Zurich’s Paul Horgan Says Public-Private Partnerships Could Fund Infrastructure Investments

America's deteriorating infrastructure is in dire need of repair and upgrades, and there are big stakes at risk for businesses and economic developers.

America’s deteriorating infrastructure is in dire need of repair and upgrades, and there are big stakes at risk for businesses and economic developers.

A recent infrastructure report card, the American Society of Civil Engineers gave the U.S. a “D+” for the condition of its roads, bridges, dams and other areas. The report comes out every four years and has given the country a grade of no higher than a “D+” since 1988. While ports and rails were given higher grades, the ASCE noted some of the country’s biggest failings are in its transit, aviation and roads.

Paul Horgan, head of North America Commercial Insurance at Zurich North America, told Chief Executive there is little doubt that the deplorable state of the country’s infrastructure is costing the economy countless hours of lost productivity and efficiency. “The impact of this is wreaking havoc on many of our nation’s businesses, strangling their ability to thrive. Aging and poorly-maintained infrastructure exposes companies to a number of risks,” Horgan said.

Horgan said one of the biggest issues is that aging infrastructure can lead to supply chain disruption. He said U.S. businesses spend $27 billion in additional freight costs due to poor conditions of roads and other surface infrastructure. Businesses also can incur additional costs for insurance coverage, including property, workers’ compensation and supply chain and business interruption insurance. The ASCE estimates that by 2020, the worsening conditions will cost American businesses $1.1 trillion in lost trade.

Most of the interstate highway system in the United States is more than a half-century old, and the Department of Transportation said it’s in need of $189 billion in repairs and improvements. More than 55,000 bridges in the country are deemed “structurally deficient,” and there are an estimated 1.2 million miles of lead pipes that need replacing.

“The private sector treats the infrastructure as an investment. They bring more discipline to maintainING IT than the public sector, who view it as a cost.”

While he has yet to release any details, President Trump made a pledge during his campaign to invest $1 trillion in the country’s infrastructure. The New York Times reported that Trump will try to use $200 billion in federal spending and attract an additional $800 billion from private investors and local governments.

Horgan supports the idea of establishing a national infrastructure rebuilding program with a combination of direct federal funding and incentives to encourage private investment. He said as federal, state and local government budgets are already stretched, a growing number of entities are turning to public-private partnerships (known as P3s) as an alternative path to fund infrastructure needs. These models allow private investors to fund construction projects and recoup their investments by charging users of the facility once the construction is complete. One such example is Chicago’s sale of the rights to tolls from the Chicago Skyway Bridge. After paying the city $1.5 billion, private sector buyers reconstructed the bridge, entitling them to the stream of tolls to be collected in future years.

“The private sector treats the infrastructure as an investment so they are proactive in maintenance for the life of the project. They bring more discipline to maintain infrastructure than the public sector who view it as a cost,” Horgan said.

Horgan added that incentives for business participation in these partnerships is improvement in the general economy, along with financially safe and reliable returns and the potential for tax advantages. While P3s represent only 2% of total funding, up to 20% of the necessary infrastructure upgrades could be funded through this model. Horgan said such infrastructure investments can be a real “game changer” for the economy and businesses. “We need to make sure the infrastructure we put in place is built to face the challenges of the next century, not the last century,” Horgan said.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.