Research Team: Kavika Dilawari, David Leipziger, Anjana Rimal, and Joel Ulloa
UC Campus(es): UCLA Anderson School of Management
Problem Statement: California faces an increasing challenge in financing the infrastructure needed to serve a growing population. Current conditions of roads, bridges, pipes, and electrical grids reflect a long history of deferred maintenance that has accelerated the deterioration of these systems: up to 68% of California's roads are in poor or mediocre condition, according to a 2012 Army Corps of Engineers report. The many billions of dollars in latent costs for repairing, replacing and building infrastructure far exceed California’s funding capacity, which is constrained by declining revenue from fuel taxes and already-high fees and taxes that are politically difficult to raise further. Using traditional financing tools, such as bonds and loans, leaves the state vulnerable to high debt service ratios that impact bond credit ratings and make future borrowing more expensive. Engagement of the private sector through public private partnerships (P3 or PPP) emerges as a financially sustainable alternative for financing transportation infrastructure projects in California.
Project Description: This fact-finding study evaluates the potential of public-private partnerships in California from a management perspective, and used a mixed-methods approach involving semi-structured interviews with 40 industry experts at financial firms and policy organizations, two surveys of financial partners and alternative delivery advisors, as well as a review of case studies from existing projects, models, and policies. The study also includes a quantitative study of historical data from proprietary industry databases (InfraDeals and P3 Bulletin) to evaluate what criteria (e.g., project size, contract length, sector, and comparative value) are correlated with successfully completed P3 projects.