Public-Private Partnerships May Be Solution to Aging Infrastructure

By: Bill Eller

Infrastructure is aging, the national deficit is growing and tax revenue has taken a hit from COVID-19. Many communities are wondering where they will find the funds to provide basic services to their residents, let alone address deferred maintenance on infrastructure projects.

How much longer can you kick the can down the road when it comes to infrastructure? Many water mains, dams and bridges have reached the end of their useable lifespan or exceeded it. This leaves many communities in a tight spot where they need to replace infrastructure, but don’t have the funding to do it. This is where public-private partnerships can help.

PPP projects are designed so the cost of the project is paid over the lifetime of the asset. Private corporations earn a return on their risk or receive a portion of the higher taxes generated by improved infrastructure. Profit is often tied to performance, while local governments retain ownership of the assets.

Public-private partnership can bring in technology and expertise that local government might not otherwise be able to exploit. PPP projects also bring quick decision-making and best practices honed in the business world. Studies show public-private partnerships help to get projects completed on-budget and on-schedule.

PPP projects are rising in popularity, with more than $36 billion worth of partnership projects coming to fruition in the last decade, saving taxpayers 20 percent for most projects, and more than 30 states have opened up public-private partnerships to their municipalities since 2015.

Here are three public-private partnership examples in the United States:

  • UC Merced 2020, a 1.2-million and $1.3 billion project including student housing, classrooms, teaching and research space, wellness and counseling facilities and recreational spaces was recently delivered to the University of California Merced. It was a design, build, finance, operate and maintain public-private partnership with a coalition of local entities working together to complete and maintain the project.
  • LUMA, a consortium of U.S.- and Canada-based firms will take over Puerto Rico’s beleaguered Electric Power Authority’s transmission and distribution, billing and collection, capital improvements and human resources. The authority’s lack of capital improvements and maintenance means that customers see more than four times the number of interruptions and six times the amount of downtime. The deal also will help fund infrastructure projects the territory can’t afford to fund as it struggles under $70 billion in debt.
  • Another public-private partnership example is Challenge Seattle, a coalition that has been exploring an ultra-high-speed rail corridor from Portland to Seattle to Vancouver, along with broadband internet access and strategic land zoning. The coalition expects the population to expand to 3 to 4 million by 2050, but with infrastructure that is only able to accommodate up to 2.3 million. The coalition hopes to proactively optimize the area’s infrastructure to not only withstand the population explosion, but to create new, walkable communities.

Besides these public-private partnership examples, PPP projects have been garnering attention on a national level recently. The National Governors Association recently met to explore private-public partnerships to finance infrastructure projects in the post COVID-19 era. Arizona Gov. Doug Ducey, Montana Gov. Steve Bullock, Louisiana Gov. John Bel Edwards, Wyoming Gov. Mark Gordon and Virginia Gov. Ralph Northam and Maryland Gov. Larry Hogan led a virtual summit for Hogan’s NGA Chair’s Initiative, “Infrastructure: Foundation for Success,” with Ducey leading a panel discussing the South Mountain Freeway project, which was completed three years ahead of schedule and $100 million under budget.

Additionally, a bill has been introduced in the House of Representatives, the Infrastructure Bank for America Act of 2020, that would lend funds to infrastructure that will help the country emerge from COVID-19. It would encourage PPP projects and private investment.

Public-private partnerships can become an additional tool for you in bringing improvements that enhance the economy and safety of your community.