For better or worse, Wall Street is finally paying attention to Main Street. In a CNBC opinion piece this week, McGraw Hill Financial CEO Douglas L. Peterson told the financial community and policy makers that rural investments offer major values and deserve more attention from private investors.
"Rural infrastructure projects have built-in advantages that should be attractive to financiers. For starters, investment dollars go farther. Literally. A December 2013 proposal from the Florida Department of Transportation estimated that the construction of a new two-lane urban road cost $3.6 million per mile. The same mile in rural Florida? $2.1 million," wrote Peterson, whose firm’s holdings include Standard and Poor’s, the Dow Jones indices, and research firm Platts, which covers agricultural prices and other commodities markets. "Additionally, investing in rural projects comes with fewer unknowns and pitfalls than urban ones. Urban projects are essentially revamps of existing, decades-old infrastructure. The underlying infrastructure, even if replaced, carries more risk. More risk means unexpected challenges and higher costs."
The piece also expressed support for the USDA’s new Rural Investment Opportunity Fund. Announced this week by Agriculture Secretary Tom Vilsack, the fund is opening with a $10 billion investment by national cooperative bank CoBank, based in Greenwood Village, Colo. The effort is intended to help big-ticket rural projects like new water systems or updated electrical grids happen by providing greater access to private investors.
"Emphasizing a diversity of capital investment into America's rural heartland matters," Peterson wrote. "State and local governments are facing serious budget limitations and are dialing back their footprint. Traditional banking sources face regulatory constraints on long-term lending projects. So finding alternatives, such as funding from institutional investors, makes sense."
Peterson’s support isn’t purely altruistic. His company is developing a way to package rural investment opportunities in a way that makes them more appealing to potential investors, especially if they are unfamiliar with rural projects. But McGraw Hill Financial’s initiative is a response to the very real challenge of connecting private capital with projects in the heartland.
"Many major investors in urban centers aren't always aware of the significant investment opportunities in rural communities," Vilsack said this week. "If the White House Rural Council can help facilitate even a small portion of the enormous amount of available investment capital into rural places, we can grow key industries and create jobs in rural and urban areas from coast to coast."