3 Pros of Public-Private Partnerships

Posted by Alannah Dragonetti on March 11, 2016
Find me on:

Public-private partnerships are having a moment. In a typical public-private partnership, or P3, private sector partner(s) invest in public infrastructure in exchange for access to the revenues or other benefits that infrastructure will produce. A variety of factors explain why these arrangements are experiencing a surge in popularity.

 

The most obvious factor is that P3s can remedy the cycle of outstanding debt that plagues cities and states across the country. When a municipality is in debt, standalone infrastructure systems, like public water utilities, transit agencies and departments of transportation suffer. This legacy debt increases borrowing costs, which causes policymakers and the public to be wary of new issuances. In some cases, statutory debt limits prevent the issuance of new bonds. P3s allow the public sector to avoid adding to their long-term debt obligations by using private sector capital to finance a project.

 

New legislation facilitates the formation of P3s. In December 2015, President Obama signed the Fixing America’s Surface Transportation Act (FAST Act). The FAST Act provides long-term funding for surface transportation issues, such as upgrading transit lines. In the first year, each state will receive a 5% increase in federal highway funding while local transit systems will receive an 8% increase.

 

P3s’ rise in popularity can also be attributed to technological innovations, such as GovPilot™. GovPilot™’s GIS feature provides both public and private sectors with critical information regarding properties, enabling them to make the best possible choices. For instance, at Paterson, New Jersey’s  tax lien auction last month, prospective buyers consulted GovPilot™ GIS’ new Market Analysis feature before deciding which properties to bid on.

 

This trend has the potential to completely rehabilitate participating municipalities. Keep reading to find out how!

 

The 3 Pros of P3s

 

P3s appeal to government leaders, private investors and the public at large for the following reasons:


  1. Versatile

Thanks to their flexible structure, P3s can transform every corner of the community. Some P3s act as a modern-day Public Works Administration. For example, Colorado’s Eagle P3 for transportation expansion is expected to create 3,000 jobs in construction alone, the majority of which will be filled by the area’s unemployed, at-risk youth. In addition to improving the quality and quantity of basic infrastructure, the P3 format can be applied to public services like hospitals, schools and prisons.       

  1. High Quality

Because the private sector owes profit to investors and shareholders, it is generally less tolerant of project delays than the public sector. To reduce lifecycle costs, the company or association that assumes responsibility for funding infrastructure may opt to invest in more durable materials or efficient technologies. Though not the cheapest short-term options, these superior materials have the potential to drive savings over the long-term through decreased energy usage, lower maintenance costs and/or enhanced resiliency.

  1. Promote Economic Growth

The new and stable infrastructure that results from P3s is a huge draw to business owners looking to cater to and hire locals. The right businesses can catalyze a budding community to flourish.

 

P3s promise to revolutionize infrastructure and stimulate the economy. GovPilot™ will be covering all of the exciting developments!