Open Section Menu ^

P3 & Financing Approaches

According to the Federal Highway Administration, public-private partnerships (P3s) are defined as “contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects.” Public-private partnerships have become a useful tool in helping cash-strapped states meet the public’s growing transportation needs, and the P3 approach to highway construction is a potential financing mechanism for governments and private firms to consider.  This section will provide an overview of the advantages and challenges of P3 projects, a sample of P3 state statutes, and a summary of proposed public-private partnership legislation at the federal and state level.

P3 DOCUMENTS:

• Public-Private Partnerships for Transportation: Categorization and Analysis of State Statutes— In-depth report produced by the National Conference of State Legislators. NCSL categorized and compiled the provisions of state law addressing public-private partnerships (P3s) for transportation.
• P3 Congressional Caucus Summary – November 19, 2013
• The Role of Private Investment in Meeting U.S. Transportation Infrastructure Needs : A landmark ARTBA study that: 1) reports on how transportation P3s have been utilized for more than 20 years and what impact P3 projects have had toward meeting U.S. transportation capital infrastructure needs; and 2) realistically assesses the P3 process in the U.S., including the political, procedural and financial constraints/opportunities for transportation investment.

OVERVIEW OF PUBLIC-PRIVATE PARTNERSHIPS (P3s)

• 36 states and Puerto Rico have enabling legislation to authorize public-private partnerships.
• P3s are an option in the transportation financing tool box, and they are a supplement to other funding options in paying for construction projects, and not necessarily a replacement.
• P3s have a role to play in delivering infrastructure improvements, where possible.
• Since 2008, the P3 market share has remained around 2%.

FEDERAL ROLE IN SUPPORTING P3 PROJECTS

• Private Activity Bonds (PABs).  These tax-exempt bonds are one of the main ways that the U.S. Department of Transportation helps to support P3 projects throughout the nation.

• “Transportation Infrastructure Finance & Innovation Act” (TIFIA) Program Loans.  This credit assistance program provides loans, loan guarantees, and letters of credit to projects that exceed $50 million and have revenue sources to repay the funds.

• P3 Agreements in Section 1534(d) of Moving Ahead for Progress in the 21st Century (MAP-21).

• New Congressional Caucus on Public-Private Partnerships (P3s).

Tolling

Tolls are highway user revenues that are collected in exchange for the usage of transportation facilities. These direct user fees are primarily collected in order to help fund transportation improvement projects.

Currently, over thirty states currently have enabling legislation to authorize tolling as a new revenue source and to fund new transportation projects. According to the National Conference of State Legislatures, 42 states have tolling authority and/or tolling facilities and 28 states have the legal authority to operate tolling facilities. Moreover, 20 states have tolling facilities that are privately operated.

Tolling is often a component of public-private partnership (P3) agreements. In recent years, there has been growing interest in pursuing these types of P3 transportation infrastructure projects, where private investors like pension funds or investment banks finance some or all of the costs of building a highway and earn a return by charging tolls.