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Follow TURFStates turn to P3s to get projects done
P3s are not a good deal for taxpayers or the public interest. They don't bring money to the table, the taxpayers are still going to pay for every cent of these projects - and pay more because of the private corporations doing them. What's the point of getting a project done faster if no one can afford to actually drive on it?
We're not solving congestion with P3s, just manipulating traffic for private profit. The cost of borrowing private capital versus public capital makes P3s cost more, not to mention politicians who allow corporations to control and set toll rates and extract the highest possible toll from the traveling public upon threat of losing their car registration or even going to jail (for failure to appear in court)!
Private money, public projects: More U.S. states doing deals
By Hilary Russ
Reuters
April 14, 2014
(Reuters) - Visitors to New York who land at LaGuardia Airport could be forgiven for not realizing they've arrived in one of the world's swankiest cities.
The airport's leaky ceilings, threadbare atmosphere and meager food and public transit options put it at or near the top of lists of the worst airports in the United States.
But with constraints on its resources and no appetite for further debt, the agency decided to tap private investors and developers to rebuild the 50-year-old central terminal for $3.6 billion, instead of using traditional public finance methods.
It's not alone. Short on funding but big on need, U.S. states and cities are increasingly turning to such deals, known as public-private partnerships, or P3s, hoping to leverage assets that can bring a quick infusion of private dollars to rebuild crumbling infrastructure.
The last 12 to 15 months have seen more deals and more opportunities to invest in the sector, said Jim Barry, head of BlackRock's infrastructure investment group. U.S. insurance companies and public pensions are all eager to invest.
"After let's call it a decade of promise, I think we are actually beginning to see that movement," he said. "Over the next five years, you could have a lot of deal flow."
The pacts have been common for decades in the U.K., Australia and Canada but have been slow to catch on in the United States. Now, analysts say, a shift is under way.
The 2007-2009 recession was a motivating force. States and cities had no choice but to reduce spending on maintenance and construction, and the federal economic stimulus program enacted in President Barack Obama's first term offered only a temporary boost.
At the same time, the other main source of transportation funding -- grants from the federal government -- also dwindled.
The federal highway trust fund, which uses gas taxes to pay for highways and mass transit projects, is nearly broke.
Now, there are more projects in development and more investor interest than ever in the U.S. P3 market, analysts say. Public agencies are also looking more closely at the pacts because they're able to add less debt to their books while shifting construction risk to the private sector.
"You're actually seeing ... a real pipeline of projects" building up since 2012 and continuing through at least this year and possibly next, said John Medina, a global project analyst at Moody's Investors Service.
The projects include everything from a light rail system in suburban Washington, D.C., to the replacement of hundreds of bridges in Pennsylvania.
In the past, the United States has had an average of one or two public-private partnership deals valued at more than $500 million in the works annually, according to Bank of America Merrill Lynch's municipal banking group. This year, the bank said, there are 8 to 10 such projects.
Thirty-three states allow varying levels of public-private partnerships for transportation projects, according to the National Conference of State Legislatures, up from 23 in 2006. Kentucky lawmakers passed such legislation in late March, but the governor vetoed it on Friday.
Investors clearly have an appetite for infrastructure. Unlisted infrastructure funds raised $17.1 billion of capital for projects in North America - targeting private and P3 infrastructure projects in the United States - in the last quarter of 2013, according to Preqin, which provides data on alternative assets. That's the highest quarterly total on record, Preqin's data showed.
The needs are huge. The nation should spend $3.6 trillion on infrastructure by 2020 to recover from decades of neglect, the American Society of Civil Engineers said last year.
Wall Street and public officials have also expanded their definition of what a public-private partnership is - and thus expanded the number of deals that some people consider P3s - no longer applying it only to big, new transportation infrastructure. Student housing, courthouses, jails, parking garages and community centers are all trying out versions of such pacts.