America needs more than public funds to solve its infrastructure problem

The United States faces massive infrastructure challenges, and to their credit, both President Trump and congressional leaders from both parties have put forward a call to action to address this and add to our economic vitality. But we can only adequately meet the challenge if we have the proper funding, and we will only have the proper funding if we also leverage “civic capital” from the private sector in innovative ways.

The numbers are daunting: experts estimate the cost to modernize our infrastructure will be in the trillions over the next decade, but the federal government spends less than 3 percent of its budget every year on meeting infrastructure needs. Total public spending is higher, but still insufficient, and our overall public infrastructure expenditures are significantly lower in real terms than they were just 15 years ago.

The reality is that public funds will not be enough. President Trump has called for a $1 trillion infrastructure initiative as a starting point, financed through public and private capital, and we agree.

UBS works closely with small businesses, large institutions and individual investors across America. We’ve heard from them on their desire to participate in wide-scale infrastructure investment. As an adviser to those who sponsor, manage and invest in infrastructure projects around the globe, we understand not just the economic imperatives and financial benefits but the civic responsibility and societal benefits that come from investing in and rebuilding America.

Policy changes will help get us part of the way there. Today, for major infrastructure projects to begin, we estimate that it requires 59 different permits and reviews from a dozen separate agencies. The federal government should mandate one lead agency for projects of national significance, and eliminate sequential permitting processes. The creation of a National Infrastructure Fund for these major projects, with tax advantages for individual contributions, could help tap nearly $100 trillion in U.S. household wealth and a provide a new vehicle for giving, promoting civic engagement. And to address the broadband gap, the government can better coordinate fiber optic installation alongside road construction or grid installation, creating cost synergies in the process. 

But we also need a fresh approach to private financing, one that uses civic capital drawn from the private sector. To address the $88 billion investment gap in our airports, we need to encourage privatization that allows proceeds to be invested in tangential infrastructure like roads and hotels. Water utilities, which historically have underutilized public-private partnerships, could draw on more private funding by increasing the maximum size of bank qualified bonds for new money investment. Our electrical grid would get a boost from tax incentives that encourage electric vehicles owners to use vehicle-to-grid technology to store and provide grid power.

We’re all familiar with what the challenges are today: highways choked with traffic, antiquated airports, vulnerable water systems, outdated and inadequate electric grids and older, inefficient ports. Unmaintained infrastructure makes it harder to move goods, creating inefficiencies and slowing down our economy. Crowded highways mean more pollution, less time with our families and a lower quality of life. And as we’ve seen recently in Flint and elsewhere, there can be real public health effects from older, unsafe water delivery systems.

Add to this challenge the new infrastructure needs of the 21st century: Every American doesn’t just deserve but requires access to broadband for the U.S. to continue to lead the world in economic strength. Unfortunately, broadband access in the U.S. is still inadequate, especially outside urban areas, which is increasing the digital divide and gap in education, economic opportunity and high-quality jobs for those in rural areas. 

Policy changes will spur private capital solutions to our infrastructure financing needs, helping to ease budgetary pressures on the federal government and grow our economy. And make no mistake: Private investors — individuals, institutions, funds and others — will be the critical element of any successful large-scale infrastructure proposal.

It’s time for the private sector to step up and provide concrete solutions on the role we can play in mobilizing civic capital for public purpose. As our leaders in Washington address the critical priority of our infrastructure gap, I hope these suggestions will help both parties understand the essential role private capital will play in rebuilding America. 

Tom Naratil is president of Wealth Management Americas and Americas UBS.

The views of contributors are their own and are not the views of The Hill.