Public-Private Partnerships (P3s or PPP) Funding
Rooted in the decline of federal funding, and stretched local funding
for transportation projects, there has been an increase in interest in public-private partnerships (P3s or PPPs). Promoters of the concept point
out that P3s bring together public and private funding and expertise to
large central projects, while detractors maintain that P3s fail to promote the public’s interest and government
entities are naturally the better stewards in such projects. Although
3Ps have a fairly long history in the US, there is not a substantial
amount of academic writing looking directly at this financing mechanism
to reconcile these two competing viewpoints (Papajohn et al. 2011).
Funding for streetcar and light rail projects for cities are rarely paid for exclusively by public entities. This relates to the infrastructure’s high capital costs and the fact that revenues never wholly cover the expenses of operating the system in the US. Even the most heavily utilized public transit systems, like New York City's subway, fail to recover operating costs from fares alone (New York's subway covers about 55% of operating costs from fares). (Levinson 2013)
Public-private partnerships are becoming an increasingly common way to finance portions of the costs of public transit infrastructure whether for capital or operating costs. Denver's new light rail Eagle line aggressively uses private funding to bridge gaps in the project's budget -- covering 23% of the project's budget. (Transportation for America 2012, 53-57)
P3s generally involve a private entity taking over parts of project implementation that are usually carried out by the government, in exchange for collecting some kind of revenue stream or simply collecting payments from the government entity (or both). Bank of America built a large transportation center on land owned by the city of Charlotte (where the Bank is also headquartered). The two entities jointly administer its operations and Bank of America receives a certain amount of the revenue from fares. (Frazier 2014)
There’s also a relatively new type of P3, known as a private activity bond (PAB), that essentially allows private entities to raise funds for projects as if they were tax-exempt governmental entities (Transportation for America 2012, 27-29). In practice, however, PABs need to be qualified by a government agency with administrative power; in the case of private activity bonds this is the USDOT (Transportation for America 2012, 28). Therefore, PABs need to have a clearly established public benefit. Funding for these types of bonds has been capped at $15 billion annually at the national level (Federal Highway Administration 2014).
Funding for streetcar and light rail projects for cities are rarely paid for exclusively by public entities. This relates to the infrastructure’s high capital costs and the fact that revenues never wholly cover the expenses of operating the system in the US. Even the most heavily utilized public transit systems, like New York City's subway, fail to recover operating costs from fares alone (New York's subway covers about 55% of operating costs from fares). (Levinson 2013)
Public-private partnerships are becoming an increasingly common way to finance portions of the costs of public transit infrastructure whether for capital or operating costs. Denver's new light rail Eagle line aggressively uses private funding to bridge gaps in the project's budget -- covering 23% of the project's budget. (Transportation for America 2012, 53-57)
P3s generally involve a private entity taking over parts of project implementation that are usually carried out by the government, in exchange for collecting some kind of revenue stream or simply collecting payments from the government entity (or both). Bank of America built a large transportation center on land owned by the city of Charlotte (where the Bank is also headquartered). The two entities jointly administer its operations and Bank of America receives a certain amount of the revenue from fares. (Frazier 2014)
There’s also a relatively new type of P3, known as a private activity bond (PAB), that essentially allows private entities to raise funds for projects as if they were tax-exempt governmental entities (Transportation for America 2012, 27-29). In practice, however, PABs need to be qualified by a government agency with administrative power; in the case of private activity bonds this is the USDOT (Transportation for America 2012, 28). Therefore, PABs need to have a clearly established public benefit. Funding for these types of bonds has been capped at $15 billion annually at the national level (Federal Highway Administration 2014).