States seek solution to infrastructure funding gap

Some US officials are pushing for the introduction of public private partnerships to create permanent funding sources for transportation projects. California, New Mexico and Texas are among the states that say they need private funds.

US States are grappling with how to fund transportaion infrastructure projects.

In an effort to prompt the US government to increase state funding, the American Association of State Highway and Transportation has published a list of 3,071 “ready-to-go” transportation projects in all 50 states totaling $18.2 billion that could come under contract within the next 30 to 90 days if funded today.

Transportation projects:
ready to go

But many state officials see federal funding as a temporary fix for what ultimately requires private investment. Instead, they hope to use the political environment as a catalyst for developing laws governing private investment in infrastructure, often termed public private partnerships, or PPPs.

To date, 23 US states have adopted PPP legislation for the development of transportation infrastructure, according to the US Department of Transportation. This has enabled private sector players like Sydney-based Macquarie Group and Spanish toll road operator Cintra to finance US toll roads, notably the Indiana turnpike, a $3.8 billion concession they closed on in 2006.

Public backlash against such projects has heightened their political risk and slowed dealflow, but the tide may be ready to change yet again.

Texas, among the 23 states with PPP legislation, topped the list with $1.8 billion in ready-to-go projects that lack funding. Last year it put in place a two year moratorium on private financing of public infrastructure projects while a government panel reviews the issue. As the moratorium is set to expire next year, officials are again looking to the private sector.

“Money from the federal government is very welcome, but it’s hard to believe that federal money alone will solve our transportation problems,” said a spokesman for the Texas Department of Transportation.

In New Mexico, Secretary of Transportation Rhonda Faught cautions that the state, which doesn’t have

It's hard to believe that federal money alone will solve our transportation problems.

Texas Department of Transportation spokesman

tolling authority nor PPP legislation on its books, is only able to fund about half of its identified transportation projects.

For now, the state hopes that the federal government will step in and help fund its $1.4 billion in projects, which consist mostly of road, bridge and highway maintenance and development work.

Faught hopes to work with state leaders to develop legislation next year that will invite the private sector to participate in the financing.

“There is a good possibility that our legislature will meet in January, preparing packages to go through that process. As part of that, we’re looking for PPPs and potential tolling authority and other project delivery tools – anything that will help us deliver a project more quickly,” Faught said.

Officials in California see the $800 million in unfunded transportation projects as a window of opportunity for re-introducing previously rejected PPP legislation.

“There’s not an opportunity for private investment in those projects at this point because we don’t have authority for PPPs in California. Governor Schwarzenegger has been trying to obtain authority for PPPs, but has not gotten it yet,” said Will Kempton, director of the California Department of Transportation.

Kempton advises that the governor’s administration remains interested in public private partnership legislation. Like Lippincott and Faught, he has his eye on January 2009, when the state convenes its next session and such legislation can again be proposed.