‘PPP obstacles more perceived than real’

Stephen Goldsmith (pictured) – former mayor of Indianapolis – argued that both the public and private sectors have to be ‘creative’ and more ‘sensitive to one another’s perspective’ at the Infrastructure Investor Americas 2011 conference, in New York.

There are tens, if not hundreds of billions of dollars in sidelined global capital in the infrastructure sector that could be invest in the US, panellists argued at the Infrastructure Investor Americas 2011 conference, held last week in New York.

But the chief impediment to greater deal flow, identified by panellists and audience members from the public and private sector, continues to be a series of disconnects between both sides.

“Many of the obstacles are more perceived than actual,” Stephen Goldsmith, the former mayor of the city of Indianapolis and a public-private partnership (PPP) pioneer, told Infrastructure Investor. “There’s so little experience doing PPPs that few public officials understand how to creatively respond to these challenges.”

Nonetheless, there may be ways to bridge the divide, and of course some states have proven that PPPs can be successful. Goldsmith is encouraged by the prospects for activity in select US states along the eastern seaboard.

Despite the opportunity, panellists faulted the public and private sectors for not being sensitive enough to one another’s perspective.

Private investors resent the steely grip that public owners have on infrastructure assets that they are reluctant to release. As Goldsmith described, it’s a control issue and public owners do not want to allow PPPs because they don’t want to relinquish that position and lose out on revenue streams or the right to control rates.  Such details, panellists contended, can be addressed and tailored in PPP contracts.

Public sector representatives indicated, however, that the concern from their side of the negotiation table is less about control and more about responsibility. For instance, in the event that a private investor or developer vanishes due to a bankruptcy or some other failure, the public entity would have an obligation to continue to service the asset and very possibly devote additional and unforeseen resources to it. 

“The conversation has been insufficiently nuanced on both sides,” Goldsmith noted.

Another area where some public and private sector participants fail to see eye-to-eye is on job security. There is what some characterise as a misconception touted in the public sector that suggests brownfield infrastructure projects are rooted in anti-labour behaviour.

“I say no,” Goldsmith said. “Blue collar workers are still there and in many models benefitting quite well. It's often the management, the bureaucracy that is more stressed. I think there is an opportunity for investors and the new management [of a project] that will produce operational and capital benefits.”

He added:  “I think if we could cause more conversations among political leaders and informed advisors, we can help elected officials really resolve the most substantial objections. Labour objections can be addressed,” Goldsmith insisted. “These projects can be pro-labour. They don’t have to be anti-union.”