US public and private sectors agree on more PPPs

US public and private sector participants overwhelmingly said they plan to work with each other over the next three years to develop infrastructure projects, according to a survey conducted by law firm Husch Blackwell.

Results from around 180 respondents at the Public-Private Partnership Conference and Expo event in Dallas this week show strong interest in the use of PPPs to finance infrastructure projects. Ninety-one percent of public-sector respondents and 94 percent from the private sector said they plan to engage in multiple PPPs in the next three years, the survey says.

Thirty-seven percent of respondents were from the public sector, mostly at the state and local level, while 63 percent were private-sector participants including engineering and construction companies, financial advisory and lending firms.

In the US, interest in PPPs has been growing over the past few years as states and cities managing tight budgets have tried to figure out how to allow the private sector to invest in infrastructure that governments have traditionally operated. Earlier this month, President Donald Trump unveiled a $1.5 trillion infrastructure plan that encourages the use of PPPs.

Among the respondents, 81 percent of the private sector and 53 percent of the public sector are currently involved in a PPP project.

However, Charles Renner, a Husch Blackwell partner who leads the firm’s PPP practice, told Infrastructure Investor a portion of the survey respondents are potential market entrants. “Their optimism level is higher for what they expect to see happen than it has been before,” he said.

The survey shows that public and private sector respondents agree that project efficiencies, financing advantages and risk transfer are top reasons why PPPs are desirable. They also said that risk-return limitations and more favorable deal arrangements with other partners are the top reasons for not doing PPPs.

The two sides diverged significantly, however, when asked whether a lack of understanding of PPPs was a deterrent to pursuing such projects, with less than half of the survey’s private sector respondents thinking it is, compared to nearly 70 percent of public sector participants who believed so.

Husch Blackwell, which has provided counsel to US PPPs, including the $964 million Kansas City International Airport, released its inaugural Public-Private Partnership Trends Report alongside the survey results.

“Increasingly, there is no typical P3 deal; rather public and private partners are striking upon an array of approaches to fit the P3 model to any number of uses and circumstances,” according to the report.

Renner said the firm studied 16 projects in the US that have reached financial close between 1 January 2016 and 31 December 2017 in sectors including higher education, transportation and energy.

The report found that 14 of the 16 projects used a “full-model” PPP, which means the private sector was involved in all phases of development – design, build, finance, operate and maintenance.

As for financing, three-quarters of the projects used debt to finance 70 percent of capital costs. “By far, the largest component of the debt stack during the study period was tax-exempt public activity bonds,” Husch Blackwell said in its report, with 13 projects having used PABs to some extent.

The 16 projects Husch Blackwell examined included the: Long Beach Civic Centre, UC Merced 2020 Campus Extension, Denver Airport, I-70 East, Transform 66, Ohio State Energy Project and LaGuardia Airport.