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(P3) as a core strategy for addressing our nation’s infrastructure needs.In fact, more than 30 states and the District of Columbia have already enacted statutes that enable some form of P3.
Using this P3 process for existing government operations and assets can create a stream of recurring savings that can be used to fund new infrastructure projects.Infrastructure funding discussions at the federal level sometimes devolve into discussions about the merits of creating a national infrastructure bank, where support for or opposition to the concept can become a proxy for supporting or opposing additional infrastructure spending.While a properly structured, narrowly focused and non-political infrastructure bank could have potential benefits, creating one is not essential to implementing the concepts outlined in this paper.In addition to reducing the need for new revenue and taxes to fund today’s infrastructure requirements, as the bond payments for the new infrastructure taper off over time, this process will have helped to reduce the run-rate cost of government.Given the massive and growing pension and health care obligations that many state and local governments face, even beyond their unfunded infrastructure needs, operating expense savings are a source of self-generated capital financing that we should not ignore.Our country’s current inefficient approach to public infrastructure development and operation has made delivery delays, wasteful overhead costs, and stagnant innovation more common.
Preventive maintenance and life-cycle asset management, though proven to extend asset life and reduce long-term costs, have become an afterthought.
Also, highly competitive and well-managed P3 transactions, supported by well-crafted contracts and rigorous contract oversite processes, can help ensure that providers deliver higher levels of service and maintain public assets more efficiently over time—no matter whether the P3s are for new or existing infrastructure.
The P3 process unlocks the value trapped in existing government assets and can help boost the value of the operations.
When leveraged at today’s historically low interest rates, these savings streams can provide a large “bang for the buck” when it comes to new infrastructure.
Converting current P3 operating expense savings into tomorrow’s capital funding streams would offer still more benefits.
We have yet to resolve the longstanding macroeconomic debate over whether publicly funded infrastructure projects have stimulative effects. And while it supports additional, carefully targeted infrastructure spending, especially on preventive maintenance activity, neither does this paper take a position on how much we should spend.