S&P urges states to mull P3s

Ratings agency Standard & Poor’s has suggested states need to consider P3 projects because of the benefits it brings to operation and maintenance (O&M) costs.

Pointing out that O&M operations cannot be funded by tax-exempt debt, the report says that, as states try to keep their debt at sustainable levels, P3 deals will become increasingly attractive.

“P3s offer states a way to fold O&M expenses into the overall cost of financing a project, and interest in P3s by states is growing,” the report, entitled US State Debt Levels may be More Sustainable Than the Condition of the Nation’s Infrastructure, explains.

The study argues that state and local governments would need a combined $3bn in funding to meet the current infrastructure gap. It also suggests that states have been reluctant to risk their credit ratings during the global financial crisis by heaping more debt onto their books, meaning a solely debt-funded solution is unlikely.

However S&P also warned that P3 projects have encountered political opposition in “in certain states”.

Earlier this year, S&P published a report that highlighted the political risk inherent in P3 projectsacross the US.