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May 21, 2020

Covid-19 is redefining infrastructure investments

Governments worldwide are facing difficult decisions about diverting funds from long-planned infrastructure projects as the novel coronavirus pandemic wreaks havoc on their budgets.

Maintaining essential projects will likely mean a greater reliance on public-private partnerships and federal aid, while restructuring some deals, according to an analysis from Jones Lang LaSalle.

“The infrastructure imperative doesn’t go away because of COVID-19. But those investments may need to be redefined,” said Barry Scribner, one of JLL’s US infrastructure advisory service leads in the report. 

In Maryland, for instance, Prince George County’s effort to fund a needed school investment program hit obstacles over coronavirus concerns. “To moderate the impact on the county’s budget, we are helping structure a deal so their payments to the building contractor can be deferred until after the new schools are built,” said Scribner, JLL’s president of Department of Defense and Federal Services. 

Shutdowns from the pandemic have caused a drop in traditional infrastructure funding revenue, such as sales taxes, travel-related fees and user rates, according to JLL executive vice president Brian Oakley. 

That has delayed some scheduled projects, he said. The state of Missouri postponed several projects slated for May, valued at $40 million, after it lost budgeted revenue from a drop in driving-related taxes and fees, compounded by a lack of federal matching funds. 

But Singapore’s transport ministry used the partial closing of the Changi Airport to expedite scheduled upgrades, shortening the project’s duration by up to a year, he added.

“Traditional public financing sources are strained at the moment and will need to be supplemented to keep projects on track,” Oakley said. “These projects are critical, so we need to be pursuing all available options, from private investment to traditional public financing and federal assistance.”

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