Virginia Project Shows What's Possible With Privatized Infrastructure

 | Jan 18, 2017 | 3:00 PM EST
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I discussed the concept of an infrastructure bank last month in the column, "An Infrastructure Bank Is a No-Brainer." 

That, however, was only a reference column. The pragmatic reality is that if there is to be an infrastructure bank, it will take time to create and President-elect Trump is signaling that he isn't going to wait for that to happen. It might happen in the future, but right now it appears that Trump is going to move forward with his plan for the federal government to facilitate infrastructure investment by the private sector immediately, and will announce the plan soon. 

Privatized infrastructure and public-private partnerships are not new. I discussed the increasing U.S. and global reliance on such and how to invest in it in the column, "When Infrastructure Goes Private," shortly after President Obama's 2014 State of the Union address, in which he announced his intentions to pursue an infrastructure investment program. 

The broadest global way of investing in such is through iShares Global Infrastructure ETF (IGF) and SPDR S&P Global Infrastructure ETF (GII) . I discussed the strategy of those ETFs and the companies in which they're invested in 2014, so I won't rehash it here. 

From a domestic U.S. perspective, though, it is probable that the Trump plan will be similar to the privatized infrastructure plans already being used in Europe. 

There is also an area in the U.S. that is well along this path and provides excellent insight into what some of the goals and results of the Trump plan will be. 

That area is Tysons Corner, Va., a metro area in northern Virginia about 10 miles from the center of the Washington, D.C., federal district. In the last four years, the area has become the largest concentrated infrastructure investment area in the United States and one of the largest in the world. 

Even the contemplation of the plans was awe-inspiring, as was evidenced in this 2013 Washington Post article concerning them. 

Most germane to this column is that in conjunction with the separate municipal and private investments that have been made to transform the area into one of the largest urban centers in the U.S. in just a few years, many of the roads in the surrounding areas have become privatized toll routes. These roads are referred to as "express lanes" and were built to run parallel to the existing municipal, state and federal roads. 

Drivers can opt to use the "express lanes" and pay a variable toll for doing so that is determined by congestion on them. The more drivers use them, the higher the toll goes, with the idea of ensuring that traffic on them moves at a constant speed, regardless of what is happening on the parallel legacy roads. 

Although numerous companies have been involved in the development of the Tysons Corner area, as pertains to investment opportunities it implies, if what's been done there is indeed one of the principal models to be followed elsewhere in the U.S., there are three principal beneficiaries. 

They are, as I discussed in the column, "Implications of a Trump Presidency, Part 2: Trump vs. Military Industrial Complex," Fluor (FLR) , Jacobs Engineering (JEC) and Chicago Bridge & Iron (CBI) . All three are already established as "lead contractors" for federal government contracts and Fluor has been especially involved in the Tysons Corner development. 

In the immediate, I expect all three stocks to get a pop from the Trump announced plans, but I'm also a bit flummoxed by the fact that they haven't already been getting a bid over the past month as Trump has increasingly telegraphed his intention of pursuing an infrastructure program of some kind. 

This may be due to investor cautiousness concerning the political viability of any of Trump's plans as the debt ceiling fight looms in March. It's probably also due to the fact that many economists don't like privatized infrastructure and this is confusing investors. 

Economists have a tendency not to deal in the real world where real and pragmatic decisions have to be made. 

The situation is very fluid, but the spectacular performance of what's been accomplished in the Tysons Corner area over the past few years will, in my opinion, go a long way toward garnering the political support necessary in Congress to affirm Trump's infrastructure proposal because many members of Congress have witnessed it firsthand. Most live in the surrounding suburban areas of Tysons Corner and it is impossible not to be impressed by what's happened there. 

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