The Hood River–White Salmon Bridge connecting Oregon and Washington. Photo: Brett Hansen/FHWA.
The Pacific Northwest’s Hood River Bridge could have been rebuilt for $150 million just eight years ago, but is somehow now on pace to cost more than $1.1 billion. And the agency that owns it spent the intervening years commissioning a study and creating more red tape rather than a solution.
That kind of mind-bending arithmetic and its accompanying pattern of choking cost overruns on public projects shows up repeatedly, whether in the construction of county jails, renovated water systems, or other public infrastructure assets across the country. And at the same time, private capital is sitting outside the gate with a willingness to spend more money on infrastructure than at any point in history.
Why aren’t the deals happening? Why are governments consistently willing to watch more taxpayer funds swirling the drain as they try to complete and maintain infrastructure projects?
Wherever a public asset is falling apart, the officials in charge too often act as if they have more to gain from delay than from fixing the problem. Local governments own the overwhelming majority of the country's failing bridges, water systems, fire stations and streetlights, and are objectively falling farther behind each year in repairing and replacing them.
Private capital (from pension funds, sovereign wealth funds, and family offices) has more appetite for infrastructure than it has in decades, with institutional allocations climbing sharply and investors describing themselves as under-deployed relative to their targets.
But the delivery of completed projects keeps stalling anyway, and the cost overruns keep soaring. Too often the people and institutions currently responsible for these assets have the wrong incentives, which is to keep operational control despite the historically poor performance of governments in managing their infrastructure assets.
Almost no elected officials seem willing to give that up, and public works departments that would lose budget allocations to outside firms fight to keep infrastructure maintenance work in-house.
But most elected officials have never hands-on managed a major construction project in their lives. Admitting as much might be a good way to lose an election, so a feasibility study or an indefinite delay for “environmental concerns” often serves as an effective delay tactic.
The market failure isn’t just on the government side, though. Private capital investors who could fund a fix often arrive with financing terms built for a boardroom, not a city council meeting. That means that too often, no elected official wants to try to sell those terms to voters.
That leaves private capital circling a small set of safe, already-profitable deals like already-built-and-operating toll roads, while the broken assets that need investment sit untouched because nobody has built a financing model that a community would accept in the first place.
But the problems - and the opportunities - for private capital extend well beyond private bridges and toll roads.
Consider America’s fire stations. Roughly 40% of the nation's fire stations are more than 40 years old, many without backup power, and a majority lack basic exhaust systems that protect firefighters from the carcinogens they may come in contact with every shift. The cost of bringing the U.S.’s firehouses up to code would run into the tens of billions of dollars.
Same thing for the country’s school buildings, where the estimated tab to get all schools into a good state of repair is $85 billion.
But rebuilding schools and firehouses isn’t sexy like building a new NFL stadium is. So fixing vital facilities for critical constituencies loses quietly (but consistently) to louder and flashier budget priorities year after year.
The cycle only spits out action when a firehouse or school collapses or burns or is rendered otherwise uninhabitable.
Voters have begun responding to this pattern even without naming the mechanism behind it. Municipal bond rejections are running well above historical averages, with about a quarter to a third of local measures failing in recent voting cycles. Those rejections track years of watching the same officials and agencies that delayed the last project ask again to be trusted with the money for the next one.
Solving this starts with identifying who benefits from the current arrangement. Just who is protecting a job or a revenue stream instead of an asset, and how long has a delay been quietly reclassified as due diligence?
Capital allocators have to build financing structures designed to survive local politics rather than ones that look slick in an investment committee memo. Financing deals need to offer communities something they can actually accept rather than imposing one more charge taxpayers will resent.
Every year that the Hood River project sat under study instead of under construction, its price climbed and its risk compounded. Nothing about that dynamic is unique to one port authority in the Pacific Northwest.
Public infrastructure is falling behind because delay is rewarded, replacement is deferred, and too many investors seek financing structures that don’t fit the most broken assets. The bridge that needs to be built most urgently is the one that connects and solves those two opposite problems.
Bob Hellman is the CEO and Managing Director of American Infrastructure Partners.