Will 2019 Be the Year of Infrastructure, P3s?

Major investments needed to fuel economic growth

By Ed Green
P3 Kentucky Editor

Leaders across the country – at every level – have talked for years about the growing need to reinvest in our national and local infrastructure. However, we still haven’t seen the types of investments they’ve discussed are needed to restore our transportation (surface, air and waterway), water, energy, school, rail and recreation infrastructure. There are a plethora of needs that are being ignored.

According to the 2017 Infrastructure Report Card, the nation has nearly $4.6 trillion in needed infrastructure investments by 2025, and only $2.5 trillion in estimated funding is available. That leaves a huge gap with huge consequences, according to the American Society of Civil Engineers Report. ASCE estimated that failing to invest in infrastructure will result in $3.9 trillion in losses to the GDP by 2025, $7 trillion in lost business sales and, most importantly, 2.5 million lost jobs.

Still, there has been less talk in recent month about major infrastructure investments at both the federal and state levels. During the recent Kentucky Chamber Day Dinner, the state’s largest gathering of business and elected leaders in Kentucky, Kentucky Chamber President Dave Adkisson set the stage for a discussion, saying infrastructure funding remains one of the chamber’s top priorities for 2019. However, there was little talk after Adkisson’s opening remarks about planned investments.

Leaders at Kentucky’s largest airports recently spoke out about the need to invest in critical infrastructure, noting that the airports have a combined $13 billion impact and support more than 100,000 jobs.

“Kentucky is in urgent need to appropriately fund our critical infrastructure needs, to both size our infrastructure to accommodate for future growth and to maintain what is currently in place,” wrote Dan Mann of Louisville International Airport, Candace McGraw of Cincinnati/Northern Kentucky. International Airport and Eric Frankl of Lexington’s Blue Grass Airport.“Highways, roads, bridges, and other forms of transportation across this state require billions of dollars in maintenance, let alone needed funding to build new assets.”

When will we see action?

It’s unclear if this will be the year federal or state leaders move forward with major funding for infrastructure. The national discussion is currently stuck on border security and reopening the government. Although the nation finished 2018 without a major infrastructure bill, both the Trump Administration and Democratic leaders have indicated infrastructure investments are still a priority.

According to Rebecca Rockey, an economist with Cushman & Wakefield who spoke with National Real Estate Investor, a bill could emerge this year. Investments could be fueled by Rebuild America bonds or an increase in the federal gas tax, Rockey said in the report.

Moderate increases in fuel excise taxes also continue to be discussed in Kentucky, primarily as a way to restore and expand the state’s aging roadways and bridges, as WDRB.com reported. However, legislative leaders who spoke at a Kentuckians for Better Transportation conference last week in Lexington, said revenue bills likely will be not addressed during the current legislative session because they require supermajorities for approval. They could take up revenue or tax reform measures during a special session or next year.

This news is disconcerting for industry leaders tracking rapid declines in infrastructure of all types.

So where does P3 fit in?

It’s impossible to predict how the federal government will use P3s to fund its infrastructure programs. There has been a lot of back and forth about whether P3 opportunities will be part of the eventual infrastructure plan and whether states will be able to use P3s to leverage federal dollars. A sign for optimism is last week’s reintroduction of the Move America Act, a bi-partisan initiative that would allow greater use of P3s to fund infrastructure.

A growing number of progressive cities and states are turning to P3s to advance their initiatives. According to P3 expert Mary Scott Nabers, state, local and education market were hot sectors in 2018.  She noted that the largest number of procurements in 2018 were related to construction, operations and professional services. Those industry sectors will continue to see significant contracting opportunities in 2019. In addition, Nabers added that many state leaders are not waiting for Congress to act on infrastructure and are finding funding from outside sources, if necessary.

Look for Kentucky to be among those states in 2019. The Commonwealth has been relatively quiet about P3s, but the state’s work with one or more P3 advisers should help speed P3 activity in 2019 and beyond.

In short, 2019 might not be the year of infrastructure in Kentucky, but we should see some progress in the Commonwealth that supports economic growth.

P3 Kentucky was created to educate, inspire and connect leaders with resources, so if you have a question about where to go next, please reach out: (502) 544-2917 or ed@c2strategic.com.

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