A House Transportation and Infrastructure hearing focused on public-private partnerships (PPP) shed light on how PPPs have been utilized in other countries.
In answering lawmaker’s questions April 8, Dr. Matti Siemiatycki, an associate professor at the University of Toronto, testified that in Canada, PPP’s are used primarily as a way to finance road construction, rather than fund it as is typically the case in the United States.
Canadian PPPs generally do not place tolls on the facility to repay the private sector’s capital investment, he said. Instead, the private sector finances the project and is repaid through a government-sponsored availability payment over a period of time.
This was an important distinction for lawmakers to hear, especially those that hope PPPs can resolve some of the transportation funding problems in the United States.
Siemiatycki also testified that PPPs generally are not a cheaper way to deliver infrastructure projects.
Private borrowers typically have higher financing costs than governments, he said. In addition, they face higher transaction costs for lawyers and consultants as well as higher management and project monitoring costs.
Siemiatycki said PPPs can effectively manage risk, however, for the government, particularly in large projects plagued by cost overruns and delays.
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