An overview of the amount of private dollars available dedicated to infrastructure and how it can enhance job creation.

1. The Benefits of Private Investment in Infrastructure
Note: Updated as of April 2013
Note: All dollar figures are measured in today’s terms

2. This Summary of Information was Compiled by
For More Information Contact Addison Smith at (202) 862-5520 or addisons@sphereconsulting.com
* This report was done in coordination with several private sector infrastructure colleagues and is
based on the original report released in 2011.

3. Private Capital in Infrastructure Works
Jointly public and private investment in infrastructure can create
millions of jobs. The private sector is already largely responsible
for designing, building, and financing our nation’s infrastructure and
can do more.
Over $214 bn of private capital has been raised, and some
additional legislative and administrative changes could accelerate
infrastructure projects and enhance funding.
Private investment in infrastructure frees government dollars for
allocation to other troubled areas of the economy and transfers risk
away from the public partner to the private entity.
Private investment has been proven worldwide to generate positive
economic growth and can act as a stimulus by providing investment
grade projects to invest in.
Private capital allows U.S. workers through their pension funds to
invest in the growth of our national economy, generate jobs, and
enhance our global competitiveness.
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4. Private Capital is Ready to Create Jobs
Private investment in infrastructure could generate nearly 1 million sustained jobs in the U.S.
market...
Private
investment could
help to reduce
unemployment by
approx. 8%
National
Unemployment:
12 million or 7.7 %
“Tonight, I propose a “Fix-It-First” program to put
people to work as soon as possible on our most urgent
repairs, like the nearly 70,000 structurally deficient
bridges across the country. And to make sure taxpayers
don’t shoulder the whole burden, I’m also proposing a
Partnership to Rebuild America that attracts private
capital to upgrade what our businesses need most:
modern ports to move our goods; modern pipelines to
withstand a storm; modern schools worthy of our
children. Let’s prove that there is no better place to do
business than the United States of America. And let’s
start right away."”
~ President Obama, February 12th, 2013
National Unemployment
Source: Bureau of Labor Statistics, US Department of Labor, March 2013
...Incentives to invest private capital must be taken into account in
President Obama’s “Partnership to Rebuild America” proposal.
Note:
1. Actual figure is 963,000 projected private jobs given $214 bn of private capital invested over 10 years at 60 percent leverage.
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5. Construction Sector Hit Harder
Construction unemployment remains significantly higher than the national average ...
&!"
%#"
Feb 2013 Construction
Sector Unemployment:
15.7%
%!"
Over 1.7 million
construction sector jobs
(seasonally adjusted)
have been lost since
January 2008. [1]
$#"
$!"
#"
!"
2003
%!!&"
2004
2005
2006
2007
'()*+(,"-+./0,*1/.+2"3"
2008
2009
2010
2011
2012
2013
4*+52678)*+"-+./0,*1/.+2"3"
Source: Bureau of Labor Statistics, US Department of Labor, January Construction Workforce Statistics
... “Unfortunately, construction employment in many metro areas appears to be suffering
from declining public-sector demand and a private-sector market that is still well below peak
levels.”~AGC Chief Economist Ken Simonson, January 30th, 2013
[1]: Bureau of Labor and Statistics. February, 2013. “Employment, Hours, and Earnings from the Current Employment Statistics survey (National),” http://data.bls.gov/timeseries/
CES2000000001?data_tool=XGtable.
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6. Growing Public Pension Fund and Investor Interest
The total equity capital committed to infrastructure is in excess of $214 billion.
$Bn
$300
$225
$150
~$214 Bn
$75
$0
~$60 Bn
2006
2013
Private Infrastructure Fund Growth
Source: Preqin
Growing US Pension Fund
Interest
•According to data recently compiled by the research
firm Preqin, there are now 49 pension funds interested
in infrastructure with approximately $38 billion of funds
available for investment in such projects.
•Some of the larger U.S. public pension funds are now
forming their own internal teams to pursue direct
investment in transportation projects.
•Dallas Police and Fire Pension System acquired a 10%
ownership stake in the $2.7 billion Texas LBJ Freeway
PPP project.
Additional funds considering direct
infrastructure investments include California Public
Employee Retirement System and the San Diego
Country Employees’ Retirement Association.
}
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Dedicated funds available for infrastructure have
more than tripled from 2006 to 2013 and such
private investor interest remains strong.
In addition to companies that invest in
infrastructure, there are over 60 infrastructure funds
ready to invest in the U.S. market with a levered
purchasing power of ~$535 billion.
An important and growing source of private capital
for transportation investment in the United States
comes from quasi-public, tax-exempt institutions
such as public pension funds, university endowments
and charitable foundations, which are in essence
sub-national sovereign wealth funds of the United
States.
The total equity capital available to invest in U.S.
infrastructure is likely to substantially grow in the
coming years assuming our nation taps into the
current pool of equity capital.

