Could Fiscal Cliff Talks Provide Fuel for Public/Private Partnerships?
The Wall Street Journal reported today that, among the talking points for fiscal cliff avoidance, the government is considering removing the tax exempt status of municipal bonds, which would severely limit the borrowing power of local governments. If this happens, the cost of private capital to fund public facilities and infrastructure would not be so out of whack compared to the cost of public borrowing. This would encourage more public/private partnerships. Currently, when considering alternatives for financing public construction, public agencies compare the higher costs of private capital to the lower costs of issuing municipal bonds. That is one of the factors that could weigh in favor of traditional procurement techniques over public/private partnerships. However, if the tax exempt status of municipal bonds is removed, this would no longer be a factor in favor of traditional procurement.
Keep an eye on this. If in fact public financing becomes less attractive and the pending public/private partnership bill passes in Florida, P3s in Florida may become much more prevalent in future public construction.