Funding challenges are increasingly driving municipalities towards P3s

The Bond Buyer's 2026 Public-Private Partnerships Survey

What will P3 deal volume look like in the next few years?

Key takeaway: A majority of muni pros expect P3 project volume to increase over the next three to five years.

P3 deal volume is expected to grow over the next few years.

Two-thirds of respondents are expecting P3 project volume to increase within their regions over the next three to five years, versus 2% who are predicting decreases in P3 activity and 20% who say there will be no change in volume. Four percent said they were unsure.

For respondents in the northeast, 73% predict increases over the next three to five years, 3% predict decreases and 18% predict no change. Eight percent were unsure.

In the south, 71% predict increases and 30% expect volume to remain the same.

More than three quarters (76%) of respondents in the western region expect increases in P3 volume over the coming years, while 4% expect decreases and 20% said volume will stay the same.

Respondents from the midwest represented the largest share of professionals (88%) expecting increased P3 volume over the next three to five years, versus 13% who said activity will remain relatively the same.

P3 projects have popped up in Indiana, California and Kentucky to support funding needs since the start of the year, as the deal structure surges in popularity.

Following the revival of a public infrastructure project in Maryland surrounding the refurbishment of the American Legion Bridge and construction of express lanes along I-495 and I-270 on the Maryland side of the D.C. beltway, Gov. Wes Moore established an office dedicated to P3s.

"When we bring partners to the table, we can tackle complex challenges that once seemed impossible," Moore said in a statement. "The Maryland Center for Publi​​​c-Private Partnerships at Maryland Economic Development Corporation will help us do exactly that, connecting public entities with private-sector innovators, universities and nonprofit leaders to create lasting change in our communities."

What is influencing shifts in P3 project volume?

Key takeaway: Funding and budgetary limitations are driving up the popularity of P3 projects.

The surging popularity of P3-structured deals is due in no small part to limited public funding options, higher borrowing costs and a host of other market factors.

Limited public funding and budgets (48%) was the top factor behind changes in P3 project volume across various regions, followed by private capital appetites (26%), aging infrastructure needs (24%) and risk transfer and efficiency (20%).

Other notable drivers include whether P3 deals are good for the public (19%), increased success and awareness of P3 projects (17%) and sector-specific P3 momentum (17%).

Lack of adequate funding for infrastructure improvements has been a driving factor behind municipalities turning to P3s for vital capital needs.

Earlier this year, South Carolina lawmakers introduced Senate Bill 831, which if passed would grant the state the ability to use public-private partnerships for transportation projects. It would also push for the creation of a list of state roads for potential conversion to county and municipal control and ownership.

"Public-private projects to deliver expansion of lanes and other improvements may move faster than other alternatives," John Hallacy, president of John Hallacy Consulting LLC, told The Bond Buyer. "Given the financing will be done on a taxable basis, it would be more expensive than the municipal tax-exempt option. The question is how will the payments flow. Will the payments be from the Department of Transportation or will there be tolling to consider?"