7. Leveraging Private Capital
The Amount of Available Capital Grows From Approximately $214 bn to over $530 bn with Leverage
$650
$ 535 Bn
• Leveraging private capital creates a larger pool of funding for state and local
governments to address infrastructure needs while driving economic growth and
creating jobs.
Dedicated Capital (in USD billions)
$520
• When leveraged at a 60:40 debt-to-equity ratio, approximately $214 Bn in private
$ 428 Bn
capital could generate as much as $535 bn for infrastructure investment in the
United States.
$ 356 Bn
$ 305 Bn
$390
$ 267 Bn
$ 237 Bn
Total Investment
$ 214 Bn
$260
Equity: ~ $214 bn
$130
$0
Actual Capital
10% Leveraged
20% Leveraged
30% Leveraged
40% Leveraged
50% Leveraged
60% Leveraged
Note: Scenario assumes the approx. $214 bn in available capital is distributed evenly over a 10-year period and does not take into account fluctuations in funds’ size.
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8. Private Investment Creates Middle Class Jobs
Annual Sustained Job Creation with the Sole Use of Private Capital Over a 10-year Period
$650
• When used alongside federal dollars, private investment in infrastructure will greatly
963,000 Jobs
increase the amount of jobs that can be created. At the same time, existing public sector
collective bargaining agreements are honored and union representation respected.
$520
infrastructure investment, 18,000 direct and indirect jobs are created. [1]
• The President’s Council of Economic Advisors report on infrastructure investment
Dedicated Capital (in USD billions)
770,000 Jobs
• A Political Economy Research Institute study finds that for every $1 billion in
finds that 80% of direct jobs created through infrastructure spending would be
middle class jobs. [2]
642,000 Jobs
550,000 Jobs
$390
481,000 Jobs
428,000 Jobs
Total Investment
385,000 Jobs
$260
$130
Equity: ~ $214 bn
$0
Actual Capital
10% Leveraged
20% Leveraged
30% Leveraged
40% Leveraged
50% Leveraged
60% Leveraged
[1]: Heintz, James, Robert Pollin, and Heidi Garrett-Peltier. 2009. “How Infrastructure Investments Supports the U.S Economy: Employment, Productivity, and Growth,”http://www.peri.umass.edu/
fileadmin/pdf/other_publication_types/green_economics/PERI_Infrastructure_Investments
[2]: Department of Treasury with the Council of Economic Advisors. 2010. “An Economic Analysis of Infrastructure Investment,”http://www.treasury.gov/resource-center/economic-policy/
Documents/infrastructure_investment_report.pdf
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9. Private Capital is Available to States Facing Deficits
Federal dollars are expected to decrease for state transportation budgets
The Highway Trust Fund is primarily financed through the
18.4 cent per gallon federal tax on gasoline. Both inflation and
rising fuel economy standards threaten the long-term
viability of the gas tax as a reliable funding source for
transportation.
The CBO projects the Highway Trust Fund will reach
insolvency by 2015 and a study from the College of William &
Mary projects a $365.5 billion shortfall over the next 23 years.
[1] [2]
Absent significant increases in the gas tax or other reforms,
states should expect to see a shrinking pool of federal dollars
available for infrastructure.
Private funds can serve as a supplemental or alternative
source of capital for cash strapped states as they look to meet
their transportation needs.
CBO Highway Account Shortfall Projection (-$billion)
50
37.5
25
12.5
0
2015
2016
2017
2018
Source: CBO February 2013 Baseline Projections
Total State Budget Shortfall in each fiscal year, in billions [3]
0
-50
-100
-150
-200
-250
-$110
-$191
-$45
-$130
-$107
-$55
Estimate
-$191
2009
2010
2011
2012
[1]: CBO. February 2013 Baseline. http://www.cbo.gov/sites/default/files/cbofiles/attachments/43884_HighwayTrustFundAccounts_0.pdf
[2]: William and Mary Thomas Jefferson Program in Public Policy. January 2013 Baseline. http://movecolorado.org/wp-content/uploads/2013/02/WM-HTF-Report.pdf
[3]: Center on Budget and Policy Priorities, as of June 2012
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2013
2019

