Last night the US House of Representatives passed an economic stimulus bill that weighted in at 640 pages, dictated $825 billion of government spending and made 73 mentions of the word “infrastructure”.
Infrastructure investors should naturally find themselves thinking, “What's in it for me?'
The bill puts two types of capital in play for infrastructure investors: financial and political. They will break even or gain on the first, but may lose on the latter.
On the financial side of the equation, the roughly $100 billion in the bill for federal spending on infrastructure certainly won't flow directly to infrastructure investors in any meaningful way. Congress drafted the bill with one thing in mind: getting money out the door as quickly as possible. That means using existing avenues of allocating spending – few of which involve partnering with the private sector for infrastructure projects.
Still, some of the money may indirectly benefit private equity firms via their portfolio companies. For example, part of the $32 billion targeted toward energy infrastructure will go toward a renewable energy and electric transmission loan guarantee program. That’s good news for investors with renewable power generation and transmission assets.
On the political side of the equation, infrastructure investors may lose political capital as a result of the stimulus bill. After the stimulus is enacted, Congress will turn its attention to the reauthorisation of SAFETEA-LU (“Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users”), a 2005 bill that governs surface transportation spending and is scheduled to expire with the end of the government's current fiscal year on 30 September 2009.
That's the place where investors can hope to see more private sector-friendly language, such as public-private partnerships, an infrastructure bank and extension of tax-exempt credit programmes for infrastructure investors – not the stimulus bill.
But with all the talk of infrastructure in the stimulus bill, one must begin to wonder whether Congress and the American public are ready for another prolonged debate about infrastructure spending. Chances are that after throwing $100 billion at the problem, some voters, not to mention members of Congress, will want to turn their attention to other problems, like stabilising the banking sector. This despite the fact that, even with the stimulus, the US will still have a $1.1 trillion gap between available and needed spending over the next five years.
Education and continuing the dialogue will be key. But with so much financial and political capital already spent thanks to the stimulus, a new question arises: will anyone listen this time around?