COVID-19 is redefining infrastructure investment

Moving ahead

Traditional sources of funding, such as user rates, sales taxes, and travel-related fees have dried up, causing financing concerns, says Brian Oakley, Executive Vice President, JLL — a U.S. based advisor to infrastructure clients.

“In some cases, this has caused project delays, while in other cases, public agencies have used the opportunity to accelerate projects,” he says.

After Missouri lost a huge portion of its budget — due to the lack of driving-related taxes and fees as people sheltered in place, compounded by a lack of matching funds from the federal government — the state delayed a handful of projects valued at US$40 million that were slated for May.

On the other side of the coin, Singapore seized an opportunity for infrastructure investment. The partial closing of Changi Airport due to COVID-19 allowed the Ministry of Transport to expedite planned upgrades, shortening the project by up to one year, Transport Minister Khaw Boon Wan told Parliament.

In Genova, Italy, the Morandi Bridge — which collapsed in 2018 — was nearing completion before the pandemic, and is now in its final stages. Construction of the vital thoroughfare, a joint venture between a private construction company and the infrastructure subsidiary of a state-run shipbuilder, proceeded with strict social-distancing and PPE measures in place.

“Governments are trying to figure out what to do amid redefined priorities,” says Lindsay Stowell, Executive Vice President of Public Institutions and Higher Education at JLL. “Some are looking to minimize increases in user fees during these difficult times while others are seeking to keep projects on track while tapping new funding sources. However, there seems to be broad recognition that provision of and investment in infrastructure will be essential to supporting economic recovery.”

“For shovel-ready projects, these incentives provided meaningful benefits, accelerating job growth and much-needed infrastructure improvements,” he says. “The Port of Miami Tunnel project, a vital undersea thoroughfare, got moving during the recession with the help of a federal loan.”

A long-neglected issue

In the U.S., infrastructure was neglected long before COVID-19 spread across the world. The country’s infrastructure needs are estimated at over $7.7 trillion by 2030 just to keep pace with GDP, according to OECD/WEF.

“We know that 1 in 3 U.S. bridges are structurally deficient,” says Walter Kemmsies, Economist and Chief Strategist for JLL’s U.S. Ports, Airports & Global Infrastructure Group. “There are more than 46,000 bridges that don’t have the capacity to support local populations.”

Transporting goods into congested ports and along crumbling roads causes invisible economic damage.

“When you can’t move goods quickly, that adds costs,” Kemmsies says. “It makes the U.S. less competitive as a nation.”

The state of Georgia, which needs $200 billion in infrastructure updates according to estimates, was already looking at a loss of revenue due to a planned state income tax rate cut that passed the Georgia House of Representatives in March.