10. Private Investment Growing
Private Infrastructure Infrastructure Investment is Growing
($ millions)
Chicago Downtown Public Parking
$563; 99 years
Port of Portland – Terminal 6
$68; 25 years
Chicago Metered Parking
$1,157; 75 years
Chicago Midway Airport
$2,521; 99 years
Pennsylvania Turnpike
$18,301; 75 years
Chicago Skyway
$1,830; 99 years
Port of Oakland – Outer Harbor
$686; 50 years
Northwest Parkway
$603; 99 years
Harrisburg Parking
~$200; 50 years
OSU Parking
$483; 50 years
Indiana Toll Road
$3,850; 75 years
Bayonne Water & Wastewater
$150; 40 years
Port of Baltimore – Seagirt
$334; 50 years
Indianapolis On-Street Parking
$35; 50 years
Presidio Parkway
$929; 30 years
Capital Beltway HOT Lanes
$1,933; 80 years
East End Crossing
$763; 35 years
Denver FasTracks
$1,637; 46 years
Rialto Water & Wastewater
$172; 30 years
Long Beach Courthouse
$490; 35 years
CT Service Stations
$178; 35 years
Cincinnati Parking
$206; 30-50 years
Pittsburg Parking
$452; 50 years
I-95 Travel Plazas
$56; 35 years
I-95 HOT Lanes
$925; 76 years
I-635 / LBJ
$2,700; 52 years
DTT / MLK / MLK Extension
$2,041; 58 years
SH 121
$3,463; 50 years
Carlsbad Desalination Project
$925; 30 years
Pocahontas Parkway
$611; 99 years
North Tarrant Expressway
$2,050; 52 years
Legend
LMM – San Juan Airport
$615; 40 years
SH 130 (5&6) – Trans Texas Corridor
$1,380; 50 years
I-595 Express
$1,909; 35 years
Parking
Toll Roads
Airports
Ports
Water/Utilities
Other
36 U.S. P3 transactions announced totaling ~$56bn since 2005
Port of Miami Tunnel
$903; 30 years
Notes:
Locations are not exact
Gray shading represents transactions that are either pending close or have been withdrawn
source: Greenhill & Co
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PR-22/PR-5
$1,136; 40 years
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11. Benefits of Private Capital
Government retains asset ownership: The public entity regulates infrastructure assets funded with private
capital, much like utilities are regulated, while transferring operating, maintenance, and financing risks to the party
best equipped to manage them.
Private Capital
Complements
Public Interest
Government receives direct funding (upfront payment / portion of future revenue) and/or
investment through project delivery:
• Private capital proceeds can be reinvested in infrastructure or other public goods providing long-term
economic benefits to the general public.
• Proceeds from leasing existing assets or invested in new projects can allow state and local governments to
meet federal matching requirements for funding of projects in the absence of available tax revenues.
Government sets and enforces standards: The public partner sets and enforces the operating and safety
standards of the infrastructure assets while they are improved and operated by the private investors. In many cases
the government also sets requirements for Disabled Business and Small Business Enterprises, as well as local
employment participation in the arrangement.
Greater access to funding: Private investment can provide billions of dollars of new infrastructure funding
while supplementing funds provided by state and federal governments. In certain cases, federal and even state
dollars may not be necessary for project delivery, depending on the nature of the project.
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Greater value for money: Through global best practices, experience and innovation in design, finance,
construction, operation and maintenance, private investors can bring greater efficiencies at a lower cost to the
procurement of infrastructure assets and services creating disciplines and benchmarks around spending and
development.
Greater accountability: If the private entity partner fails to meet minimum requirements under the concession
agreement then the public entity partner may terminate the agreement at significant financial loss to the private
sector partner. This provides a significant incentive for the private sector partner to perform materially above
minimum contractual obligations and exceed government-required service levels.
Greater long-term efficiencies (life cycle planning): The private sector has incentives to maintain high
quality infrastructure assets and thereby provide the end user with a safer and improved quality of service over the
useful life of the asset or contract. Under traditional government procurement, the party that builds the facility
does not always take into full account the future cost of maintaining what gets built.
>
Less public debt: The use of private capital allows state and local governments to avoid taking on more debt to
fund projects, which either reduces interest payments or allows states and municipalities to use their bonding
capacity to finance other needed government services.
Less taxes for taxpayers: Taxpayers benefit because the state does not have to rely solely on tax revenues to
support infrastructure investment or debt servicing.
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12. Conclusion and Recommendations
• At a time when public sector resources have never been scarcer and our infrastructure performance has never suffered more in the
last 50 years, public private partnerships (P3s) are a powerful policy tool currently available to governments to tackle multiple
issues simultaneously and provide an additional project delivery tool for MAP-21 reauthorization.
• By taking these incentives into account when authorizing a new transportation bill, the federal government can deploy the private
sector to more effectively address employment and infrastructure demands utilizing three key policy levers:
- Programmatic Changes:
• Reform and expand TIFIA by increasing the total TIFIA authorization and the percentage of each project TIFIA can fund.
• Utilize existing discretionary resources to leverage additional private investment.
• Create a permanent $3-5 billion dollar/year competitive discretionary grant program that is based on merit rather than
earmarks.
Conclusion
• Require a value-for-money analysis for large projects.
• Create a performance pilot to test process streamlining and authorize up to 3 states to participate.
- Regulatory Changes:
• Expand flexibility for states to implement direct user fees on Federal-aid highways.
• Enhance State Infrastructure Bank resources.
• Require private investment through PPPs before federal transportation grant money is awarded to states.
• Set targets to reduce Pre-Construction approval timelines.
- Tax Code Changes:
• Reform and expand the use of Private Activity Bonds (PABS) for infrastructure projects.
• Permanently remove the Alternative Minimum Tax (AMT) applicability and state and federal cap allocation.
• Make a taxable bond option available for PABS or reissue the Build America Bonds (BABs) program and include projects
with private sector investment.
• Add Infrastructure Assets to existing REIT Rules.
• Create a National Infrastructure Bank (NIB) that is authorized to lend at favorable terms to both the public and private sectors for
qualified infrastructure projects.
- Base structure on the European Investment Bank (EIB) with federal and state guarantees to backstop new NIB debt issuance to
provide loans for infrastructure projects.
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