Critical repairs, maintenance and construction of the U.S. infrastructure system have been hindered by the battered economy and reduced budgets, according to a study titled, Infrastructure Construction and Equipment Finance Opportunities. But, the gap between the investment required and investment allocated creates upside potential in infrastructure construction for equipment suppliers, lessors of that equipment, and financial institutions, to help close the investment deficit that exists to restore the national infrastructure to good condition.
The report, issued by the Equipment Leasing & Finance Foundation (ELFF), Washington, D.C. offers an outlook on infrastructure construction and a review of the current situation, as well as an analysis of future trends. The study also refers to current legislation or policies that may impact infrastructure construction, provides insight into the impact of infrastructure construction on equipment demand, and examines the opportunities this landscape presents for equipment finance. It was conducted at the request of the ELFF by IHS Global Insight.
The U.S. infrastructure system has been rated a D grade by the American Society of Civil Engineers (ASCE), due to years of neglect and delayed maintenance. It is estimated that $2.2 trillion is required over the next five years to repair and modernize infrastructure, which includes highways and streets, power and communications, sewer and water, and other heavy and civil engineering.
According to the report, stimulus bills such as the American Recovery and Reinvestment Act will give infrastructure construction a small, temporary boost. The future of infrastructure investment depends heavily on federal legislation. Currently, Congress is targeting the highways and streets, power, and rail segments. The prospect of public-private partnerships and the development of a national infrastructure fund designed to attract private investors is becoming more enticing as government agencies struggle with fiscal troubles.
Lack of work forced many companies to lay off workers and idle or sell their equipment. Utilization rates among construction equipment fell to around 60 percent compared to around 80 percent during normal economic times. Operating on a lower-risk model, financial institutions are requiring that borrowers have top credit quality. They are also giving preference to longstanding clients.
Opportunities detailed by infrastructure sector: The most visible infrastructure segment, highway and street projects will continue to attract public and private attention. Gaining momentum as a preferred mode of transport, high-speed rail studies are sprouting up across the nation. Power sector investment will dominate infrastructure construction spending for this sector.
Despite the urgent need for repair, federal support for water and sewer infrastructure is generally mixed. Trends in transportation are generally slower moving and less volatile, which means that growth in the segment will not occur overnight. The nation's dams, levees, and locks all received poor to failing grades from the ASCE. Of the 257 locks that are part of the inland waterway system, 47 percent were deemed functionally obsolete by the U.S. Army Corp of Engineers.