Main Street, not Wall Street, should fix crumbling U.S. infrastructure
Repairs will cost trillions. Public pension funds can help pave the way.
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America needs a large source of stable, long-term capital to build the system of buildings, roads, and power supplies needed to sustain the country. We need a source of capital that values infrastructure because it provides a reasonable rate of return, strengthens the overall economy, and doesn't burden users with excessive fees.Skip to next paragraph
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Enter that source of capital:
Public pension funds, which are responsible for the retirement benefits of more than 18 million Americans, have more than $3 trillion in assets, and a long-term investment approach consistent with the stable returns that infrastructure assets generate.
Pension funds could buy and build infrastructure, putting the profits to work for the retirement of workers, not for the benefit of Wall Street CEOs.
This is how it works: Pension funds pool their assets and invest directly in projects to build new roads and bridges in multiple states, bypassing the Wall Street firms that want to siphon off profits. The steadyily increasing streams of revenue that come from tolls and other sources would deliver stable, long-term returns to working Americans, while creating well-paying construction and service jobs connected to each project.
These pooled pension direct investment vehicles would:
• Provide the much needed capital infusion sought by governors and state legislatures to improve their states' infrastructure;
• Ensure that billions of dollars stay in our communities instead of going to big financial firms;
• Create a multiplier effect, generating jobs, economic activity, and new tax revenue for states;
• Achieve strong investment returns and stable long-term cash flows that meet or exceed actuarially required levels; and
• Support "green" infrastructure projects that are environmentally sustainable.
Hurdles remain to pension funds' direct investment in infrastructure. Pension funds with little history of collaboration will have to work together. But one important barrier could be lifted by passing federal legislation that would allow pension funds to access tax-exempt debt to finance infrastructure investments.
This is a solution worth supporting. Public pension funds, governors, state treasurers, comptrollers, and the Service Employees International Union (SEIU), whose members participate in pension funds with more than $1 trillion in assets, have begun preliminary discussions about how to create this type of investment vehicle.
This collaboration offers a promising model for a win-win solution to help address the growing infrastructure problem we face across America.