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US infrastructure champion Governor Larry Hogan addresses GIIA Board members

Larry Hogan, former governor of Maryland and founder of the National Governors Association’s initiative Infrastructure: Foundation for Success, says US states must learn how to leverage private finance

“Modernizing America's infrastructure won't happen without modernizing the way we finance infrastructure.”

That was the opening message from a man who has relentlessly championed infrastructure ever since serving eight years as Governor of Maryland, and who, as chairman of the National Governors Association, launched its initiative to focus states on fixing America’s crumbling roads, railways, ports and airports.

Speaking to Board members of the GlobaI Infrastructure Investor Association this month, Larry Hogan, a private sector business leader who became a political champion of infrastructure modernisation, said private investors have a crucial role to play.     

 “Since the passage of the bipartisan Infrastructure Bill and the Inflation Reduction act, the time to invest in American infrastructure projects, in my opinion, has never been better. And I'm hopeful that many of the successes that we've already achieved together are just the beginning of a public private partnership revolution in the United States.

“It's about time that we brought the United States in line with the rest of the world.

“When we took office, our roads and bricks were crumbling. We launched an infrastructure initiative all across the state, taking a balanced, all-inclusive approach to infrastructure investment. I'm proud that we made Maryland into both a national and an international leader, in using innovative solutions to address pressing infrastructure concerns. We moved forward on nearly all of our state's highest priority transportation projects in every single jurisdiction.

“All across our state we made record investments in roads, bridges, tunnels, transit systems, ports and airports. We replaced and repaired every structurally deficient bridge. We resurfaced nearly 100% of the entire state highway system.”

Hogan explained how the state tackled traffic gridlock on the Capitol Beltway, upgrading both I-495 and I-270. How public private partnerships (P3s) have delivered the Purple Line light rail transit across the Washington Capital Region, replaced a 140-year old tunnel that was a rail bottleneck along the East Coast, and expanded another tunnel to allow double stacked freight trains.

A further P3 in the Port of Baltimore added a 50-foot deep terminal for more of the world’s largest container ships, doubling the port’s capacity and creating thousands of jobs. Partnership with the private sector also transformed Baltimore/Washington International Airport, and expanded water and sewer treatment plants beside Chesapeake Bay.

Partly because of those successes, Hogan said, he was elected to serve as Chairman of the National Governors Association, where he launched a national initiative focused on repairing and modernizing America's infrastructure.

“We held a series of stakeholder summits all across America, and in Australia, and we brought together leaders from the federal, state, and local governments and the business community, some of the smartest people you can find.

“As one of the first governors of America to embrace P3s for infrastructure, one thing that we realized was that both state, and particularly local issues and interests, often created more of a headache for investments than national politics did. Many times we found that having partners who knew how to navigate state local government entities were some of the most valuable allies in trying to get large infrastructure projects approved.

“So we incorporated state and local advisors into the working group that could anticipate concerns raised by hyper local interests, that could easily derail or delay projects. After a year-long effort, I got all 50 governors to agree on a series of recommendations, including four main pillars.

“First was to relieve congestion to boost economic competitiveness. We insisted that the states be granted maximum flexibility to relieve congestion and to invest in adaptable and innovative solutions.

“Second, enhancing efficiency by eliminating red tape and integrating smart technology. We pushed for a two-year goal for completion of environmental reviews and a 90-day timeline for related project authorizations.

“Third, we focused on protecting America's critical infrastructure against not only traditional threats, but also emerging cyber threats. We recommended that Congress make investments in both resiliency and security.

“And fourth, and in my opinion the most important and most impactful, was to advocate for the financing of infrastructure projects through private sector investment.

“We stressed that states needed maximum flexibility to harness the full potential of the private sector to be a part of America's infrastructure future and through P3s. Government - whether federal, state or local - simply cannot afford what it will take to address all the gaps that exist in our collective investment in American infrastructure.

“Each of these pillars and nearly all of our recommendations were included in the final Infrastructure Bill, which passed through Congress with bipartisan support.”

This was a big step forward, said Hogan, that took the United States from “maybe what was last place” in terms of private infrastructure funding to being a wide-open market that could be number one for future investment.

“Of course, there are still risks in this emerging American market, despite the passage of the IIJA,” warned Hogan, “and there's still much more work that needs to be done. We've got to do more to accommodate and incentivize private sector investment and to reform the broken regulatory process. We also need to do a better job of bringing the message of P3 success to other state governments.

“Often times, when I was NGA Chairman, I would meet with governors across the country, both Republicans and Democrats, who frankly knew very little about private financing for infrastructure. It's important for potential investors to know that some of the biggest decision makers in America are often times state and local politicians and bureaucrats, who are still not yet sold on the benefits of P3s and infrastructure financing.

“I still believe that America’s best days are ahead, and we have shown the path to modernizing America's infrastructure. It starts with modernizing the way we finance our infrastructure projects. America is a country that was founded on innovative solutions and a spirit of optimism. I firmly believe that what we've started together is blazing a trail for others to follow.

“Now it's time for us to just get the rest of America on board.”

In questions and answers with Board members, Hogan stressed that infrastructure investors would need to work hard with states to sell the benefits of private investment.

“State, local governments and the federal government are not going to be able to accomplish all the things, no matter how much money they try to invest. They're finding they're running out of funds. People are tightening their belts rather than investing more in some cases, which is all the more reason why we need to tap into the vast amount of private sector money that's willing to invest in infrastructure.”

What’s more, Hogan said, where governments face demand for better services and have no appetite for tax increases, they need to release equity from some of the assets they already own to invest in new priorities.  

However one issue, said Hogan, is that many people who work in state governments have never focused on private finance because it’s not something that America is used to doing. States will need to bring in the experience they need and get further along the learning curve. The tougher things get financially, the more states will have to consider alternatives to public funding, even if they’re reluctant and used to doing things another wary.

“The last thing any politician, whether they're progressive, Democrat or conservative, probably wants to do is raise taxes. And when they have revenue shortfalls and increasing expenditures and capital needs, I think there's never going to be an easier time to persuade them that, hey, we have a solution.”