The need for innovative financing will drive innovation and dealflow.
- Funding shortfalls on the state and municipal level are expected to drive future P3 procurements
- In January, the incoming Democratic majority in Congress intends to introduce a $300 billion bond plan to fund infrastructure projects
- Recent legislation such as New Jersey’s P3-enabling law suggest that more states are looking at P3 potential projects
Some market participants are expecting funding shortfalls and policy changes to spur new public-private partnerships (P3) in 2019.
“We will see more public-private partnership-funded projects in 2019,” Ronald C. Green, shareholder at the global law firm Greenberg Traurig said. “As infrastructure needs continue to grow and governmental funding sources remain flat, cities will look for opportunities to leverage private investment in projects.”
Green told Icons of Infrastructure that he believes all levels of government will be involved in these projects. He added that, with the creation of opportunity zones, more private investment will occur in inner cities.
“It is a win-win,” Green said. “The private sector will gain tax benefits from those investments while the city, county and state tax base grows.”
Marshall Macomber, senior policy advisor at the Association for the Improvement of American Infrastructure (AIAI), said that he expects the P3 pipeline to grow as all levels of government are forced to find ever greater infrastructure efficiencies to meet their demands. He added that the same pressures will spur innovations for the taxpaying public.
“P3s and other alternative procurements blend the ‘best of the best’ when it comes to merging technology and the built environment,” Macomber said, noting that Americans will see massive advances in their infrastructure systems in the coming decades. “P3 stands as the model to help deliver the most efficient, innovative and ultimately lowest cost infrastructure in this time of constrained resources and economic transformation.”
New Infrastructure Policies
Democrats are in January poised to become the majority in the House of Representatives. While there has been talk in the broad market about the potential for bipartisan cooperation on infrastructure development and refurbishment, some say that the chances of any increase in federal funding for P3 projects is low.
“The longer term trend is still ‘less federal funding for projects,’” Brien Desilets, head of Infrastructure Advisory at Grant Thornton said. “Even looking at transportation and rural states infrastructure, the federal share of funding for projects is going down.”
Desilets noted that the incoming Congress may create new programs around green infrastructure and renewable energy/renewable fuels. But, the body is already developing a more comprehensive policy.
U.S. Representative John Yarmuth of Kentucky told Icons of Infrastructure that the Democrats in January intend to introduce a $300 billion bond plan to fund infrastructure projects. The bonds would be sold exclusively to public and private pension funds, and the revenue would be used to create a national infrastructure bank. The interest rate on the bonds would be two percentage points more than the yields on 30-year Treasuries.
Yarmuth, who is slated to lead the House Budget Committee when the new congress convenes, said that he expects the legislation could get rolled into a broader public-works package that Democrats want to get approved immediately after they assume control.
“As infrastructure needs continue to grow and governmental funding sources remain flat, cities will look for opportunities to leverage private investment in projects.”
— Ronald C. Green,
shareholder, Greenberg Traurig
Legislative “green shoots” in US States
The growing number of states that have recently passed P3 enabling legislation is one more sign that P3s may play a role in more infrastructure projects down the road.
Notably, New Jersey Governor Phil Murphy recently signed the Sweeney-Oroho P-3 Bill, S-865 into law. The legislation permits government entities to enter into public-private partnership agreements with private firms in order to undertake building and highway infrastructure projects. The current law authorizes only state or county colleges to enter into public-private partnership agreements. The new law allows local government units, school districts, and state government entities to be eligible to enter as well.
The New Jersey Economic Development Authority will provide oversight for the P3 agreements.
“We are confident that the new P3 law will allow for a statewide expansion of successful P3 projects,” State Senator Steve Oroho (R-Sussex/Warren/Morris) told Icons of Infrastructure. “These partnerships are an important way to stretch scarce public dollars to complete needed projects that will benefit our residents and create jobs and economic growth.”
Sen. Oroho, who is one of the P3 bill’s sponsors, said that P3s will promote innovative and sustainable infrastructure development in the state. He also referenced the success of P3s at the state’s public colleges and universities.
Notably, Ramapo College in Mahwah is partnering with a private company to repair its roof. The roughly $23 million project entails the replacement of the roof, and the installation of a 5-megawatt solar panel system that will cover it as well as carports and berms along NJ Route 202. The generated electricity will then be sold back to the college.
Mary Scott Nabers, president/CEO of Strategic Partnerships, Inc., noted that nearly forty states now have public-private partnership legislation in place. Morever, she said that — among them — Virginia, Illinois, New York, Maryland and California stand out as leaders. But she added that 2019 may be a bellwether year for P3s.
“Public-private partnerships are just now beginning to be considered common in the United States,” Nabers said. “America is definitely behind the curve and it has taken longer than it should have taken for the public at large to understand the benefits associated with this type of engagement.”