Liz Dubeck, project finance and development partner with the law firm of O’Melveny & Myers LLP, outlines the prospects for private-sector participation in infrastructure development called for in President Biden’s ambitious initiative.
The private sector will play a key role in redevelopment of multiple sectors within the Biden plan, Dubeck says. Similar arrangements have been a success in limited projects in the U.S., as well as on a wider scale in Europe, Canada and other countries. “There are a lot of opportunities to find profitable and efficient ways to have the private sector participate,” she says.
In many if not most instances, private-sector investment will require imposition of some form of toll or user fee so that the participants can recover their costs and make a profit on the jobs in question. “Public-private partnership doesn’t mean we get these projects for free,” Dubeck says. “Investors need to be paid back — compensated for the work they do, and earn an equity return.”
Private developers bring several advantages to the table, including the possibility of completing projects more efficiently and at lower cost, she says. Yet not all projects envisioned under the Biden plan will be suitable for private investment. Those that aren’t will need to be paid for by some other form of public funding.
The Biden proposal has already attracted a degree of controversy for its broad definition of what constitutes “infrastructure” — going beyond roads and bridges to include elements such as broadband, water systems, housing and even elder and child care. Such targets aren’t likely to attract the same interest by private entities as the more traditional projects that fall under the category of infrastructure. “That’s not to say that private investment is off the table,” says Dubeck.
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