Trump’s infrastructure plan: Finding the right funding for the right projects

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The Trump Infrastructure Plan: big ambitions, open questions

The Trump infrastructure plan has landed. It could transform the infrastructure sector in the US in four main ways, but key questions remain. We look at the most important takeaways, what we still need to know, and the implications for stakeholders.

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States and cities: Get ready to compete for infrastructure financing

Even though investor capital is abundant at the moment, states and cities need to hurry if they want a slice of the infrastructure pie. Based on PwC's experience, we have come up with six guidelines to help states and cities win the interest of both private investors and federal policymakers:

  1. Focus on data to prove each project's viability
  2. Prioritize wisely to optimize capital projects portfolio
  3. Consider finance options (e.g., public-private partnerships, federal funding programs)
  4. Explore resources to ensure adequate staffing, technology, and external support
  5. Use a capital project excellence framework to anticipate hurdles and maximize efficiency
  6. Gather evidence to demonstrate track record

States and cities that follow these guidelines can better compete for the financing they need to drive critical capital projects forward—and deliver them on time and on budget. 

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“The federal government should consider doing more than just proposing incentives for “shovel ready” projects . . . we need a well-designed and integrated capital plan that selects projects according to a comprehensive, repeatable process that reduces politicization and focuses on the greatest long-term value for each dollar."

Riz Shah, PwCNational Public Sector Leader. Capital Projects & Infrastructure

Five ways tax reform legislation can boost infrastructure investment

President Trump has floated the idea of potentially supporting private financethrough tax reform legislation. While generous tax incentives may attract more investors, they may also produce unwelcome consequences for US deal flow. For example, investors may end up chasing tax advantages instead of evaluating projects based on predictable returns and long-term value.  

In our view, any tax incentive must be carefully crafted to take into account the demand and supply equation that governs deal flow. The graphic on the left illustrates five way​s ​incentives can be structured to attract investors and expand the project pipeline​.

A centralized federal entity can help states access private capital more efficiently

Many of the urban infrastructure assets are operated by one of the 3,141 counties in the US. Most states (with the exception of Virginia) don’t have a centralized infrastructure pipeline to track what’s going on in the counties, however. As a result, investors often can’t find sufficient data to judge if a project is ready and how well it aligns with investment mandates. 

 

Non-revenue generating infrastructure projects can attract investors if structured properly

There is a misconception that the private sector is interested only in traditional infrastructure projects like toll roads, where they can collect revenue upon completion. But that may be an outdated notion. With new innovative approaches to allocating risks and project scope, even infrastructure projects without a traditional revenue stream, such as streetlights, have proven attractive to investors. In fact, in recent years, we have seen a growing number of US P3 infrastructure projects in non-traditional areas including:

Streetlights

In August 2015, the Michigan Department of Michigan (MDOT) and Freeway Lighting Partners, LLC formed the Metro Region Freeway Lighting Public-Private Partnership with a contract term of 15 years. Freeway Lighting would design, build, and finance the improvements on existing freeway and tunnel lighting systems during a two-year construction period, and operate and maintain the existing and improved lighting system for the remaining operating and maintenance period of 13 years. It would then hand back the lighting system to MDOT at the end of the contract term. In return, MDOT would make Milestone Payments to the Freeway Lighting during the design and construction period and Service Payments for performance of services during the operating and maintenance period. The Service Payment takes account of energy savings achieved by Freeway Lighting. (Source: World Bank Group).

Schools and universities

The number of public universities interested in P3s is growing. Montclair State University in New Jersey began the trend with a P3 for housing facilities in 2011. Since then, universities in Georgia, Kentucky and Indiana have done similar deals. In 2016, the University of California at Merced closed with the Plenary Group on a $1 billion P3 to build campus facilities. (Source: InfraAmericas and PwC)

Government buildings

P3-sponsored government building projects are on the rise. Seth Miller Gabriel, director of the Office of Public-Private Partnerships for the District of Columbia, says government buildings, including schools, are the main areas in which his city is looking at P3s. Also, the city of Long Beach, California closed on a $530 million P3 to build a new civic center in 2016. (Source: InfraAmericas and PwC)

Waste and water projects

Congress passed the Water Infrastructure Finance and Innovation Act (WIFIA) at the end of 2014, realizing the potential for federal credit assistance for water infrastructure P3s. Miami-Dade County in Florida is moving ahead with its P3 program for a number of waste and water projects, and we expect more to enter the pipeline. (Source: InfraAmericas and PwC)

Other infrastructure

For example, Kentucky closed in 2015 a $275 million P3 to build a 3,000-mile statewide broadband network. The Ohio State University is using a P3 to upgrade its energy system. And Purdue University and the city of West Lafayette closed with the Plenary Group in 2016 on a P3 to turn State Street into a pedestrian-friendly urban hub. (Source: InfraAmericas and PwC)

How we can help

In our work with governments, investors, multi-lateral development banks, and architectural, engineering and construction firms, our capital projects and infrastructure team assists public and private sector clients through the entire project lifecycle – from strategic planning to finance and delivery – of large-scale capital projects and portfolios. See how we can help you navigate the challenges and opportunities of this rapidly-evolving US infrastructure industry. Explore below.

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Contact us

Daryl Walcroft
Principal, US Capital Projects & Infrastructure Leader, PwC US
Tel: +1 (415) 498 6512
Email

Darin Siders
Partner, Capital projects & infrastructure (Mergers & Acquisitions), PwC US
Tel: +1 (646) 818 8086
Email

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