Desperately seeking infrastructure: A Solution

As observed earlier in this series (http://nyrej.com/80812), cooperative effort, meaningful investment and risk-taking by both public and private sectors is required to solve the monumental, and increasingly dangerous, problems facing N.Y.C. and the rest of the world from outdated, unsafe and insufficient infrastructure. Identifying short- and long-term funding sources for the development of desperately needed infrastructure is the solution. Widely used in Europe and other parts of the world to address their infrastructure crises, "public-private partnerships" may also be best suited to fund large-scale U.S. infrastructure projects with ongoing maintenance requirements. A "public-private partnership" (PPP) is a relationship in which public and private resources are blended to achieve goals judged to be mutually beneficial both to the private entity and the public. With the glaring need for modernized, improved and expanded infrastructure apparent, the need for PPPs to play an integral role in successfully achieving that goal, is equally obvious. Governments and public authorities have been using private contributions for the public benefit for thousands of years. In Athens BC, they funded public festivals, monuments and public buildings, and have since been used across the globe to finance numerous "public benefit" projects, including Paris' relatively recent metro system development: its tunnels constructed by the city, with tracks, energy, signaling and rolling stock provided by the private operator. PPP funding of similar U.S. projects is not new either - utilized in the 1780s to found and fund the University of Pennsylvania's medical school (the first in the British colonies), by Benjamin Franklin's private American Philosophical Society of Philadelphia and the Pennsylvania House of Representatives. U.S. political leaders have since relied on private businesses to fund similar projects advancing scientific, medical and agricultural innovation for the benefit of society. PPPs have since evolved, adapting to today's economic environment. They are now complex, highly technical contractual arrangements between a public agency or public-sector authority and a private-sector entity, which allow for greater private participation in the delivery of public and commercial services to and for the general public, and allocate among public and private partners the risks, rewards and responsibilities of their shared investment. Yet, although commonly used elsewhere, there has been a dearth of U.S. infrastructure investment by these PPPs, exacerbating the imperative for immediate action. As a result, many states have enacted legislation encouraging private-sector participation in infrastructure projects, and U.S. investors have developed an increasing appetite for PPP investment opportunities, and the relative financial stability they afford. Wider adoption of PPPs in the U.S. will also require consistently demonstrating to public officials and taxpayers, the tangible benefits in cost savings and efficiency; and to private investors, that existing or future regulation won't undermine their investment. History has shown that investing in infrastructure does more than repair broken pipes and fix leaks: It improves the quality of service, helps conserve essential resources and benefits the public. Using PPPs can be a public/private win/win to fill the infrastructure-financing void, when structured and managed appropriately, as discussed in the next series article. Barbara Champoux, Esq., is a partner at Crowell & Moring LLP and a past president at NYCREW Network, New York, N.Y.