U.S. public-private partnership activity weakened last year but the longer-term trend of a rising number of P3s held strong while the future boasts a healthy project pipeline and infrastructure funds looking to invest.
The southeast region remained the frontrunner in the space, with big-ticket projects queued up in Georgia, Louisiana and Tennessee. Availability-payment P3s remained more popular than revenue-risk deals. Public pension funds continued to show interest in investing in infrastructure, though most had to leave the U.S. to find suitable assets for investment. Infrastructure fund investment dropped significantly but the five-year total raised by the top 100 funds reached $1 trillion for the first time. And only a handful of states considered P3 legislation last year, reflecting the political opposition that makes the U.S. a global laggard when it comes to infrastructure privatization.
Those are among the conclusions reached by a pair of recent annual reports by Reason Foundation, a libertarian-leaning think tank that closely tracks public-private activity in the U.S. and across the world.
"I think it's a better pipeline than most of the years I've been writing these reports," said Robert Poole, Reason's director of transportation policy, who has been crafting the
During 2023, five surface transportation P3 projects worth $8.56 billion reached financial close in the United States. That's down from the eight projects totaling $12.1 billion that closed in 2022, according to the 2024
The only new P3 to reach to reach financial close last year was New York's Metropolitan Transportation Authority's
The world's largest single P3 transportation financing last year was the
"The U.S. market is continuing to recover from the COVID years," said Baruch Feigenbaum, Reason's senior managing director of transportation policy, who penned the surface transportation report with Jay Derr. "If you look at the trajectory and what deals were closing, the trend is still positive," he said.
"The downside is that P3 activity is still heavily concentrated in about eight states," he added. "A number of places in this country, like California and Texas, could be making greater use of P3s and neither one is, for political reasons, albeit very different political reasons."
The U.S. continues to lag the rest of the world in infrastructure P3s, due to political opposition and low-cost financing available through the tax-exempt municipal bond market. The obstacles were illustrated last year when Transurban
In keeping with the last few years, the
Tennessee last
Georgia last week advanced a major P3 project when the State Transportation Board voted to work with the State Road and Tollway Authority to add toll lanes to the top half of I-285 and along Georgia 400.
Louisiana early this year
Louisiana is also planning to replace a bridge across the Mississippi River in Baton Rouge, an estimated $1 billion project, but it's unknown whether this will be structured as a P3.
Potential future P3s include a truck roadway between the Port of New Orleans and I-510 and the possible extension of existing P3 express toll lanes on I-4 around Orlando. The North Carolina state transportation department "seems close to green-lighting the addition of express toll lanes to I-77 between Charlotte and the South Carolina line," Poole noted in his report.
Illinois, a state traditionally unfriendly to P3s, last year passed legislation allowing for unsolicited bids and is considering the addition of express toll lanes on I-55 in Chicago.
That Illinois bill was the only P3 legislation to pass last year. Only a handful of states even considered measures, Feigenbaum said. It's more surprising given last year was an odd-number of year, when more legislative work typically gets done, he said.
"It shows we've got this situation where we've got a relatively small number of states that use P3s a lot; a larger number of states that use P3s sparingly; and a good number of states, at least 12, that don't use P3s at all," he said. "For the states that use infrequently or not at all, that's up to the political leaders in those states and that's what is going to really increase the amount of P3 activity in this country substantially."
There are 36 states, the District of Columbia, and Puerto Rico with P3 authority for transportation infrastructure, Feigenbaum said, but the laws vary widely.
Infrastructure funds last year raised $112 billion, a substantial 35% drop from the previous year, Poole's report said. But the top 100 funds have raised more than $1 trillion in the last five years. Funds ended the year with $1.67 trillion assets under management, and so-called dry powder — funds raised but not yet invested — totaled $376 billion, about the same as the previous year.
For the second year, transportation was the largest category of projects financed by infrastructure funds, Poole said. "That's particularly surprising because the other categories includes all kinds of energy and environmental projects," he said. "But transportation continues to have almost 50% of all the global P3 investment of last year and [2022]."
Meanwhile, public pension systems — led by the California Public Employee Retirement System, the country's largest system that has invested in London Gatwick Airport and the
Poole cites several U.S. public pension funds that made initial or increased infrastructure investments last year, including the New York State Common Retirement Fund, the Illinois Municipal Retirement Fund, and the Employees Retirement System of Texas.
Countries like Canada have shown that investing in infrastructure can improve pension system's funded ratios, Poole said.
"This is not something that can happen overnight, but if more state legislators were aware of the connection between the financial viability of their retirement systems and the [systems'] ability to invest in infrastructure, there might be more P3 legislation," he said.
