$20bn funding deal puts P3 market in ramp-up phase

Port Authority chief believes the precedent set by the Gateway project gives reasons to hope deal flow will grow.  

News that the state governments of New York, New Jersey and the federal government have arrived at a 50/50 funding agreement for the Gateway project couldn't have come at a better time for Patrick Foye, Executive Director of the Port Authority of New York and New Jersey.

Set to connect the two states through tunnels under the Hudson River, the Gateway project has an estimated price tag of around $20 billion. The agreement to split its cost is a milestone for a scheme that hasn't been able to get off the ground for several years. 
It also comes two months after Governors Cuomo and Christie jointly requested that the federal government contribute 50 percent of the funding.

“From a very provincial point of view I'll note that the two governors and senators directed that the project be run by the Port Authority, which was the right decision and good news for the Port Authority,” Foye told attendees at Infrastructure Investor's LP Summit this week.

The agreement also calls for the creation of the Gateway Development Corporation, an idea put forth by Senator Schumer in August. The corporation will be established and chaired by the Port Authority. It will have a four-member board representing New York, New Jersey, the US Department of Transportation (USDOT) and Amtrak.

The new entity will develop a financing plan, identifying and maximising federal grant opportunities in collaboration with USDOT. It will also pursue low interest loans from the Railroad Rehabilitation & Improvement Financing (RRIF) and the Transportation Infrastructure Finance and Innovation Act (TIFIA) programmes.

In addition to reaching a funding agreement, the governors and the two US senators will be exploring the option of public-private partnerships (PPPs, P3s) to procure the project, Foye noted.

“That leaves me to be really bullish about the P3 business in the US and in this part of the country.”

Another important component of the agreement, he highlighted, is an accelerated time frame for the environmental review and permitting process.

“All parties agree […] to work together to expedite all environmental and planning approvals needed to bring this project on line as soon as possible, including requesting the placement of the project on the federal infrastructure 'dashboard' qualifying the project for expedited attention within the federal system,” Cuomo's office stated in a press release.

Despite the significant breakthrough Gateway represents, Foye acknowledged that P3s have not taken off as expected in the US. He referred to California's Gold Rush taught in US high school history class. “Very few gold prospectors made money but vendors of shovels, denim jeans, whisky, […] and gold rush conferences prospered,” he said, noting that while the increase of P3 conferences has been exponential the number of actual P3 transactions in the US remain modest and flat.

But given the role private capital has played in building public infrastructure, Foye remained reasonably bullish.

“Whether you're talking about Grand Central Station, Penn Station, the Hudson and Manhattan Railroad, the predecessor of PATH, the Amtrak tunnels underneath the Hudson which are still in use today […] the New York City subway, the Long Island Railroad and lots more – they were all constructed with private capital in the last 100 plus years. There's a rich history of using private capital and we're at an inflection point where we'll see a lot more of that.”