P3 lessons from Australia

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WASHINGTON – The U.S. needs to tap into the private sector to finance its insufficient infrastructure and educate both local governments and the public about the process and benefits of public-private partnerships, experts said Wednesday.

The future of P3s in the U.S. was the topic when representatives of both the public and private sectors came together for an Infrastructure Week discussion at the Bipartisan Policy Center, a Washington-based think tank. Participants shared their experiences as participants in P3 transactions, and provided their perspectives on what policymakers must do to effectively utilize public-private structures to modernize U.S. infrastructure before the lack of investment seriously hampers economic growth.

Jason Grumet, founder and president of the Bipartisan Policy Center, said he believes early 2019 will be the next opportunity for a concentrated push to get the federal government to take serious action on infrastructure funding. He was followed by Australian ambassador Joseph Hockey who said that the U.S. is a world leader in many ways but with a glaring exception.

“Your infrastructure is mediocre at best,” Hockey said.

Hockey said the U.S. can’t simply buy economic growth, but must instead earn it by increasing its productivity. And to do that, the country must invest in its infrastructure.

“How badly do you want to maintain your quality of life?” Hockey asked. “How badly do you want to maintain your leadership of the world economy?”

Australia was an early adopter of the P3 model, and Australian companies are among the world leaders in P3 participation.

Hockey noted the political challenges of promoting P3 development in the United States, where local populations often look with suspicion on the idea of leasing a public asset to a private company. He mentioned specifically the Indiana Toll Road, developed under a highly visible P3 agreement that became a poster child for P3 critics after it failed to bring in the expected revenue and went bankrupt in 2014. Hockey said that in his native country, the city of Sydney’s Cross-City Tunnel has also experienced bankruptcy, but the public never felt those effects.

“That’s hard politics,” Hockey conceded. “But it’s right. Good policy is good politics.”

Hockey said, for example, that the idea of cities and counties owning airports seems “absurd” to policymakers in most other developed countries, and also questioned the wisdom of public ownership of most toll roads.

Panelists who spoke after Hockey said that policymakers need to be able to sell the public on the specific benefits of a P3 arrangement. Keith Hennessey, head of P3s at Bechtel Civil Infrastructure in Washington, said that the public has generally been more accepting of new “greenfield” projects than it has been of P3 arrangements of existing “brownfield” projects. Hennessey said the municipal market is proven and efficient, but can’t by itself get American infrastructure to where it needs to be.

Hennessey said some localities have found ways to do P3s that pay for themselves very easily, as opposed to transit projects that often require a government subsidy. Many public wireless internet access projects are P3s, Hennessey said, with a private partner setting the infrastructure up and then selling advertising on the bandwidth.

“It more than pays for itself,” he said.

Infrastructure Week concludes May 21, with more events nationwide until then.

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