Innovative Infrastructure Financing

Heads up Ashtabula County!

Public-private partnerships (P3s) are growing in popularity for infrastructure projects for several reasons: they maximize capital resources, transfer risk, enhance accountability, and move faster. Florida’s Interstate 595 P3 finished capacity improvements 15 years sooner than a conventional public plan would have delivered. Similarly, a container terminal expansion at the Port of Baltimore done through a P3 finished two years ahead of schedule.

In New York City, a real estate developer will pay $220 million in transit upgrades for Grand Central Terminal in exchange for zoning changes which will allow construction of a property to exceed original height restrictions (New York Times). In Boston, theNew Balance athletic company is building its own commuter rail stop for $14-16 million to service its headquarters and will cover maintenance costs for at least 10 years (The Atlantic).

And in Florida, Leon County is partnering with a guy named Jeff. Jeff Phipps is building Florida’s first privately owned toll road, which will connect northeast Tallahassee to the city airport (Tallahassee Democrat). The state infrastructure bank is providing a $13.5 million loan; Phipps has spent $3 million of his own money on permitting, design, and legal fees. Leon County will lease the road to Phipps to operate and will assume ownership after the 99 year lease expires. Toll revenue will be used to cover maintenance and the cost of the loan.

However, P3s are not free of risk, nor are they always cheaper (Governing). A federal environmental review of a Virginia toll road which began as a P3 found that the project would damage wetlands far greater than originally anticipated. Due to mounting costs, the project was cancelled, but Virginia had already paid the company $290 million before construction started. The state department of transportation maintains that full-public funding could complete many projects cheaper through cheaper borrowing costs and by collecting tolls.

 

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