AASHTO Journal

Virginia’s Layne Tells Senators About Risks in Planning, Negotiating P3 Projects

Virginia Transportation Secretary Aubrey Layne cautioned a U.S. Senate panel that public-private partnerships, or P3s, for highway and other infrastructure projects require extensive negotiations to obtain the best public benefits.

And he pressed Congress as a "first order of priority" to shore up the Highway Trust Fund.

Layne's comments come as the Trump administration has said it is in the final weeks of producing a set of "principles" for its infrastructure investment proposal to guide Congress in writing legislation, with a strong emphasis on provisions to spur private investors to help build U.S. infrastructure.

capitol0816.jpgHe told the Senate Environment and Public Work's Subcommittee on Transportation and Infrastructure in a May 16 hearing that Virginia's experience had some P3s that worked well and drew significant amounts of private equity investment and financing, while others delivered projects only with heavy levels of public investment and even with provisions protecting the private investors against potential losses from other transportation projects.

Layne said he found the state got the best deal with private partners when Virginia officials showed they were willing to directly fund a major project with public funds, prompting would-be P3 participants to compete to offer bids that deeply reduced the public-sector costs.

In his prepared remarks, Layne also said private capital cannot replace public funding for transportation facilities.

"I want to be clear that financing, whether public or private, helps leverage funding but is not a replacement for sustainable and stable public funding," Layne said. "The Virginia General Assembly took courageous action in 2013 to enact new taxes and fees to support our transportation program. However, this was done with the expectation that the federal government would remain a strong and reliable partner in our efforts to improve the nation's transportation system. The first order of priority for Congress should be addressing the long-term solvency and growth in the federal Highway Trust Fund."

He also warned that some proposals for how Congress could entice more private investment in projects could undermine the public's negotiating position, through incentives that would only be available for privately financed projects.

Layne also spelled out some other challenges to applying P3s broadly across the nation. He cited Federal Highway Administration information that "there are only 42 surface transportation projects across the country that have involved private financing. Of these, almost 60 percent have taken place in just five states – Virginia, Texas, Florida, California and Colorado.

"Overall 35 states have never entered into a single transaction involving private financing. Many states would be unable to take advantage of private financing today even if they had a project that was a good candidate for a public-private partnership because they lack the knowledge and experience to do so."

Questions regarding this article may be directed to editor@aashtojournal.org.

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