As states and cities struggle to find money to repair, replace and add infrastructure, more private equity funds and other investors, both here and abroad, are well positioned to finance such projects that provide reliable, long-term revenues. Although the number of U.S. public-private partnerships has been relatively modest to date, “[t]he market is starting to take off,” wrote Michael Likosky, principal and co-head of the infrastructure practice at 32 Advisors and Huffington Post contributor. He attributes this greater interest to the large number of thriving managed funds, widespread investor interest in U.S. business opportunities since the Iraq War and a growing number of visibly successful P3s.
Likosky offered as examples major transportation projects in Pennsylvania and Florida that illustrate the United States is ripe for international investment in P3s. “America not only welcomes private participation in our economy, but we have the best investor protections in the world,” he noted.
The Plenary Group’s investment of $899 million to repair 588 of Pennsylvania’s most severely deteriorating bridges is a partnership through which the Canadian consortium will complete in just three years a project that under government auspices would have taken far longer if the state had managed to find the funding for it.
The PortMiami Tunnel system is another textbook example of a highly successful and innovative P3 involving international investors; one that alleviates traffic gridlock on the city’s congested streets while increasing the volume of goods being transported between the port and the regional expressway, Likosky wrote. Investors from Luxembourg and France financed the project and agreed to operate and maintain the tunnel system for 30 years.
These types of partnerships prove that the desire to accomplish much-needed projects can spur lawmakers to rise above political rivalries to bring such projects to fruition. In addition to uniting Florida and its financing partner, PortMiami Tunnel “was made possible through a financial collaboration among federal, state and local governments. Republican Governor Rick Scott worked closely with the Obama Administration to finance the project,” Likosky noted.
Attracting private and public parties to the table requires a clear understanding of the benefits to both, he added. Investors and private firms with the necessary expertise to complete the project must be certain of a reliable, long-term revenue stream, whether provided by fees or government payments over time. The public partner must in return benefit from receiving services and expertise that it would otherwise struggle to obtain, often combined with a completion date far shorter than it could envision accomplishing on its own.
Each partner also must understand the environment in which the other operates, wrote Likosky. Governments need “a sophisticated understanding of capital markets. For their part, investors must realize that increased deal flow and higher returns on investment mean understanding how to serve a country with exceptional aspirations.”