Private Road Money

Private Road Money

Copyright 2003, Traffic World, Inc.

An Australian finance official says he has the answer to the gap between the money needed for highway projects and the money available to spend on those projects. Nicholas James of Macquarie Securities is promoting private investment as an answer to the growing U.S. highway infrastructure needs and the shrinking pot of gas tax money to pay for them.

"There are actually billions of dollars sitting around looking for good investments, in funds, pension funds and such," said James, director of Macquarie''s Infrastructure Group.

The Macquarie Infrastructure Group is an Australia-based equity fund with a market capitalization of approximately $4 billion that finances toll roads around the world. Supporters of private investment in public infrastructure envision extrapolating the idea to fund other infrastructure projects, such as airport projects, in the future.

Congress, which is inching toward progress on reauthorizing the multiyear highway bill, has been willing to consider marginal private investment allowances for road funding. The Bush administration''s proposed highway bill would allow some private investment, which now in the United States cannot be combined with public money for road projects.

Separately, two members of Congress introduced bills this year to allow states to levy tolls for new lanes of roads. The Senate Environment and Public Works Committee rejected the Senate version, sponsored by Sen. Wayne Allard, R-Colo., when it considered the highway bill. But supporters have not given up yet.

James says there has to be a partnership with various levels of government for private road investment to be successful. No one envisions private entities heading out and deciding where to build new roads, a function federal, state and local governments oversee. "Nothing like this can work without the community supporting it and wanting it," James said.

The other side of the equation is finding investors who expect to earn a return on their money by investing in road projects. So far, Macquarie''s 40,000 investors are doing well, with compound annual return of more than 25 percent.

The Macquarie fund went public in 1996 and now is investing in 25 road projects around the globe. The only one in the United States is in San Diego where a 9.3-mile, four-lane toll road is expected to open in the second half of 2006. Macquarie provided about 25 percent of the financing for the $773 million project.