P3 problems largely driven by unrealistic revenue forecasts

The Bond Buyer's 2026 Public-Private Partnerships Survey

What are the leading factors behind the issues in P3 deals?

Key takeaway: Unrealistic revenue projections were the main driver of issues in deals using the P3 structure.

Projects using the P3 structure for funding needs have seen varied levels of success, with everything from revenue projections to permitting issues impacting outcomes.

Unrealistic revenue projections (66%) was the top driving factor behind instances of P3 deals causing issues for projects, followed by misaligned incentives between partners (62%) and cost overruns (59%).

Other drivers included political opposition (50%), dispute over or improper risk allocation (49%), public opposition (48%), unanticipated community impacts (43%) and difficult to renegotiate contract terms (41%).

Only 5% of respondents said they haven't seen any problems related to the P3 structure.

Making sure all parties involved in projects remain aligned on expectations can help address many of the challenges that could derail P3-structured deals, especially where community impact and revenue projections are concerned.

Back in 2024, Louisiana's first P3 to fund the building of a new Belle Chasse Bridge hit a snag when the north and south approaches to the bridge were impacted by subsidence ? the ground sinking relative to sea level. The developer, Plenary Americas, was fined $10,000 a day in damages, which reached $1.45 million at the time of reporting.

"I think [the people of Plaquemines Parish] have gotten a raw deal and we need to find a way to fix it," said state Sen. Patrick Connick, chair of the Senate Transportation and Public Works Committee. The Republican's district includes the Belle Chasse bridge.

What are the underrecognized components of P3 in municipal finance?

Key takeaway: Value for money and public benefit are under-recognized aspects of P3 in muni finance.

Muni professionals say the various aspects of P3-structured deals get an uneven amount of attention, and that needs to change.

Both value for money (19%) and whether P3 deals are good for the public (19%) were identified by respondents as areas where P3s in municipal finance deserve more attention than they're currently receiving.

Close behind was risk allocation (18%), followed by long-term oversight and O&M (14%), taxpayer and resident impact (13%), performance monitoring & data (12%) and public and stakeholder education (12%).The budgetary constraints many issuers face make P3 deals an attractive offer for issuers, especially if the project is aptly suited for the structure.

Last month, Western Kentucky University finalized a 50-year public-private partnership to overhaul its housing portfolio and attract more students.

The deal calls for WKU to enter into a 50-year ground lease with the Collegiate Housing Foundation, an Alabama-based nonprofit, which will serve as owner and borrower. The revenue bonds will be backed by student housing fees, with surplus revenues going to WKU after repair and maintenance costs, according to the school.

Timothy Caboni, president of WKU, told state lawmakers on the Capital Projects and Bond Oversight Committee that residence halls were a "constraint" and not an "asset" for the university, requiring a different approach.

"The scale and the complexity of what we're attempting to do required a new partnership with a national firm," Caboni said, calling the P3 a "fundamental change in our approach."