Summary | Current Environment | Case Histories | District of Columbia | Real Estate | Water | Transportation

Over 50,000 non-profit institutions participate in the $2.6 trillion municipal bond market to finance roads, bridges, schools, hospitals and other projects. However, aging infrastructure and increasingly challenged municipal revenue have made traditional bonding less attractive in some cases and unfeasible in others. Federal and local governments cannot satisfy populist demand for new modes of energy, transportation and economic development within existing budgets.

The Federal Highway Administration has flagged 72,000 bridges as structurally deficient in 2007; by the end of 2008, the Highway Trust Fund was projected to have a several billion dollar deficit and Congress was forced, in September, to transfer over $8 billion in general funds to the Trust Fund in a bailout of sorts. The American Society of Civil Engineers puts the price tag for needed infrastructure repairs over the next five years at $1.5 trillion.

The economic crisis has severely curtailed development investment. However, many financial institutions still have infrastructure units in place and calls for infrastructure investment as the leading edge of economic stimulus are coming from federal, state and city levels.

President Obama’s plans for transportation and energy call for aggressive commitments to new technology and the establishment of a green collar economy. As credit markets thaw and the administration makes progress, innovative public-private partnerships will offer compelling benefits to all stakeholders. Investors will hold tangible, long term assets and communities will receive immediate economic stimulus and the development of necessary infrastructure.

Public officials have become increasingly receptive to P3 solutions as traditional funding sources prove inadequate. Resistance comes from suspicions about the profit motives of Wall Street and non-local operators, entrenched bureaucracies in operating authorities and organized labor. U.S. communities face the political challenge of how to strategically address the infrastructure gap before equity capital begins to flow out to foreign development, where P3 projects are common. Communities need to operate more as competitive businesses when they undertake new arrangements, and partnership bidders need to contribute insight to help them through the process.

U.S. P3 Projects

• VDOT is planning toll supported HOT Lanes in a joint venture with a private consortium.
• Chicago has had a so-far successful experience leasing it’s Skyway Bridge to a foreign consortium.
• The California High-Speed Rail Authority is evaluating P3 expressions of interest.
• San Diego’s South Bay Expressway, opened in 2007,  was the first private toll road to receive funding from the U.S. Transportation Infrastructure Finance and Innovation Act program.
• The Indiana Toll Road was leased in 2006 for $3.8 billion.
• Denver is in the final steps of bidding a $2.3 billion 46-year contract (Eagle P3) for transit construction and operation.