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As Investors, Officials Meet, a Warning Note on Public-Private Deals
Posted at 11:52 a.m. on July 17, 2014
Even as President Barack Obama was headed to Delaware on Thursday to promote public-private partnerships to finance infrastructure, Peter Ruane, president of the American Road and Transportation Builders Association, was telling a conference of officials and investors who put together such deals that there’s growing resistance in Congress to the “P3s” trend.
Even proven programs such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program “could be subject to cuts or elimination” by Congress, Ruane told the conference.
TIFIA loans are often a key ingredient of P3 deals to finance roads and bridges. Ruane warned that P3s “are not the chosen one. You’re subject to the same kinds of attacks and criticism that all other programs are. … We’re going to be playing some defense in the coming weeks, in the coming months.”
Ruane said after his speech that “there are some folks in Congress that really aren’t happy with TIFIA” and are eager to eliminate the loan program. Ruane said there was no specific bill yet to kill TIFIA, but “it’s a cloud on the horizon that’s real.”
Following Ruane at the conference was Peter Rogoff, the acting undersecretary of Transportation for policy, who gave a strong endorsement of P3 financing, but also warned that they face challenges winning acceptance from state and local officials who he said need to “overcome the reticence” about entering into such deals.
He said Transportation Secretary Anthony Foxx and Treasury Secretary Jacob J. Lew have been meeting with investors and officials and have made trips to Europe and South America “to dig in and find out what are the barriers — what has made public-private partnerships successful in other parts of the world, but not here.”
One of things the Obama administration has proposed in its 350-page Grow America Act that “will help advance public-private partnerships is our effort to speed project delivery. When we talk to potential investors who are interested in investing in domestic transportation infrastructure, they cite specifically the uncertainty surrounding the permitting process.”
The permitting quagmire can involve multiple agencies from the Environmental Protection Agency to the Army Corps of Engineers to the Fish and Wildlife Service. That means what should take 18 months can take up to five years.
He acknowledged that “we also have some (TIFIA) loans that are in trouble…. We now have to deal with some loans that could go south and it obviously makes people nervous, as it would with any lender.”
Rogoff didn’t identify which ones he was referring to, but last week the bond rating agency Moody’s said the operator of one P3 toll road project, an extension of state Highway 130 in Texas, had failed to make a debt payment an event that “constitutes a default under Moody’s definition.”
Taking a preemptive swipe at critics — perhaps from the political left — Rogoff said, the P3 trend “is not a headlong leap into the privatization of public assets and it’s not a headlong leap into the privatization of public services.”