Engineering Inc - November/December 2017 - 25
"Rather than building something and then ignoring it
until it falls apart or needs maintenance, you're able to
maintain it over its life span and, in the end, produce a
more cost-efficient asset."
SAMARA BAREND | AECOM
REMOVING THE GUARDRAILS
Getting the U.S. up to speed on P3s will not be a simple task.
"It hasn't translated into as robust a pipeline as many groups
would like to see. There is still some confusion about these projects
and how they can benefit everyone," Middleton says.
In fact, the Brookings Institution reports that between 1985 and
2011, Europe and Asia built $540 billion in infrastructure using
the approach. That's about eight times the funding allocated in the
U.S. during the same period. "Misconceptions abound. There is the
notion that these projects enrich the private sector," says Barend.
One barrier, Middleton says, is that government officials and
others in decision-making roles aren't always familiar with how P3s
work and what results they deliver. Some also have concerns about
winding up on the financial hook-if a project fails or doesn't
achieve the projected revenue stream. And that's not an absurd
notion as a few P3s have failed.
For example, the state of Indiana recently took control of a P3
interstate highway project in Indiana that had run into major problems and cost overruns. Officials reported that only $72 million was
left to complete a project that would require $236 million. "These
deals must be designed well," Weintraub cautions. "At the end of
the day, the government entity must come up with the money and
financial framework to make a P3 work."
Another roadblock is mistrust of P3s. Because the U.S. has
traditionally relied on financing projects through bonds (in fact,
federal law limits the use of tax-exempt bonds for projects where
more than 10 percent of the funding comes from private sources), a
government-centric approach has become the norm. Consequently,
many people bristle at the idea of paying tolls or the idea that private companies operate assets and profit from projects that have
traditionally involved the public sector. In some cases, there's also
sometimes opposition among organized labor, which may view P3s
as a way to undermine their power and transfer jobs to the private
sector-sometimes at a lower wage or with fewer benefits.
"There is political baggage and political risk associated with P3s,"
says Weintraub.
All of this has created a paradox: Despite an uptick in P3 adoption and a growing number of success stories, some states are
eschewing the concept while others that have previously embraced
it are now backpedaling. New Mexico and Mississippi tried
unsuccessfully to pass P3 measures in recent months. Meanwhile,
Texas recently rejected a bill that would have supported P3s for
18 major highway projects at a price tag of about $30 billion.
That left the state, which previously used P3s, unable to move
forward on partnerships to finance infrastructure improvements.
Opposition centered largely on resistance to tolls-and politicians
defending the concept have found themselves in the crosshairs.
"Texas has been extremely successful at rolling out large and com-
plex P3s. But, some of these projects have become increasingly
political," says Segal.
However, the biggest challenge is often putting all the pieces
together. According to the PwC report, "Trump's $1 trillion infrastructure plan: Finding the right funding for the right projects" [see
sidebar below], the biggest limitation to infrastructure investment
today-the lack of suitable, bankable deals and incentives to attract
private capital-must be carefully crafted.
According to InfraDeals, which tracks transactions, the total value
of P3 projects currently stands at about $38 billion, but global infrastructure funds hold upward of $70 billion in their coffers. Simply
put: Many agencies aren't aware that financing is available.
INVESTING IN THE FUTURE
The question of whether P3s can emerge as more than a niche tool
remains to be seen. Yet, for now, President Trump aims to take the
concept to a new level. In January 2017, his administration released
a list of 50 infrastructure projects totaling upward of $137 billion
that it has prioritized for P3s. Among them:
* The Gateway Program to improve the rail corridor between
New York City and Newark, New Jersey ($12 billion)
* The Brent Spence Bridge spanning Kentucky and Ohio
($2.5 billion)
* Locks and Dams 52 and 53 on the Ohio River ($3 billion)
These three projects alone would support an estimated 18,700
Building a More Robust P3 Framework
W
hen PwC conducted an analysis of President Trump's
infrastructure proposal, it found that several key
issues need to be addressed to make P3s more
attractive to investors and more successful for participants.
