CONNstruction - Spring 2011 - (Page 7)

newsandviews Banking on our Future By Donald Shubert CCIA President People have reason to be concerned about banks and government spending these days. However, we shouldn’t let our fears stall America’s recovery. Infrastructure banks, funded by initial government investments, can play a major role to pull us out of these challenging economic times. We have to transition our tainted view of banks and government investments to compete in today’s economy. In order to confront our extraordinary economic challenges, we must learn from the policies that created the recession, and the missed opportunities not taken that could have created economic growth. We have to address our country’s biggest challenges with a new approach. To boost our economy, we have to address two seemingly insurmountable challenges. We have to lower the high unemployment rate that exists as the labor force continues to suffer from the most protracted blow from any recession. We also have to modernize America’s failing infrastructure, which now lags behind many developing countries. Infrastructure banks can turn these two market factors into catalysts for economic growth. The banks can generate investments in infrastructure projects that capitalize on the significant unused capacity in the construction industry. This will put millions of people back to work at a reasonable cost, building a modern infrastructure that sustains economic growth. The infrastructure bank concept is simple. The government makes an initial investment of government capital to establish a bank. The bank uses the government’s capital to leverage billions of dollars of private investment. Private equity industry consultants estimate that there is over $180 billion in private equity and pension fund capital available to be used for infrastructure equity investments. Then the bank loans funds to finance income-generating infrastructure projects. Two examples of income-generating projects that readily repay government loans are clean water projects and tolled transportation facilities. The obstacle to the infrastructure bank concept lies in the recent political debates. These debates feed our fears to a point that it precludes us from seeing beyond an initial government investment and the creation of a new financial institution. The rhetoric about “tax and spend policies,” “private profits and public losses,” “another Fannie Mae and Freddie Mac,” and out-of-control government spending stop us early in the analysis. As a result, we remain stuck at a point where we do not see the short and long-term economic benefits of an infrastructure bank. It is also difficult to get beyond the concerns over large federal and state deficits. These concerns are convincing the public that government investments are no longer an option to create economic growth. However, in this case, the initial government investment is the key. To move beyond our fears, we have to understand how infrastructure banks can be designed to avoid the financial disasters that collapsed our economy. For example, the largest concerns are easily eliminated when infrastructure banks are capitalized with equity capital that comes solely from the government. Funding its equity in this manner avoids the problems encountered with Government Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac. Those GSEs are significantly different from infrastructure banks because GSEs are hybrid organizations chartered to be owned by private shareholders, while benefitting from government sponsorship. Properly formed infrastructure banks avoid the shareholder interest that some people believe led to the failure of GSEs. Successful infrastructure banks are established and working in several states and other countries. The South Carolina Infrastructure Bank has been financing projects since 1997. European Infrastructure Banks have been financing successful transportation projects for years. We must move beyond our fears, and embrace infrastructure banks. This is a sure way to start effectively rebuilding America, and begin working towards regaining our stature in the international marketplace. Our future is something we should bank on. CONNstruction / Spring 2011 / 7

Table of Contents for the Digital Edition of CONNstruction - Spring 2011

CONNstruction - Spring 2011
Banking on our Future
Innovative Alternative Methods to Finance Infrastructure Projects on the Horizon
Ahead: 2011 Labor Front
Industry Survey Reveals Contractors’ Guarded Outlook for the Future
Executive Summary
2010 Training, Educational Programs and Safety Roundtables
Safety and Training
Legislative and Government Relations
Government and Industry Related Groups
Labor Relations
Member Benefits and Services
2010 Officers and Board of Directors
2010 CCIA Divisions and Activities
Turner Construction Company – Saint Francis Hospital
Loureiro Engineering Associates, Inc. – Wheeler Clinic’s Northwest Village
CCIA Annual Membership Meeting & Holiday Reception
CRBA Fall Dinner Meeting
Index to Advertisers/

CONNstruction - Spring 2011