration revoked a $1.5 million grant to Ohio, which wanted to study turning over operations of the Ohio Turnpike to private enterprise.
The initiative mirrors a push by Obama’s predecessor Bush, who, before the recession, advocated for more private investment in transportation. He considered privatizing the air-traffic control system and had his Transportation Department officials travel the country supporting bringing money from companies includingGoldman Sachs Group Inc. (GS:US) to transportation deals.
The Interstate 495 bridge where Obama spoke serves an estimated 90,000 vehicles daily. It was closed on June 2 after state officials found that four columns were tilting. Engineers have blamed the damage on a 50,000-ton pile of soil placed next to key supports.
A $35 million emergency project is under way to make repairs and officials are aiming to at least partially reopen the bridge by Labor Day.
Earlier this week, the House passed a temporary patch to replenish the Highway Trust Fund through May 2015. The legislation, which now moves to the Senate, cobbled together $10.8 billion to stave off job losses and delays to transportation projects across the country.
While the White House supports the legislation because it will keep projects on track, the administration has spent much of this week pushing Congress to approve his four-year transportation proposal or some other a longer-term funding solution.
The patch is “insufficient” to do the kinds of upgrades the country needs, Foxx said.
“If that’s all congress does we’re going to have the same kind of funding crisis nine months from now,” said Obama. “Congress shouldn’t be so proud.”
Later today, the president will travel to New York City to headline fundraisers for the Democratic National Committee and the House Majority PAC, a super PAC supporting Democratic congressional candidates. The events are closed to media.
Thirty supporters, who contributed $32,400 each, will participate in the roundtable discussion at a private home for the Democratic National Committee, according to a DNC official.
(An earlier version of this story corrected the attribution of remarks to Secretary Foxx.)
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