While Congress deals with the contentious budget reconciliation process, the future of a surface transportation reauthorization waits in the wings along with the possibility of opening more financial inroads into infrastructure funding from private capital.
"The U.S. market remains a huge opportunity for investors," said Jon Phillips, CEO of Global Infrastructure Investor Association. "But its over-reliance on public debt to pay for infrastructure, and obstacles like permits that take years to approve, are holding it back."
Models for opening the flow of private funding into roads, bridges, rail transit and airports is explored in a 40-page, in-depth
The report diagrams several variations of debt and equity financing models in use around the world including Design-Build-Finance-Operate-Maintain and Availability Payment.
Availability payment refers to a company negotiating a revenue stream from the government to cover the capital and operating costs of the project and make a reasonable profit, which negates the need for tolls.
Per the report, "The capital markets generally find such a concession agreement compatible with financing the project, via a mix of debt and equity."
The Federal Highway Administration defines DBFOM as, "the responsibilities for designing, building, financing and operating are bundled together and transferred to private sector partners.
Per the report, most new P3 projects in the U.S. "use a DBFOM contract with terms ranging from 30 to 70 years. Since 2012, the major trend in highway concessions has migrated away from toll-revenue-based financing toward AP-based financing."
The same trend is showing up in Europe. "In the highway sector, nearly all long-term concession P3 projects in Canada, Germany, the U.K., and a number of Central and Eastern Europe countries have been procured and financed as availability payment (AP) concessions."
Advocates who would like to see more private investment in infrastructure used by the public believe federal grants may be holding back the flow.
"I think the biggest obstacle to more U.S. infrastructure P3s is free federal money that encourages anti-toll officials to hold out against using revenue-financed P3s," said Bob Poole, director of transportation policy at the Reason Foundation.
The Trump administration has been putting
"Given the still-expanding federal budget deficits and the unprecedented peace-time national debt, that kind of free federal money is not a long-term strategy for major infrastructure," said Poole. "Once that sinks in, I expect a U.S. P3 renaissance."
Industry group including the American Society of Civil Engineers point out that even if the federal government maintains current spending levels the country is still running behind.
"The U.S. has a $3.7 trillion infrastructure funding gap, which cannot be closed without the private sector taking a greater role," said Phillips.
"This Administration and this Congress have an opportunity to make the U.S. the top destination for private investment, helping to deliver its policy agendas on energy security, artificial intelligence infrastructure, and 21st century transportation."
