“What Texas really needs – and what officials must support – is a permanent planning and funding mechanism, with a long-term time horizon and with private investment at its heart.”

Opinion: No matter the election results, Texas infrastructure must win

The private sector must step in but mechanisms for investment need to be put in place.

Sadek Wahba

Texas politics is as intensely polarized and divisive as ever – or maybe more so – as the 2022 general election campaign gets underway. One issue has the potential to unify. Whether Gregg Abbott or Beto O’Rourke wins, and no matter which party gains or loses ground, those who wind up in power have to deal with the dire state of Texas’ infrastructure.

The Texas Department of Transportation’s $85 billion, 10-year Unified Transportation Plan is a large, promising step in the right direction. But it does not go far enough. What Texas really needs – and what officials must support – is a permanent planning and funding mechanism, with a long-term time horizon and with private investment at its heart.

Nothing less will enable Texas to make up lost ground. Over the past several years, Texas has had more than its fair share of infrastructure failure. Transportation is only part of the problem. The state is only one Gulf hurricane or winter ice storm away from another catastrophic event. The American Society of Civil Engineers (ASCE) gave Texas infrastructure a grade of C in its 2021 report card.

The fundamental question – the one that should be top of mind for candidates and voters – is how to fund and build modern, resilient infrastructure for Texas and who should pay. The private sector must be part of the answer.

It may seem odd to talk about private funding given the scale of federal funding coming to Texas through the bipartisan infrastructure bill. The Infrastructure Investment and Jobs Act (IIJA) provides $35 billion over five years for Texas infrastructure. Some of those federal funds are beginning to arrive in the state.

But Texas officials must note that these funds are limited. The IIJA is a once-in-a-generation event. Political realities mean it is unlikely to be repeated anytime soon. The amount isn’t truly sufficient. The IIJA provides $1.2 trillion in funding, but the ASCE estimated in 2021 that current U.S. infrastructure investment from all sources is $2.59 trillion short of the actual need.

This is why the private sector must step in. The good news is that it can. Private investors are eager to invest in infrastructure projects, which produce stable, predictable long-term returns.

But mechanisms for private investment need to be put in place. It’s not easy for private funds to find their way to public projects. Enabling public pension funds – U.S. pensions alone had over $35 trillion assets under management in 2020 – to invest in infrastructure through Public-Public Partnerships (PPuPs) is one answer. Private ownership of public infrastructure is another. TxDOT will fund airport construction but leave the airports under municipal management and ownership. In Europe and Asia, airports are privately owned and operated and can offer superior service and better economics. Private investment also unleashes capital that the state can then invest in other critical sectors.

The best long-term answer is a state infrastructure bank – a permanent institution that would bring together public and private funds at scale, directing them to infrastructure projects. Texas is so large and has such extensive infrastructure needs that it could easily charter and support a bank of its own.

A Texas Infrastructure Bank offers many advantages. It can raise enough capital to support a balance sheet in the hundreds of billions of dollars, operate independently of the short-term political cycle and serve as a project clearinghouse, helping investors find the best projects and acting as a source for local officials lacking resources.

As Texans well know, everything in Texas is as large as possible. Unfortunately, that includes its infrastructure problems. The Texas Infrastructure Bank – a Texas-sized solution – should be a priority for every candidate.

An expert on global infrastructure investment, Sadek Wahba is a member of the Global Advisory Council of the Wilson Center, a nonpartisan policy forum, and a Senior Fellow of NYU’s Development Research Institute. He is chairman of I Squared Capital.