OIG: Public Private Partnerships a Mixed Blessing

August 4, 2011

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In a report issued in late July, the Office of Inspector General found that public-private partnerships have several financial disadvantages when compared to traditional public sector financing, but certain private sector efficiencies can meaningfully offset PPPs' cost disadvantages.

Called, "Financial Analysis of Transportation-Related Public Private Partnerships," the report sought to (1) identify financial disadvantages to the public sector of PPP transactions compared to more traditional public financing methods; (2) identify factors that allow the public sector to derive financial value from PPP transactions; and (3) assess the extent to which PPPs can close the infrastructure funding gap.

The OIG found that PPPs have a higher cost of capital than traditional public financing, and they incur certain tax obligations that do not exist for public entities. On the other hand, private sector efficiencies that can offset cost disadvantages include lowering new facility design and construction costs, as well as generally more efficient revenue generation.

The OIG also found that PPPs are not likely to significantly decrease the infrastructure funding gap because private sector investment in transportation through PPPs generally does not entail new or incremental funds.

Download a PDF of the full report here.

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