1.  INTRODUCTION

A variety of factors have negatively affected states' ability to pay for necessary maintenance of transportation infrastructure and to build new capacity to keep pace with and encourage economic development and job creation. These factors include changing economic conditions, a delayed federal transportation reauthorization bill, the declining value of the fuel tax (due to a number of factors) and a reluctance to increase it, and growing infrastructure needs. In this environment, public-private partnerships (PPPs or P3s) have been increasingly studied and pursued by state policymakers as one alternative method, among others, to procure transportation infrastructure improvements. Such partnerships combine a leveraged mix of public and private dollars to better bridge the gap between transportation needs and the financial resources available to meet those needs.

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Thoughts from the NCSL Partners Project…

On Collaboration, Involvement and Education
"Public-private partnerships can be a valuable tool for states when they are developed by the executive and legislative branches in a collaborative atmosphere. Equally important is the obligation to involve the public. It is critical that elected officials educate themselves and the public when considering P3s against traditional procurement approaches."

Representative Terri Austin
Indiana
Co-chair, NCSL Partners Project on PPPs

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As defined by the Federal Highway Administration, "A public-private partnership is a contractual agreement formed between public and private sector partners, which allows more private sector participation than is traditional. The agreements usually involve a government agency contracting with a private company to renovate, construct, operate, maintain, and/or manage a facility or system."1 PPPs cover as many as a dozen types of innovative contracting, project delivery and financing arrangements between public and private sector partners. In PPPs, the private sector performs functions normally undertaken by the government, but the public sector remains ultimately accountable for the facility and the overall service to the public.

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Thoughts from the NCSL Partners Project…

On Due Diligence
"In both the U.S. and around the world, PPPs have proven to be valuable tools in leveraging private capital, improving efficiencies, and managing and developing the transportation infrastructure and services that are the foundation of our economy. One of the central lessons we've learned from international PPP experience is that they are complex arrangements that need to be implemented with proper due diligence and attention to best practices, making the NCSL toolkit a valuable and critical policy resource for state lawmakers as they continue to explore PPPs and seek ways to close the transportation funding gap."

Leonard Gilroy
Director of Government Reform, Reason Foundation
Steering Committee Member, NCSL Partners Project on PPPs

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Twenty-nine states and Puerto Rico have enacted authority for a state transportation agency to consider and enter into PPPs for highway projects; 20 states also allow transit PPPs. More than 80 transportation PPPs have been completed over 20 years in the states (this includes all design-build projects and a handful of transit and airport projects), involving more than $46 billion in investment.2 (PPPs also have been used to procure other types of infrastructure, including schools, housing and water projects.)

With the growing interest in PPPs, the debate over their proper use has become somewhat polarized. The by-products of this polarization have included misunderstanding, misinformation and unrealistic expectations. Boosters and detractors of PPPs have dominated the public debate, while reasoned voices have been harder to discern. Through this report, NCSL seeks to bring a realistic and balanced understanding of the role of PPPs. The goal is to help state legislators as they consider whether and how to pursue PPPs within the context of their broader responsibility to the public interest.