How to Pay for Rebuilding Infrastructure? Where would the money come from to fix the nation's crumbling infrastructure? Investment banks and hedge funds are one source, but there are many ways to finance big construction projects.
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How to Pay for Rebuilding Infrastructure?

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How to Pay for Rebuilding Infrastructure?

How to Pay for Rebuilding Infrastructure?

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LIANE HANSEN, host:

For some, the money to fix the nation's bridges and roads can be found on one of those roads, Wall Street. Investment companies are raising capital in so-called infrastructure funds. The idea is to help, say, a county government hold down costs and make money in the process. NPR's Curt Nickisch filed this report.

CURT NICKISCH: Hi there, how's it going? Can I have a receipt, please? Thanks.

So I just paid $1.25 to go through the toll on the Massachusetts Turnpike. And some people look at my car and the steady stream of cars behind me that are annoyed that I'm just pulling out now and think, these tolls really aren't bad business models.

Mr. PETER LUCHETTI (Senior Partner, Table Rock Capital): They provide stability and cash flow, which are nice qualities in an investment.

NICKISCH: That's Peter Luchetti. He's with the investment firm Table Rock Capital in California. And he's been raising literally billions of dollars to help public agencies build toll roads and power lines and sewer pipe around the country. Infrastructure funds are not new, but they're pretty popular right now. U.S. firms have raised about 100 billion dollars in them over the last five years. Sure, the recent credit crunch has made investing in concrete things more attractive, but Luchetti says the real reason for the boom is the nation's looming infrastructure needs.

Mr. LUCHETTI: Even before the credit crisis, that train was coming down our track and was getting closer and closer and closer. And that pressure is becoming quite intense now.

NICKISCH: It's quite intense because the money has to come from somewhere. Ray Levitt, a public policy expert at Stanford, says it's getting harder for local and state governments to raise money through bonds.

Dr. RAY LEVITT (Professor of Civil and Environmental Engineering, Stanford University): A combination of that plus an allergy to taxes in the U.S. has meant that public agencies are very cash strapped to come up with the capital costs. So there's a tremendous unmet need for infrastructure.

NICKISCH: That's where private money could come in. Other countries do this a lot already. Investor Peter Luchetti says they're able to save as much as 30 percent on the cost of big projects when they team up with private investors to take advantage of their business expertise.

Mr. LUCHETTI: So, there's a real gain to be had by tapping into those private sector management skills and having them benefit the public sector.

NICKISCH: With savings like that, you might think that domestic projects would be cropping up left and right.

Mr. JOHN FOOT(ph) (Researcher in Public-Private Partnerships, Harvard): Well, that hasn't happened.

NICKISCH: John Foot researches this field at Harvard. He says one reason this trend is getting off the ground more slowly in the U.S. than many people expected is because these deals are complicated. They're hard for policymakers to explain to voters. Each project is different and Foot thinks infrastructure funds will do well if they focus on the ones with the clearest benefit to society.

Mr. FOOT: And although these public-private partnerships are not the silver bullet for our infrastructure problems in this country, they could be one important possible solution.

NICKISCH: One possible solution, Foot says, because even with the 100 billion dollars they've got now, these investment funds still won't come close to paying for all of the country's infrastructure needs. Curt Nickisch, NPR News.

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