Why Do U.s. States Adopt Public-private Partnership Enabling Legislation?

Rick Geddes (Cornell University)
Benjamin Wagner (Cornell University)

Abstract: Many U.S. states are facing severe budgetary shortfalls. At the same time, there is unprecedented demand for transportation infrastructure construction and renovation. As a result, states are increasingly turning to private firms for assistance with their transportation infrastructure needs. Twenty-nine states have legislation that would better enable them to utilize public-private partnerships (PPPs) to help finance the construction of new transportation infrastructure and the renovation of existing infrastructure. Key elements of this legislation include provisions regarding unsolicited proposals, prior legislative approval of contracts, and the mixing of public and private funds. Using a series of the basic elements of PPP enabling laws, we develop an index that measures the degree to which a state’s law encourages the private sector to invest their resources in that state. We explore reasons why states pass such laws, and why some states pass legislation that is relatively friendlier to the private sector. We consider economic, fiscal, and political drivers of passage, and find that political factors and congestion levels are important predictors of both the passage and private-sector friendliness of PPP legislation. We find some evidence that fiscal stress leads states to adopt PPP enabling legislation, and very little evidence that supports the importance of traditional finance variables in the models.

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