CHICAGO & NEW YORK--(BUSINESS WIRE)--Bridging the gap between enormous near-term infrastructure needs and current levels of project funding requires flexibility, Fitch Ratings says. In our view, public officials must have a range of tools at their disposal including traditional public delivery methods, adequately capitalized independent public authorities, and public-private partnerships (PPPs). In addition, as future public policy needs are difficult to predict, the ability to levy user fees or taxes should not be precluded. Recently, Governor Beshear of Kentucky vetoed parts of a bill that would address public-private partnerships over a ban on using tolls to replace the Brent Spence Bridge.
States generally have been raising tolls and user fees, though resistance to these increases is evident in Kentucky and beyond. Local groups are advocating for increasing the number of non-tolled lanes on Interstate 77 in North Carolina while the state is negotiating a 50-year concession with Cintra Infraestructures to build managed lanes. We believe that enshrining these concerns in legislation is problematic, as it can restrict the progress of future infrastructure development.
The use of PPPs is growing around the U.S. Kentucky's legislation is an important step in providing flexibility for project delivery and operations for that state. However, tying a toll ban into legislation in response to public opposition to tolls, or in other cases ruling out tax increases, limits flexibility. This counterproductive approach to public policy is an issue that exists across many jurisdictions and could ultimately limit U.S. infrastructure development.
In our view, PPPs can be effective if they are carefully crafted to address all stakeholder concerns. Their use can balance the responsibilities and risk between all parties. The executive and legislative branches of government set the initial toll rates and the rate of escalation. This is effectively no different than publicly managed assets. Despite its mixed track record, we believe PPPs can be effective if they are carefully crafted to address all stakeholder concerns.
State Legislatures are increasingly debating PPP frameworks and how they're crafted is crucial. A stable, sustainable framework will provide investors greater confidence.
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