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Public-Private Partnerships

on February 2, 2015 in Miami, Florida.
Photographer: Joe Raedle/Getty Images
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Boston’s Big Dig, rerouting its central highway underground. New York City’s Second Avenue subway extension. The Denver International Airport. Landmark American public works, paid for the traditional American way: the government borrows money, usually before the first shovel goes into the ground. Other places do infrastructure differently, turning to consortiums of private companies that raise money and design, build and operate projects for terms that generally run 30 years. In return, they get yearly payments or a share of a revenue stream, such as tolls. At their best, these public-private partnerships, also known as P3s, get infrastructure work done faster and cheaper. But when things go wrong, there’s no shortage of anger directed at the for-profit motive at the heart of the approach. Ask Chicago about its parking meters, for instance.

Public-private partnerships are common in Canada, Australia and much of western Europe. New questions about such arrangements were raised after a bridge collapsed in Genoa, Italy, in August, killing 43 people. Italian officials spoke of stripping Autostrade per l’Italia, the company that managed it, of its concessions to operate highways, while some government ministers suggested nationalizing all the country’s toll roads. Autostrade is a unit of Atlantia SpA, a company controlled by the Benetton family. Fallout from the disaster briefly erased about $2 billion from the fortune the family made through its eponymous clothing line. In the U.K., 125 hospitals reported that they were suffering under a combined 13 billion pound ($17 billion) debt from complex financial transactions they entered into as part of public-private partnerships. India's government seized one of the country's biggest P3 operators in September after the group ran out of cash, raising the prospect that taxpayers will end up bearing the cost of any bailout. In the U.S., asset managers raised billions of dollars for P3 projects after President Donald Trump floated the approach as the core of a $1.5 trillion infrastructure proposal. But infrastructure spending was shunted aside after Trump focused on tax cuts. Total global assets under management in such funds soared to $450 billion at the end of 2017, from just $7 billion in 2000. During the second quarter of 2018, global infrastructure deals fell to $49 billion, the lowest quarterly level in five years, according to data provider Preqin. While public-private partnerships are still new to many U.S. states, Governor Andrew Cuomo of New York has said that 90 percent of the $13 billion needed to revamp John F. Kennedy International Airport will come from private investors.