Growing Support for P3s, Law Firms Brace for New Business
The need to repair the nation’s crumbling infrastructure increases with each passing day. Cash-strapped state and local governments are desperate for new sources of funding since the old ways of financing and constructing public facilities through bonds and taxes is no longer equal to the task. That’s because the infrastructure gap is huge… and growing. Public-private partnerships, P3s, have emerged as one solution to this mounting problem. Although P3 deals (which are already widely used in Europe and Latin America) are still met with a fare amount of opposition in the U.S., the transactions are gaining momentum. In the most recent show of support, an alliance of regional and state government, finance, academic and private industry leaders announced the formation of a new coalition with the aim of garnering support for innovative financing techniques, such as public-private partnerships. The coalition intends to transform the nation’s transportation system next year utilizing a combination of public and private-sector solutions.
And while the recent surge in interest in infrastructure investing has led to a number of new players looking to make multibillion-dollar investments in U.S. infrastructure assets (including a slew of private equity funds…and pension funds), law firms are also jumping on the bandwagon. “From the Pennsylvania Turnpike to Chicago’s Midway Airport to Florida’s Everglades Parkway, law firms are aiding a revolution in financing of U.S. infrastructure projects as they craft transactions that let local and state governments lease public assets to eager private investors,” reports The National Law Journal. Now as privatization efforts accelerate, law firms are stepping up to the plate, establishing specialties in public-private partnerships to capitalize on the new multibillion-dollar market.
Now, as the lure of public-private partnerships or P3s intensifies, executive search firm, A.E. Feldman, reports that demand for qualified experts with proven track records and expertise in infrastructure assets’ operations are in growing demand. The firm says financial jobs exist for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates are those with experience in infrastructure transactions and civic engineering. Additionally, legal jobs are opening up for attorneys with expertise in global project development and complex financial transactions.
Growing Support for P3s
Next year the U.S. Highway Trust Fund is expected to go bankrupt. Facing dire infrastructure needs in the U.S., a group of politicians, financial execs and academics recently convened to create the Transportation Transformation Group – also known as the T2. The group’s members agree the way federal transportation funding is allocated needs to change.
“It’s about time we add a fresh set of ideas to the transportation policy debate,” says former U.S. House Majority Leader Richard Gephardt, representing T2 member Goldman Sachs. “If we don’t, communities across America will continue to be plagued by increased traffic congestion, deteriorating roads and bridges, safety issues and air pollution – all of which have an effect on our quality of life and our prosperity.”
According to a T2 statement, “The Federal Government should encourage innovation in finance procurement and project delivery in meeting the country’s transportation needs, including utilization of a variety of finance options, technologies and participation with the private sector.” The group adds, “The private sector’s primary responsibility is to partner with states and local governments wherever practical at every stage in the finance, operation, design, maintenance and construction of highways.”
Prior to considering any increase in the federal gasoline tax, coalition members are urging Congress to enable states to employ business strategies and innovative finance techniques that help meet the nation’s transportation goals, including tolling, congestion pricing as well as the full range of other public private partnership mechanisms that bring additional resources to help solve their transportation challenges.
Law Firms Bracing for P3 Business
The rise in public-private partnerships has created lucrative work for law firms in representing governments, bidders and lenders, according to The National Law Journal. The report states that investors are ready to plow more than $500 billion into infrastructure assets, citing research compiled by Mayer Brown. John Schmidt, a Partner at the firm, also says about $20 billion in U.S. deals have already been done.
Law firms stand to rake in tens of millions of dollars in fees from the transactions - even while taking on some financial risk, according to the National Law Journal. The report notes that government entities often have two law firms, including a more experienced national player as well as local counsel, while the bidders and lenders have their own attorneys. In fact, the National Law Journal reveals that Mayer Brown and Ballard Spahr advised the Pennsylvania on the state’s turnpike lease last month and have collectively earned more than $3 million in fees so far.
The National Law Journal quotes Ned Neaher, a Partner based in the Washington office of White & Case, as saying, “This is a market that is expanding and will continue to expand. It’s here to stay, even though politically it takes some education to bring people around to the concept that private-equity investment in public infrastructure is a good thing.”
Expecting increasingly P3 business, a number of firms are hiring attorneys with expertise in global project development and complex financial transactions. In fact, the National Law Journal says some firms expect so much new work in the area that they are shifting attorneys, including some idled by the slowdown in mergers and acquisitions, to work on P3 deals. The report states that Mayer Brown may double the number of attorneys working on such deals if current demand continues.
Nossaman Guthner Knox & Elliott LLP also recently announced that it has added three more attorneys to its infrastructure group. The group now totals 30 attorneys.
