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Political Turnover Slows Transportation Public-Private Partnerships in 2015

By Sean Slone, CSG Director of Transportation & Infrastructure Policy
The past year has seen the states of Florida, Indiana, Ohio and Pennsylvania close deals with the private sector to undertake some long-awaited transportation projects. But much of the talk at a recent conference on public-private partnerships, also known as P3s, revolved around why the market for such projects remains sluggish in the United States.
“The deal flow is erratic and very difficult to aggregate in any meaningful way,” said John Porcari at the InfraAmericas U.S. P3 Infrastructure Forum, held June 9-10 in New York City. Porcari’s resume includes stints at both the U.S. and Maryland departments of transportation and he now serves as a senior vice president at the engineering and design firm Parsons Brinckerhoff.
While 33 states and Puerto Rico have legislation that allows them to enter into public-private partnerships, a much smaller number of states have actually embarked on successful projects. While several P3 first-timers appear poised to join such states as Virginia that have championed the procurement method in recent years, speakers at the conference said the U.S. P3 market hasn’t come close to reaching its full potential.
Joseph Aiello, chief of business development at the global infrastructure firm Meridiam, said uncertainty about what long-term role Washington will play in transportation funding is one factor keeping the P3 market from growing.
“States are still hoping that the federal government is going to step back in … with a significant increase in revenues,” he said. “That hasn’t happened. Some states have reacted … with respect to raising their own funds, (but) until we see more of a national consensus about how to provide funding and who should pay for transportation, I think we’ll still see a little bit of sluggishness.”
Changes in State Leadership, Priorities
Another significant factor holding back P3s, some say, is the impact of recent political turnover that has brought with it changing priorities in a number of states.
“Both in Maryland and Virginia, my home state, where parties switched (over the last two years), new governors came in and got the list of projects they were doing and said, ‘Well, those aren’t really my priorities,’” said D.J. Gribbin, managing director at the infrastructure firm Macquarie. “You see that all over America, and I think as long as we have governors coming in with different priorities, …that increases the political risk.”
Indeed, political risk has become the number one concern for many private sector firms, speakers said.
“What drives people crazy in this room is if there is … a change in government and all of a sudden, for no real economic reason related to the project, the project is put on hold, it’s canceled or something happens that really has nothing to do with everyone that has been working on it for a year,” said Douglas Fried, a partner at the law firm Chadbourne & Parke.
Some states have sought to get around those challenges by accelerating deals so that they’re signed before a change in administration. States have also experimented with using objective economic analyses to demonstrate the value of tackling a project with a P3 versus a traditional procurement method.
Other Factors
Speakers at the InfraAmericas forum also cited a number of other possible reasons the P3 market remains slow in the U.S., including:
Jumpstarting the P3 Market
Speakers at the forum also had a variety of ideas that could help build confidence in P3s, or at least help the market weather the current lull.
First, there seemed to be a general consensus that there is a need for a continuing education process for policymakers, stakeholders and the general public on P3s.
States like Colorado and Virginia have sought to increase public engagement on P3 projects in recent years, a process that can be time-consuming but produce more sustainable buy-in, speakers indicated.
“I can tell you this now: the door is open in Virginia for public comments and public engagement and we expect to benefit from more people having a say instead of fewer people having a say,” said Douglas Koelemay, who heads Virginia’s office of transportation P3s.
Maryland and other states have changed laws to allow and encourage the private sector to submit unsolicited proposals for P3 projects. Private sector firms however said they have been wary to invest resources in producing unsolicited proposals because they prefer to support projects that already have significant public support and have demonstrated a need and because there are few examples of unsolicited proposals that have been turned into completed projects.
Michael Cheroutes, who heads the Colorado High Performance Transportation Enterprise—the state’s P3 office, said for him there is one other important factor that could boost the market.
“I think ultimately the best way to convince people that P3s belong in the toolbox is to have successful projects,” he said.
But James Ray, a partner at professional services firm KPMG, said states also should recognize what the P3 model is not.
“One thing I think we do need to be careful about is not making P3s appear to be a panacea, a silver bullet, a secret solution that will solve all of your problems,” he said. “The question is: is it an improvement over the alternative? Is it better for citizens and for public policy? And if it is, then we should embrace these and move forward.”

CSG was a supporting organization for the InfraAmericas U.S. P3 Infrastructure Forum.

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