NY-NJ Port Authority chair: US needs 'innovative' financing structures

'Re-engineering' of European public-private partnership models and the creation of 'hybrid structures' for financing them are two things that could help investors work more effectively with the public sector, according to Anthony Coscia.

The US needs to develop a “hybrid structure” to bring private capital into public sector infrastructure projects, Anthony Coscia, chairman of the board of commissioners for the Port Authority of New York and New Jersey said during a conference in New York last week.

Coscia, who oversees the Port Authority's $5.9 billion annual capital and operating budget, gave a 20-minute address at the CG/LA Global Infrastructure Leadership Forum during which he said the US needs to invent an “innovative” financial instrument that will do for public infrastructure financing what consolidated bonds did for the Port Authority 50 years ago.

“The investment banking community has taught us one thing,” Coscia said, “which is that innovation in financial instruments certainly can be used, and it can be used for good things and for things that are not so good. But I do think we can't throw the baby out with the bathwater here.”

Coscia urged the financial community to come up with a “hybrid structure”, which he described as neither typical secured debt nor pure equity. He said such a structure could help fill funding gaps, but noted there was thus far a lack of political will to experiment with different funding mechanisms.

Funding gaps have arisen because the cost of infrastructure projects has radically outpaced inflation, Coscia said. Labour costs, material costs and environmental assesments, among other factors, contributed to the spiraling costs.

Turning to public-private partnerships, Coscia said it would take effort to achieve “broader public support” in the US for such deals and said European models would have to undergo “some sort of re-engineering” in order to “work effectively” in the US. 
The replacement of the Goethals bridge, which links the New York City borough of Staten Island to neighbouring New Jersey, could provide “at least the early stage model” of a workable public-private hybrid, he said. The replacement of the 82-year-old bridge is being pursued as a design-build-finance-maintain contract, whose request for qualifications period closed Monday. A spokesperson said the authority received eight responses to the request but declined to provide the identities of the respondents due to procurement rules barring their disclosure.

Coscia said there was “enormous amount of interest from global consortia” in the project, and he was optimistic that the Port Authority would be able to select a private partner by the projected 2012 deadline.

The Port Authority has previously estimated the project to cost around $1 billion.