Do public-private partnership enabling laws increase private investment in transportation infrastructure?

Abstract

The use of public-private partnerships, or PPPs, is an important development in U.S. infrastructure delivery. PPPs are detailed contracts between a public-sector project sponsor and a private-sector provider that bundle together key delivery services. PPPs represent an important middle ground between pure-public project delivery and complete privatization. As of 2016, thirty-five U.S. states had enacted PPP enabling laws. Those laws define the broad institutional framework surrounding a PPP agreement. They address such questions as the mixing of public- and private-sector funds, the treatment of unsolicited PPP proposals, and the need for prior legislative approval of PPP contracts, among other issues. We provide the first comprehensive empirical assessment of the impact of those laws on a state's utilization of private investment. We analyze the overall effect of a state having a PPP enabling law while controlling for a variety of factors. A law's average impact represents an almost six-fold increase relative to the average percentage of PPP investment prior to enactment in treated states. We then assess the impact of PPP enabling-law provisions. We develop an expert-informed weighted index reflecting the degree to which a state's law is encouraging or discouraging of private investment. We find that PPP provisions that empower PPPs, such as exemptions from property taxes and from extant procurement laws, as well as confidentiality protections, successfully attract PPP investment.