CONNstruction - Spring 2011 - (Page 9)

newsandviews Innovative Alternative Methods to Finance Infrastructure Projects on the Horizon By Matthew Hallisey Accurately forecasting what the future holds for any endeavor is challenging. Just ask any meteorologist to predict the weather, especially in New England. In construction, commercial development is likely to increase and industry employment to grow simply because it would be hard for the industry to decline any further. Unemployment in construction has reached as high as 30 percent in some states in the past two-and-a-half years, since the recession began in 2008. Most forecasters, however, expect it will be a slow climb back for the industry. And Connecticut historically tends to lag the national economy – into and out of recessions. Thus, in this era of fewer resources, strapped taxpayers, and leaner budgets, state contractors will likely experience a more challenging environment for public financing of construction projects. Connecticut, which had about $14 billion of bonds outstanding last year, has the highest net taxsupported debt among the 50 states, according to Moody’s Investors Service. Many of those bonds finance, over the long-term, important infrastructure projects. Reducing the state’s bonded-indebtedness is on the minds of many lawmakers, who are under pressure from constituents to balance the budget. So, policy makers are likely to turn to alternative methods of financing infrastructure projects or adopt other revenue-raising measures or cost-saving devices. For instance, some key lawmakers, including Rep. Tony Guerrera (D-Rocky Hill), co-chairman of the Transportation Committee, want the state to install high-speed, electronic tolls at strategic places at the borders of the state to help CCIA Director of Government Relations and Legislative Counsel finance billions of dollars in overdue maintenance of state roads and highways. While the trucking industry and others may oppose tolls, Governor Dannel P. Malloy has indicated that the issue needs further study and, before he signs a bill authorizing tolls, he wants assurances that the revenue they generate is dedicated solely for transportation purposes. Meanwhile, some states, particularly in the west, and the federal government are experimenting with public-private partnerships. So-called P3s, which are basically contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects, are an innovative way for states to generate capital to address complex transportation problems. Under a P3, investors typically lease or buy roads, bridges or other infrastructure, operate them independently, and collect tolls. But these arrangements pose their own set of challenges. While they are an attractive option for states, they are not without opposition. Detractors, including labor unions, question whether states sell the assets too cheaply, worry about jobs that will be lost and that tolls will rise. A broader, more philosophical objection concerns whether highways, as a public asset, should be controlled by anyone but the public. Additionally, many P3s are controlled and operated by private fund firms outside the U.S., which many Americans resent. Since 2005, eight states have enacted legislation enabling officials to sell or lease highway or transit infrastructure, bringing the total to 25 states, according to the U.S. Department of Transportation. Private infrastructure funds recently acquired long-term leases for the Indiana Toll Road and the 7.8-mile Chicago Skyway bridge. Some of the revenue those projects have generated, however, goes to non-transportation programs. Infrastructure banks and private activity bonds are other means of financing projects that some states have used. State infrastructure banks (SIBs) function as revolving funds that, much like banks, can offer loans and other credit products to public and private sponsors of highway construction projects or transit and rail capital projects. Under SAFETEA-LU, all states are authorized to establish infrastructure banks. The South Carolina Transportation Infrastructure Bank, which was created in 1997 to help finance major transportation projects with loans and other financial assistance, has helped accelerate major road and bridge projects across the state, according to the Federal Highway Administration (FHWA). By leveraging the SIB, the South Carolina Department of Transportation has been able to advance 27 years of road and bridge projects valued at continued on page 32 CONNstruction / Spring 2011 / 9

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