Public-private deals seen boosting road projects

LAS VEGAS Fri Apr 20, 2012 8:46pm EDT

LAS VEGAS (Reuters) - Financing for roads and highways is likely to attract a growing number of public-private partnerships once Congress passes federal transportation funding, a panel of experts at a Federal Association of Municipal Analysts conference in Las Vegas said on Friday.

Congress last month opted for a 90-day extension of transportation funding amid a standoff between Democrats and Republicans over competing long-term proposals, casting uncertainty over the eventual level of federal spending for building and repairing highways.

When this uncertainty is finally resolved, a range of financing options for the work can emerge, analysts said.

"We will need some money first," said Richard Little of the University of Southern California, adding that afterwards, the long-term debt financing tools for major projects known as public-private partnerships could follow.

While the United States has the world's largest economy, it ranks 24th in the quality of its overall infrastructure and 20th for its roads, according to the World Economic Forum.

Public-private partnerships, more popular in Europe than in the United States, bring together public authorities and the equity and expertise of private companies.

One example is a new two-lane tunnel beside the existing Midtown Tunnel between Portsmouth and Norfolk in Virginia that will double current capacity. The project, which closed its financing in April, is equally split between Virginia and a private partnership in which Sweden's Skanska is a participant.

With tight budgets at the federal and local levels reducing the availability of public funds for new infrastructure projects, some planners will turn to private investors.

"There is ample capital available to invest in revenue-backed U.S. infrastructure projects," said Little, noting some of the $12 trillion of pension funds could become available for infrastructure investments.

However, the partnerships cannot replace public funding, experts at the conference said.

"One point is funding, and another is financing," said Joung Lee of the American Association of State Highway and Transportation Officials, which represents state transportation departments.

Gasoline taxes, both federal and state, account for the bulk of funds for building and maintaining highways, and revenue from these is in decline in real terms.

More fuel-efficient vehicles and a federal gasoline tax long set at a flat rate of 18.4 cents per gallon are pushing this primary source of road revenues down.

"We presented the Congress with a wide variety of financing options," said Lee, showing a wide matrix including endless possibilities, such as drivers' license surcharges or other taxes and fees.

"What is lacking is the political will to implement any of these options."

(Reporting By Tiziana Barghini)

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