Transportation Secretary Sean Duffy said he "loves the idea" of the U.S. Department of Transportation creating a DOT office with the aim of bringing more private capital into U.S. public infrastructure.
Duffy made the comment during a March meeting of a
"If we can stand up a better office to facilitate more projects ... I love this idea," Duffy said during the hour-long meeting. "I don't want to sell the family jewels, like, no one wants to sell the family jewels here, but [when] I think of how far behind we are, and how much money we need to get our infrastructure up and running — we need private capital."
The formation of a P3 task force should be "job number one for us," Duffy said later. "Making sure we're operational on the P3 side is going to unlock all that we've been talking about."
The office would coordinate various P3 projects, help state DOTs and local agencies apply for federal loans, manage the permitting process and accelerate procurement, said board member Robert Valentine, senior managing director at Macquarie Group.
The move would also bring confidence to private investors — and public pension plans — looking to deploy their capital, Valentine said.
"Private capital at the moment doesn't have as much confidence as they could have to spend the time to go and invest in these long-term P3 procurements," he said. "With a P3 office that sits there just to push these projects along, to guide the process, you're just going to start seeing U.S. pensions, U.S. private capital stand up and say, 'I want to participate in this,'."
A few pension plans, like in Texas and Illinois, have invested in infrastructure, he added. "But still, we haven't broken the back of that yet," he said. "This P3 office would be fundamental in ... giving everyone the confidence that these projects will come, and quickly."
The board also proposed that the administration encourage asset recycling — the selling or leasing existing assets to private entities and reinvesting the proceeds into infrastructure programs — with a grant program.
The DOT could award grants to those states who privatize existing assets like roads, ports and airports and agree to reinvest the capital in new construction within the state. "That should open the door to more states saying, 'This is an asset that could generate significant proceeds that we could reinvest,'" Valentine said. "We won't be relying on uncertain grants or uncertain funding."
The board at its December meeting suggested the administration push to loosen bond laws by allowing the tax-exempt bonds backing the assets to remain outstanding if the asset is leased or sold, instead of requiring them to be paid off, as is currently the case. Other P3 advocates
In addition to the task force, the DOT should also encourage more P3s by requiring value-for-money analyses to compare the cost of various delivery methods, said board member Francis Sacr, principal at Lorne Infrastructure and former executive director of the Gateway Development Commission.
"The default stance from public agencies, local public agencies, is often not a P3, it's looking at a municipal bond because bond rates are relatively low compared to a private financing," Sacr said. "The dilemma is that [the bond financing] doesn't include the cost of risk, the whole-of-life cost of risk. And so we want to make sure that that's getting reflected."
On the project side, the board continued to push for a bridge and tunnel transportation corridor spanning the Hudson River that would be privately developed and operated through a P3. New York and New Jersey seem receptive to the idea in initial conversations, said board chair Gregg Reuben, CEO of Centerpark.
"It comes down to cost, so I think the [Request for Interest] will be very compelling because we believe that we're going to have positive replies from the private sector to help facilitate this," Reuben said.
