Public–Private Partnerships for Infrastructure Development
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Public–Private Partnerships for Infrastructure Development

Finance, Stakeholder Alignment, Governance

Edited by Raymond E. Levitt, W. R. Scott and Michael J. Garvin

Large infrastructure projects often face significant cost overruns and stakeholder fragmentation. Public-Private Partnerships (PPPs) allow governments to procure long-term infrastructure services from private providers, rather than developing, financing, and managing infrastructure assets themselves. Aligning public and private interests and institutional logics for decades-long service contracts subject to shifting economic and political contexts creates significant governance challenges. We integrate multiple theoretical perspectives with empirical evidence to examine how experiences from more mature PPP jurisdictions can help improve PPP governance approaches worldwide.
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Chapter 8: Framework to assess fiscal support mechanisms for mitigating revenue risk in transportation public–private partnerships

Ting Liu and Michael J. Garvin

Abstract

Public agencies may opt to support public_private partnerships (PPPs) to enhance their viability. Increasingly, fiscal support in the form of public subsidies, governmental loans, governmental guarantees or direct payments are offered to mitigate PPP revenue risk. For instance, a public agency may choose to retain revenue risk in an availability payment arrangement, whereas it can elect to cover revenue shortfalls when a minimum revenue guarantee is provided. Despite the increased use of fiscal support mechanisms in PPPs, government sponsors have limited guidance when considering such options. Consequently, a framework is presented that considers a mechanism’s impact on ability to raise financing and government’s financial risk exposure to assess alternative fiscal support options that mitigate revenue risk. The framework is illustrated using a hypothetical example and three alternative support mechanisms. The example demonstrates how the framework supports identifying a dominant alternative and making trade-offs among alternatives.

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