State and local governments are finding their ability to fund infrastructure through traditional municipal bond markets increasingly constrained as a result of both reduced public budgets and market conditions. This capacity restriction comes at a time when demand for new infrastructure, and for infrastructure improvement and innovation is increasing.
For instance, the Pacific Coast region is brimming with potential in an increasingly competitive global economy – but that opportunity is jeopardized by transportation, energy and public works systems that are aging or nearing capacity. Water projects alone are expected to cost, according to the American Society of Civil Engineers:
- An extra $4.6 billion a year in California (2012 data)
- An extra $2.8 billion over the next 20 years in Oregon (2009 data)
- An extra $6.7 billion over the next 20 years in Washington (2009 data)
To bridge the gap, officials from the states of California, Oregon and Washington and the Province of British Columbia today announced they have formed a partnership to help them meet critical infrastructure investment needs that will total an estimated $1 trillion over the next 30 years. The West Coast Infrastructure Exchange(WCX) brings together governors, treasurers and key infrastructure development agencies in the three states and British Columbia with a shared goal of making vital public works and energy projects more feasible in order to improve economic competitiveness and to maintain the region’s unparalleled quality of life.
The Exchange plans to achieve that goal by helping West Coast states and British Columbia explore alternative funding methods, including the potential of private capital, to finance critical infrastructure projects.
The Exchange hired a consulting team led by Jacobs to conduct research and work with the Exchange to develop a strategic plan to support implementation of the Exchange. Our findings are part of the basis for the Exchange’s announcement. Our report, released today, found that a collaborative mechanism such as the West Coast Infrastructure Exchange would help address the region’s infrastructure needs. Our study found that there are promising private investment and delivery models employed more extensively internationally that could be put into operation by the Exchange to address the funding gap identified in our report.
Our report recommends a structure for the West Coast Infrastructure Exchange and implementation phases. The Exchange would begin immediately with collecting data and developing a business case evaluation tool. Over the next 12 months, the Exchange would create an information exchange, develop underwriting standards and deliver technical assistance to jurisdictions. When fully implemented, the Exchange would conduct business case evaluations for candidate projects and connect private investment with public infrastructure opportunities.
No projects have been selected. But the Exchange is laying the groundwork to identify a first wave of projects. During this start-up phase, an Exchange manager will be recruited and participating governments will hammer out criteria for how to evaluate projects.
The participants’ goal is to develop an innovative infrastructure financing system that provides cost savings and better collaboration, and makes projects more feasible by helping to broker connections between public projects and sources of capital. Some examples of how the Exchange could achieve its objectives include:
- Identify and bundle similar projects, which would allow for streamlining of term sheets and allow smaller projects to qualify for different financing options.
- Manage projects more efficiently, such as through “performance-based” partnerships.
- Collaborate with industry experts and innovators.
- Collect data and make expertise available to governments that may have little experience designing and financing projects.
Officials from the three participating states convened high-level talks in 2011 to discuss the potential of jointly managing and helping to broker innovative financing for infrastructure projects. Their efforts attracted the attention of the New York-based Rockefeller Foundation. The foundation provided start-up grants worth $750,000 to the Oregon State Treasury to get the Exchange up and running.
Jacobs’ planning study represented collaboration by in-house specialists related to the diverse range of infrastructure that the Exchange is interested to support. David Knowles served as the overall Project Manager for the effort. I lead the investigation of finance options and business case evaluation frameworks. Other key contributors included Matthew Wilson, who led the investigation of market trends and Kathryn Pett, who led the review of governance and organizational models. Debra Coy, a principal in Svanda & Coy LLC, served as a key advisor to the team. In addition, several subconsultants provided key insights and information to support the planning study.
More information including examples of innovative projects, the Jacobs study and the formal WCX agreement is available from the website, at www.westcoastx.org.
This article has been republished with permission by CH2M Hill. To view the original article, visit the CH2M Hill blog here.