Like most public projects, the prospects for P3 development are intertwined with geographic locales and political cultures. Not surprisingly, Sun Belt states with Right-to-Work laws are a natural setting for P3s. "Like a smile across the country, P3s have been successfully taking root in Virginia and running south all the way out to California," suggests Geoff Heekin of AON. "The South tends to be a little more fertile and a little quicker at adopting alternative project delivery." In northern states, labor unions at first resisted private participation in public services, but they are now seeing P3s as a legitimate way to move stalled projects forward.
And as P3s continue to gain ground in the U.S., attorney David Hatem envisions three eastern states emerging as the next leading markets: "It's clearly nationwide now when you look at the map. Today 33 states have P3 enabling legislation-a 50% increase over the last three years. I would say New York, Pennsylvania and Massachusetts are the next big three markets. New York has legislation pending. Once it's passed, it's going to boom. Pennsylvania just passed legislation in July. There, I think it will boom as well. And the Commonwealth of Massachusetts is daring to try to make P3s work. They need them, they have dire needs, especially when it comes to their bridges. The line curve is very long," he cautions. "It takes political stamina to go ahead. So just because a state passes a piece of legislation doesn't mean that a state is equipped to pull the trigger and implement on a long-term P3."
Christopher Voyce of Macquarie Capital (USA) Inc. also sees widespread opportunity: "The most active states historically have been Virginia, which has closed three transactions since 2007, including the Midtown Tunnel Project (in which funds managed by Macquarie Group hold a 50% interest); Florida, which has completed two projects under the 'availability payment' model, the I-595 Improvement Project and the Port of Miami Tunnel Project; and Texas, which has also closed three projects since 2007. California has closed the Presidio Parkway Project (Golden Gate Bridge approach), and could be a very large market if P3s become more widely accepted. New legislation has been passed in Ohio and Pennsylvania and those states appear prospective to us as well."
In what is the world's eighth largest economy, the state of California is fertile ground for private investment in public works. Malcolm Dougherty is the Director of the California Department of Transportation, an agency managing a $14 billion budget and a payroll of 21,000 employees. One of those employees reports directly to Dougherty as a dedicated P3 professional. Important, considering California needs $500 billion over the next five years in order to manage its 50,000 miles of highways, 400 public airports and commuter rail services. With only $200 billion in public funds available, some of the shortfall may well be financed by private investment in order to ease taxpayer burdens.
Dougherty reflects: "On October 12, 2012, we broke ground on the first P3 project of its kind authorized under state legislation: Phase II of the Presidio Parkway. This multiagency partnership was formed to replace the 1936 Doyle Drive segment of U.S. Highway 101 that connects the iconic Golden Gate Bridge with the city of San Francisco. Golden Link Concessionaire, LLC, a consortium of well-known, California-based businesses, secured all necessary funding and is now constructing a new bridge, main post tunnels, battery tunnel and a Girard Road interchange to create a spectacular and safe highway for the 100,000 daily motorists that drive this section of the highway every day."
Los Angeles-based Geoff Clark, Managing Director of Marsh Global Construction Practice observes that, "if you look at certain jurisdictions, even at the municipal level, there are certain states and certain localities that are not reliant on federal funding and will take matters into their own hands." Clark continues that "if you look at Los Angeles through Measure R, we had a sales tax that is specifically earmarked for transportation and it's been very, very successful in raising funds. Those funds can be applied to a variety of projects whether light rail or surface transportation. Everyone can agree on the need, but the question is, 'who's going to pay for it and how?' For the private sector, the project has to be not only viable and essential, but certainly has to have a revenue and return component to it." |
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