Written by Gregory Smith, March 13, 2018
Bringing about new infrastructure financing solutions and improving essential infrastructure systems will require greater innovation on a number of fronts: the adoption of emerging technologies, flexible approaches to collaboration and business models, and updated policies that increase opportunities within new and existing systems.
THE RECENT INFRASTRUCTURE plans proposed by Canada and the United States emphasize a local or middle-market approach, helping connect the private sector with communities where the need is greatest.
COMMUNITY SOLUTIONS
Although 80% of North America’s population lives in metropolitan areas, much of our critical urban infrastructure earns a failing grade. Where essential services are concerned, the trillion dollar deficit has an undeniably human impact. More than 13 million children in the US attend public schools in need of repairs, and more than two-thirds of hospitals defer badly needed capital projects, thereby threatening the quality of patient care. The US infrastructure plan proposed in February addresses local need in two ways, allocating one-quarter of the $200 billion budget to rural infrastructure projects and including proposals that would make partnerships with the private sector more economically viable for investors, communities and local governments.
ADDRESSING BASIC NEEDS FOR ESSENTIAL INFRASTRUCTURE NEEDS TO BE DONE STRATEGICALLY, AND WITH A LONG-TERM MINDSET ACKNOWLEDGING THE COMPLEXITIES SPECIFIC TO INDIVIDUAL COMMUNITIES AND CLIMATES.
The infrastructure challenge is even more acute within remote communities. In Canada, for example, more than one-third of the First Nations population lives with a water system operating at a medium to high risk of contamination. While the federal government has already made investments lifting 52 long-term drinking water advisories, the need is still dire: taking into account only the advisories that have been in effect for more than a year, there are still 81 systems to be repaired. In response, in its most recent budget the Canadian government announced an additional $172.6 million over three years to improve access to clean and safe drinking water, aiming to lift all such water advisories by March 2021. While this represents progress, safe drinking water is still years away for many First Nations communities.
Addressing basic needs for essential infrastructure needs to be done strategically, and with a long-term mindset acknowledging the complexities specific to individual communities and climates. Collaboration with the private sector can bring valuable expertise and funding to the places that need it most, guiding localized solutions, empowering communities and improving overall quality of life.
PRIVATE SECTOR COLLABORATION
Developing new partnerships with the private sector allows communities to leverage outside expertise and capital, while increasing technological capacity and performance. Additionally, trends such as climate change and population growth require more collaboration than ever to set the stage for resilient communities. A regulatory environment that encourages flexible partnerships and innovative approaches is vital to increasing private sector involvement. Public policy, whether at the local or federal level, must provide the overall framework to bring projects to market in an efficient, collaborative and productive way.
AS THE SHIFT TO MORE LOCALIZED INFRASTRUCTURE SYSTEMS CONTINUES, THE NORTH AMERICAN MIDDLE MARKET CONTINUES TO PRESENT A STRONG OPPORTUNITY FOR NEW INFRASTRUCTURE INVESTMENT AND PARTNERSHIPS.
Several proposals within the US infrastructure plan would benefit projects developed under public-private partnerships, changing rules surrounding private activity bonds to allow them to compete with state-financed projects, and allocating $100 billion to incentive programs. In addition, the proposed sale of federal energy and transportation assets to private investors, along with an eight-year decrease in permitting times, would significantly increase opportunities and cost savings for investors. By bringing in outside capital and expertise to partner with communities, these policies can open the door to new job opportunities and local economic benefits while simultaneously improving or creating much needed infrastructure.
The infrastructure that will shape North America for future generations will be designed and developed in alignment with what local regulatory frameworks allow. The recent plans proposed by the Canadian and US governments promote growth in the design, development, financing and operation of infrastructure through new forms of public and private collaboration with a community-scale scope. As the shift to more localized infrastructure systems continues, the North American middle market continues to present a strong opportunity for new infrastructure investment and partnerships.