WASHINGTON — Public finance officials and infrastructure investors need to stop talking about "the deal" and start managing political risks with clear, easily understood language about public-private partnerships, participants at a U.S. Chamber of Commerce summit said Wednesday.
The roundtable at the chamber's Transportation Infrastructure Summit in the nation's capital focused primarily on how P3 advocates can make more private investment in public infrastructure a reality. Several participants said confusing business-speak and poor communication skills continue to hamper P3 development in the U.S.
"I have a major axe with our industry," said Lois Scott, chief financial officer for the City of Chicago, Ill. Scott said an attempt to entice professional infrastructure investors with public language about "monetization" and "value capture" just muddies the waters.
"We speak in language nobody understands," she told those at the summit.
David Wilson, assistant vice president for public-private projects at transportation company Norfolk Southern, agreed that talking up "the deal" raises the hackles of opposition concerned that P3 arrangements put the desires of investors ahead of public interest.
"People jump all over it," Wilson said. "Did the state get a good deal? People are going to second-guess every single deal you do."
Wilson said that kind of environment actually creates an element of fear for private parties, because the financial consequences can be dire if the project goes wrong too far down the line. Prior to the public partner's issuance of bonds, the private party can still cut its losses if the winds are blowing against it. Once the debt is issued, that is not the case.
"Once you take one dollar, you're in for the ride," he said.
Christopher H. Lee, a managing partner at Highstar Capital who runs an infrastructure fund of about $1.5 billion, said his investors often ask him for an explanation of the risks unique to the infrastructure sector.
"It's mainly political risk," he said.
Lee said investors will flow to states where governments are ready and willing to do P3s, such as Virginia and Maryland, and it would be a "waste of time" to keep trying to hammer out a universal one-size-fits all P3 strategy that just "won't happen" elsewhere in the U.S.
Joe Wingerter, director of P3 project development at Kiewit Corporation, said parties to P3 deals can help protect the public interest by making the arrangement easily understood to everyone involved, and by providing predictability to investors. The focus should be on how the project will be successfully delivered, he said.
"It's not necessarily about the financing," he said.
Scott said P3 advocates need to do a better job emphasizing that P3 projects can serve the public interest.
"There's a perception, that doing it the old-fashioned way, relying on the federal government, issuing tax-exempt bonds, is relatively low-risk for the public," she said. "We have to begin to understand what the risks are and where we're transferring them."