Sherree:

Thanks for writing this insightful post.

In my assessment, the public sector has a significant handicap when it comes to closing the infrastructure financing gap, both at federal and local levels. There are budgetary/spending constraints that do not allow the public sector to raise enough money to spend on capex. Then there are more pressing issues (social, public pension funding, etc.) that require immediate funding. In short, there isn’t enough public money for infrastructure financing. Given the trillion-dollar size of the financing gap, I doubt that would change anytime soon.

Infrastructure projects are a good fit for long-term institutional investors, especially the pension funds, sovereign funds and insurance companies. Collectively they have enough financial muscle and the patience to finance large infrastructure projects.

The old infrastructure financing avenues (municipal bonds) do not provide a meaningful volume or financial returns for the traditional infrastructure investors. It is clear that we need a new approach to attract private sector capital into infrastructure projects.

In my experience, the Public-Private Partnerships (PPPs or P3s) have been a good example of a structure that attracts private money into the sector by effectively balancing risks, returns, construction and operating efficiency of the underlying assets.

PPPs are widely-used elsewhere in the world. We need them to become a part of the financing mix for large infrastructure projects in the US, if we are serious about closing the infrastructure financing gap.