new report weighs public-private infrastructure construction projects

Noting that more than $441 billion has been spent at the federal, state, and local level on public-private infrastructure construction projects, a new report has been issued suggesting that in most cases those partnerships have proven cost effective.

The report, Public-Private Partnerships for Transportation and Water Infrastructure, notes that such partnerships are generally designed to achieve project outcomes more efficiently, and in a way that “transfers risk to the private party.”

Public-private partnerships centered on highway projects and done with private financing were notably up during the Great Recession, with a dollar worth increasing from less than $2 billion in 2006 to around $5 billion by 2013.

The numbers have been significantly more modest for transit and rail, as well as water utility projects, although in those segments the number of public-private partnerships also significantly went up during the Great Recession, only to decrease as the economy rebounded.

The highway partnerships, says the study, have generally “shortened design and building phases and lowered costs, albeit not in all cases and by small amounts on average.”

In the area of water infrastructure projects, public-private partnerships have “lowered operation and maintenance costs and improved compliance with regulatory standards.”

“Private financing has probably helped accelerate projects in some states by providing financing more quickly than under more traditional arrangement such as public debt offerings,” the report continues.

But despite those efficiencies, continues the report, partnerships on the federal level can also result in new costs “when they draw on federally supported financing.”

Although overall the report concludes that there are more plusses than minuses to public-private infrastructure projects, this cautionary note is added: “Highway partnerships have also resulted in bankruptcies, canceled projects, and delays.”
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By way of example, the report points to decreased highway toll revenues in the wake of the Great Recession that “led to a spate of bankruptcies among private partners that provided private financing.”

​By Garry Boulard

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