This Could Be the Answer to Improving America’s Infrastructure

Could private-public partnerships save our nation’s aging transportation infrastructure? Here’s why a McGraw Hill executive says it’s important to leverage these important ties.

In the World Economic Forum’s most recent rankings of competitiveness, the United States placed 12th for quality of infrastructure. This is a slight improvement from recent years, but still behind many of our competitors like Germany, Japan, the United Kingdom, and Taiwan. Considering the uncertainty surrounding federal funding for transportation and other infrastructure investments, policymakers may need to use new tools to address this issue. Jason Gold, Director of Global Government and Public Policy for McGraw Hill Financial, writes in U.S. News that should start by expanding private-public partnerships.

Private-public partnerships (PPPs) allow the federal and state governments to partner with private sector companies on the financing, development, and operation of an infrastructure project. The federal government’s Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides long-term financing that can often secure 10x that amount in financing from the private sector. In addition, 33 states have enacted legislation allowing the use of PPPs for transportation projects.

Source: FHA

However, many states have not taken full advantage of PPPs. Gold cites a White House report that found that “the top five states in PPPs have nearly twice the per-capita value of projects as the next 20 best states – and if those states caught up, it could mean up to $30 billion worth of infrastructure projects.” That level of investment would substantially benefit the economy and create jobs. A study in May by Standard & Poor’s found that a much smaller $1.3 billion investment in infrastructure could add 29,000 jobs to the construction sector. The investment would increase economic output by $2 billion that year and provide long-term benefits after the project has ended with greater productivity.

Gold notes that PPPs have the potential to generate even more benefits as they become more common:

“Having the ability to share risk alongside the private sector requires dedicating resources. Allocating people and dollars is a worthwhile investment that builds institutional knowledge of a complicated sector, helping further attract private sector dollars to be put to work.”

A well-functioning infrastructure system is vital to America’s economy, whether it’s the highways, rail, and ports that deliver goods and supplies, the electrical grid that powers businesses, or the optic fiber cables that provide fast internet connections for digital commerce. Private-public partnerships can leverage the resources and expertise of America’s businesses and investors to get the most out of these projects. As Congress looks to finding solutions for transportation funding this spring, PPPs should be on the table.