First, the federal government must evolve beyond a
"shovel ready" mindset and devise a well-crafted capital plan
that selects projects according to a "comprehensive, repeatable process that reduces politicization and focuses on the
greatest long-term value for each dollar," says Riz Shah,
national public sector leader for Capital Projects & Infrastructure at PwC.
There's also a need for tax reform. This encompasses new
tax preferred vehicles for funding P3s; repatriation incentives that create concessions for for-profit projects, such as
eliminating tax liability on repatriated profits; tax credits for
smart infrastructure; select credits for U.S.-made supplies;
and creative financing support that increases options for
debt financing.
"We need to prioritize projects according to national
importance and do a better job of coordinating policies and
funding," says Shah.
NOVEMBER / DECEMBER 2017
ENGINEERING INC.
25
Table of Contents for the Digital Edition of Engineering Inc - November/December 2017
Engineering Inc - November/december 2017
Contents
Standing Up to Mother Nature
Fall Conference
P3s to the Rescue
Young Professionals of the Year
Self-Sustainability
Navigating the Marketplace
Creating Meaningful Connections
From Acec to You
Market Watch
Legislative Action
Guest Column
Mergers and Acquisitions
Members in the News
Florida M.o. Adopts Powerful Acec Brand
Business Insights
Engineering Inc - November/December 2017 - Intro
Engineering Inc - November/December 2017 - Engineering Inc - November/december 2017
Engineering Inc - November/December 2017 - Cover2
Engineering Inc - November/December 2017 - Contents
Engineering Inc - November/December 2017 - 2
Engineering Inc - November/December 2017 - 3
Engineering Inc - November/December 2017 - From Acec to You
Engineering Inc - November/December 2017 - 5
Engineering Inc - November/December 2017 - Market Watch
Engineering Inc - November/December 2017 - 7
Engineering Inc - November/December 2017 - Legislative Action
Engineering Inc - November/December 2017 - 9
Engineering Inc - November/December 2017 - Fall Conference
Engineering Inc - November/December 2017 - 11
Engineering Inc - November/December 2017 - 12
Engineering Inc - November/December 2017 - 13
Engineering Inc - November/December 2017 - Standing Up to Mother Nature
Engineering Inc - November/December 2017 - 15
Engineering Inc - November/December 2017 - 16
Engineering Inc - November/December 2017 - 17
Engineering Inc - November/December 2017 - 18
Engineering Inc - November/December 2017 - 19
Engineering Inc - November/December 2017 - 20
Engineering Inc - November/December 2017 - 21
Engineering Inc - November/December 2017 - P3s to the Rescue
Engineering Inc - November/December 2017 - 23
Engineering Inc - November/December 2017 - 24
Engineering Inc - November/December 2017 - 25
Engineering Inc - November/December 2017 - 26
Engineering Inc - November/December 2017 - Young Professionals of the Year
Engineering Inc - November/December 2017 - 28
Engineering Inc - November/December 2017 - Self-Sustainability
Engineering Inc - November/December 2017 - 30
Engineering Inc - November/December 2017 - 31
Engineering Inc - November/December 2017 - 32
Engineering Inc - November/December 2017 - 33
Engineering Inc - November/December 2017 - Navigating the Marketplace
Engineering Inc - November/December 2017 - 35
Engineering Inc - November/December 2017 - 36
Engineering Inc - November/December 2017 - 37
Engineering Inc - November/December 2017 - Creating Meaningful Connections
Engineering Inc - November/December 2017 - 39
Engineering Inc - November/December 2017 - 40
Engineering Inc - November/December 2017 - 41
Engineering Inc - November/December 2017 - Guest Column
Engineering Inc - November/December 2017 - 43
Engineering Inc - November/December 2017 - Mergers and Acquisitions
Engineering Inc - November/December 2017 - 45
Engineering Inc - November/December 2017 - 46
Engineering Inc - November/December 2017 - 47
Engineering Inc - November/December 2017 - Members in the News
Engineering Inc - November/December 2017 - 49
Engineering Inc - November/December 2017 - Florida M.o. Adopts Powerful Acec Brand
Engineering Inc - November/December 2017 - 51
Engineering Inc - November/December 2017 - Business Insights
Engineering Inc - November/December 2017 - Cover3
Engineering Inc - November/December 2017 - Cover4
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