CEO says she has a cure for infrastructure crisis
Former state commissioner promotes public-private partnerships that don’t have to wait for federal funding to be approved
O UR country’s infrastructure is in crisis and could require trillions of dollars to repair or replace.
Many say President Donald Trump’s infrastructure plan promises far less than what is needed, leaving state and local governments to search for funds they don’t have.
Mary Scott Nabers, a former commissioner at the Texas Railroad Commission, says our current infrastructure crisis could start a revolution in creative, mutually beneficial funding alternatives if governments and private partners work together.
She is now CEO of a consulting firm, Strategic Partnerships, which has focused on public-private partnerships. She’s the author of “Collaboration Nation — How PublicPrivate Ventures Are Revolutionizing the Business of Government” and the recent “Inside the Infrastructure Revolution — A Roadmap for Rebuilding America.”
She recently shared her thoughts on infrastructure with the Chronicle.
Q: What do you think about Trump’s infrastructure plan?
A: Trump’s plan provides $200 billion for infrastructure projects over the course of 10 years, so that’s $20 billion per year. The hope is that the $20 billion will grow to multitrillions by leveraging private sector investment.
But here’s a problem: $20 billion is tiny compared to what’s needed.
Trump’s plan says, essentially, “OK, governors, mayors, county judges, go raise 80 percent of what you need for your project and then come to us and compete nationally for the other 20 percent.”
This places a huge burden on state and local government officials when it comes to securing funding for large public projects. Many government officials have never had to raise billions of dollars from the private sector. They now have to design a project and a workable repayment model and get the word out and hope people with money — foundations, pension funds, big banks, private investors — will offer funding.
Many public officials are unfamiliar with analyzing and evaluating various types of alternative funding sources. The requirement to get funding commitments before they
go to the federal government and request the final portion of the funding is a big mountain for them to scale. Additionally, many private sector contractors will not be interested in committing to a project until all the funding is in place, making the task even more difficult.
Q: How much will it cost to fix the U.S. infrastructure?
A: The American Society of Civil Engineers estimates that by 2025 the U.S. infrastructure gap will be almost $1.5 trillion. “Gap” refers to the amount needed just to maintain what we have. That’s not to do everything we need. It will take multi-trillions to get us where we should be.
For instance, 55,000 bridges were deemed structurally deficient last year. Not a single U.S. airport is among the top 25 world airports. States are literally running out of water, yet a lot of water resources are seeping out of holes in pipelines. The majority of U.S. water pipelines are 50 years beyond their life expectancies. Power grids across the country also need to be modernized and protected from physical and cyberattacks.
Q: What’s good about Trump’s plan?
A: It streamlines the permit process from around 10 years down to two years. It also sets aside $50 billion for rural areas, where it’s harder to get private investors.
But the plan is not real exciting. It’s a start, but there’s no consensus in Congress how to get the funding together, and we cannot afford to wait. We have to move forward whether the federal government rolls out this new plan or not. The longer we wait, the costlier the work gets.
Q: What’s your solution?
A: It would be easier for public officials to engage in pure public-private partnerships (P3s) and require the private sector partners to bring all the funding. For example, a city in Texas currently considering a desalination plant will likely find it easier to accept funding from one source and negotiate a long-term contract that allows them to recoup the capital over a couple of decades.
Q: How do P3s work? A: A P3 is a partnership between a public and private entity where the private sector entity brings all or part of the funding to a public project and agrees to construct or upgrade and then operate the public asset, such as an airport, road, bridge, or water supply system — some part of the country’s infrastructure.
The public entity will own the new asset and oversee the project. But the private sector partner puts up the funding, takes the risks and brings the expertise. It also bears the risk of maintaining and operating the facility or asset for a specified period.
The public partner pays the private sector partner back for its investment over a period of one, two or maybe three decades. The investment could be paid back through a lease model, but there are all kinds of revenue models for repayment.
Student housing facilities at universities are often built and operated as P3s. Another example is a new courthouse where a private sector partner might fund and construct a new courthouse along with stores and restaurants to generate revenue to pay back its investment.
Q: What are some infrastructure trouble spots in Texas, Houston in particular?
A: In the last few years, Texas has had more water quality violations than almost any other state, partly because our water pipeline systems are so old. Houston and Texas in general have serious transportation problems. Houston’s airport needs upgrading. The community college system could benefit from upgrades to facilities and expansion.
Q: Could you tell us about your new book, “Inside the Infrastructure Revolution”?
A: Basically, the book highlights our need to do something about the infrastructure crisis right now. The federal government won’t to be able to come up with multitrillions of dollars, so we have to accept alternative funding sources, such as P3s, which may be the easiest type of alternative funding. But funding is available from other sources such as pension funds, foundations, EB-5 programs, and nonprofits.
My book is a road map for people with infrastructure projects who need to learn about alternative sources of funding. It draws on the best practices from other countries that have been doing this for years.
Q: Are people skeptical of private investors having an interest in the public’s assets?
A: Yes, many are because they don’t understand. I think people often don’t think about the costs of building and maintaining our structures and facilities. But we simply have to come up with alternatives.
If the public understood and endorsed the concept of alternative funding, we could get the transportation projects started.
There’s funding available for reservoir work, which is critically needed in Houston. It’s largely a matter of getting the public to understand that alternative funding methods like P3s would be a good thing. With support of the citizens, we could move on without the federal government.