The need for better, smarter, more resilient infrastructure that will build a stronger America has never been clearer.
With a well-publicized funding gap standing in the way of delivering this – estimated at $3.7trn between 2024 and 2033 – working together with private investors is the only viable option facing policymakers.
Earlier this year, we collaborated with P3 Bulletin to examine and assess the readiness of US states to work through public-private-partnerships (P3s). Our joint P3 Report Card graded states from ‘A’ to ‘D’ and found many already leading the way. However, a total of 28 states received either ‘C’ or ‘D’ grades for their limited or underdeveloped use of the P3 model – showing there is still a way to go in leveraging private capital to close funding gaps.
In countries such as Australia, Canada, and the United Kingdom, we have long seen mature P3 structures that help accelerate delivery, improve value for money and transfer risk away from the public sector. And of course, many GIIA members are already closely involved in investing in and advising on the delivery of these partnerships.
We strongly believe there is a way to unlock further capital and support vital new projects for Americans in states around the US which could usher in a new “golden age of US infrastructure”. Achieving this will require collaboration between industry, investors, and state policymakers and officials.
The eight recommendations below set out practical measures state leaders should consider to build the market confidence needed to unlock essential investment in US infrastructure:
Institutional Asks
- Establish a dedicated state P3 unit
Where P3 expertise is fragmented across agencies, states lack the consistent capability to develop and manage complex projects effectively – and risk slowing down progress. States should create a dedicated P3 unit to centralize technical, legal and financial expertise in one place and build private sector confidence.
- Extend P3 procurement authority to municipalities, counties and other sub-state entities
Sub-state entities often face the most acute infrastructure gaps and tightest funding constraints yet exist in legal ‘grey areas’ that make officials reluctant to proceed with P3 projects. At the same time, the smaller scale of local projects can deter private investors for whom transaction costs outweigh returns. Legislation should explicitly extend P3 procurement authority to municipalities, counties, school districts, and other local authorities – and allow jurisdictions to aggregate smaller projects into bundles large enough to attract private capital.
Enabling Legislation
- Enable the full range of P3 structures
Different projects require different approaches – the optimal P3 model depends on each project’s asset type, risk profile, and revenue characteristics. Legislation that doesn’t explicitly permit the full range of structures risks making otherwise attractive projects undeliverable, in turn deterring investors who require structural flexibility to price and allocate risk appropriately. State legislation should therefore be structure-neutral, enabling the full suite of contractual models available to investors and policymakers.
- Enable long-term concession agreements
P3 terms must match operational lifetimes of infrastructure assets, which can span up to 99 years or more. State legislation should explicitly authorize concession terms determined by asset life and financing requirements, rather than arbitrary caps. States with more developed P3 frameworks can and should go further, by incorporating mechanisms such as revenue sharing above agreed thresholds and renegotiation triggers for material changes in circumstance. These provisions are standard in many mature P3 markets and ensure that the public interest is protected over the full concession period without undermining a transaction’s commercial viability.
- Authorize unsolicited proposals
One of the most effective ways to expand a state’s P3 pipeline is to allow the private sector to bring new project ideas to government. Unsolicited proposals allow states to access the innovation, technical expertise and market intelligence held by the private sector at no cost to the public. However, private parties have been deterred by the risk of investing significant resources in a proposal only to lose the opportunity through a subsequent competitive bidding process. Legislation should therefore accommodate unsolicited proposals without a public bidding process when deemed to be in the public interest.
Financing Frameworks
- Recognise lender step-in rights
Long-term P3s currently rely on lenders’ confidence that their position will be protected even if projects encounter hurdles. State legislation should explicitly recognise step-in rights, so that lenders can intervene to protect their risk and address challenges that may risk the ultimate delivery of projects.
- Structure state legislation to ensure compatibility with federal credit programs, such as TIFIA, PABs and RRIF loans
Federal financing tools can reduce the cost of P3 transactions, but only where state legislation is designed to align directly with these mechanisms. State legislation should define P3 structures and procurement processes in ways that explicitly preserve eligibility for TIFIA, RRIF and PABs, and require the state to assess federal financing compatibility at project inception – ensuring state residents aren’t losing out on the national funding available to their administrations.
- Coordinate federal advocacy on financing barriers
Some of the most significant barriers to P3 financing will not be resolved through state action alone, and as previously outlined by GIIA will require further federal reform. By working together, such as through bodies like the National Governor’s Association (NGA), state leaders and officials can be instrumental in driving this change.
Despite variation in their delivery and political or regulatory environments, we know from the P3 Report Card and our membership that P3s are gaining momentum across US states.
Now is the time to create the right environment that translates investment appetite into real projects – serving generations of future Americans.
GIIA’s full state level recommendations can be found in more detail below.