President Obama upped his own ante on public-private partnerships last Friday, plugging a major construction project that will allow PortMiami in Florida to be linked directly to Florida's interstate highways through an under-the-bay tunnel. "State, county, and local governments got together and agreed to jointly fund PortMiami Tunnel. Everybody had some skin in the game," Obama said after touring the project. "They did something else--they partnered with a group of private sector companies to finance the design and construction of the project."
The PortMiami tunnel is being paid for by two French companies--Meridiam Infrastructure and Bouygues Travaux Publics--and several state and federal government funding sources.
It is also worth noting that the technological centerpiece of the PortMiami project is a "Tunnel Boring Machine" nicknamed Harriet by the Miami-Dade Girl Scouts that is 42.3 feet high (as high as a four-story building) and a 361 feet long. There's a great picture of Harriet on the Port of Miami Tunnel's web site.
Obama wants the business acumen that came with the PortMiami tunnel deal to be replicated elsewhere. He is proposing a $21 billion infrastructure plan that includes a national infrastructure bank, direct-subsidy bonds designed to attract new capital to infrastructure investment, and an expansion of the Transportation Department's TIFIA loan program. The details of the proposal, much of which have been discussed by the White House before, will be spelled out in the president's budget that will be released on April 10.
One of the more intriguing parts of the proposal involves increasing the size of private activity bonds that can be tax-exempt to attract private investors to large, complex projects like the MiamiPort tunnel. The ability to issue tax exempt bond to raise money has become increasingly more attractive to private investors since the upheaval in global bank markets, according to David Narefsky, a partner at the legal services firm Mayer Brown who specializes in infrastructure.
Obama's proposal also is a tacit acknowledgement that public-private partnerships are the one of the only ways major projects will get financed over the next several decades, absent billions of dollars magically appearing in the federal treasury. The goal of increasing the volume of the bonds, according to Narefsky, is "to make more of this incentive available and there's a recognition that the use of this will be increasingly popular."
TIFIA, the Transportation Department's direct loan/loan subsidy program already is tremendously popular, with a hand most major projects underway in the United States. Both the private bonds and TIFIA also enjoy wide bipartisan support in Congress, which must approve any of the changes Obama suggests.
What does Obama's latest infrastructure proposal indicate for the future of transportation and the role of government? How would raising the cap on private activity bonds impact the transportation construction market, and how quickly would the effects appear? Is expanding TIFIA a viable option? What about the infrastructure bank, which has consistently been rejected on Capitol Hill? Can there be new life breathed into that tired proposal?