Political support makes or breaks P3 transactions

The Bond Buyer's 2026 Public-Private Partnerships Survey

What is holding back the growth of P3s?

Key takeaway: Political will is the strongest impediment to the growth of P3 activity across the U.S.

Political influence is proving to be the biggest factor in P3 activity growth.

Political will (62%) is the largest barrier to the growth of P3 activity within various regions across the U.S., followed by complexities in deal structuring (57%), failure to identity value propositions for participants (54%) and the higher cost of private capital versus tax-exempt bonds (52%).

Other notable hurdles include public opposition (50%), lack of awareness or education about P3s (48%), legal, environmental and regulatory hurdles (46%), long-term contract inflexibility (34%) and lack of qualified private partners (19%).

For the Northeast, political will (70%) was the biggest hurdle, followed by complexity of deal structuring (68%) and failure to identify value proposition for participants (58%).

In the South, political will (67%) was tied with public opposition (67%) for the biggest hurdle, followed by a three-way tie between higher cost of private capital versus tax-exempt bonds (44%), failure to identify value proposition for participants (44%) and lack of awareness or education about P3s (44%).

Higher cost of private capital versus tax-exempt bonds (76%) was tied with failure to identify value proposition for participants (76%) as the greatest hurdles to growth in the West, followed by legal, environmental and regulatory issues (64%).

Respondents from the Midwest said complexity of deal structuring (63%) was the top hurdle, followed by higher cost of private capital versus tax-exempt bonds (50%), political will (44%) and public opposition (44%).

Evolving regulations and political appetites for the deals directly influence how comfortable issuers are using the P3 structure, as well as whether other issuers will follow suit.

Earlier this month, South Carolina Gov. Henry McMaster signed a bill into law that, in addition to restructuring the state's transportation agency, grants the ability to establish toll lanes and turn to P3s for the managed lane projects or other DOT-owned road or bridge assets.

"We're going to look at it case by case, what makes sense for the state and what works for the project," Justin Powell, the state's transportation secretary, said while speaking at The Bond Buyer's Southeast Public Finance conference. "Not every project is going to be a P3 project, but we're going to look at it."

Which regions are the best equipped to handle P3s?

Key takeaway: Obtaining political support is the most challenging aspect of P3 transactions for muni pros.

Not all pieces of a P3 deal are as easy to tackle as the others, and many professionals struggle to handle them all.

In the Northeast, when it comes to P3 transactions, municipal finance professionals are best equipped to handle financial advisory and deal modeling (74%), legal structuring and due diligence documentation (70%) and procurement and competitive selection processes (65%). The deal aspects proving to be most complicated are obtaining appropriate political support (80%), community engagement and public communications (70%) and ongoing performance monitoring relating to compliance (65%).

For the South, financial advisory and deal modeling (78%), legal structuring and due diligence documentation (78%) and ongoing performance monitoring relating to compliance (60%) were the areas most under control. Troubling aspects include obtaining political support (78%), community engagement (66%) and capturing sufficient return on investment for the private partner (45%).

In the West, financial advisory and deal modeling (72%), investor outreach (68%) and legal structuring and due diligence documentation (68%) were the areas of P3 transactions professionals felt the best equipped. By comparison, obtaining appropriate political support (80%), ongoing performance monitoring relating to compliance (76%) and community engagement (60%) were the areas respondents felt the least equipped to handle.

Those in the Midwest feel best equipped to handle the following components of P3 transactions: legal structuring and due diligence documentation (69%), financial advisory and deal modeling (69%) and investor outreach (51%). The areas most challenging include ongoing performance monitoring relating to risk (75%), contract negotiation and long-term risk allocation (63%) and applying best practices (63%).

Activist groups, not just regulators and lawmakers, are becoming a growing challenge facing private partners and others involved in P3 deals.

Earlier this month, representatives from ReRoute the Route, a group of farmers, ranchers and businesses that oppose the Texas Central bullet train proposal, voiced their concerns over a similar project in California. Specifically, they've called upon the U.S. Department of Transportation to reject a $6 billion federal railroad loan for the Brightline West high-speed rail line.

"The concern my clients have is that if the administration approves a $6 billion [Railroad Rehabilitation and Improvement Financing Program] loan for Brightline West, it would set a precedent for a potential RRIF or other type of loan or grant or credit assistance for the Texas high-speed rail project," John Sitilides, principal at Trilogy Advisors LLC, a Washington, D.C.-based lobbyist, told The Bond Buyer.

Are muni pros confident about their ability to handle P3 deals?

Key takeaway: Most professionals are confident that they can effectively work on P3 transactions in the current market.

The rising popularity of P3 deals has done little to undermine muni professionals' confidence in their ability to handle such transactions.

Close to two-thirds of respondents (74%) said they were moderately to very confident in their ability to effectively work on P3 transactions, while 21% said they were somewhat to not at all confident. Two percent were not sure and 3% said not applicable.

Sellside professionals were the most confident (92%), followed by those on the buyside (77%), issuer side (67%) and others (66%).In the background of P3 activity, officials with the U.S. Department of Transportation have been campaigning Congress to lift the private-activity bond cap and expand a key transportation loan program to encourage more public-private partnerships.

Representatives from the Trump administration announced this month efforts to enlist a master developer for overseeing the reconstruction of New York's Penn Station more than a year after taking over the project from the Metropolitan Transportation Authority.

"When it comes to our rail, we're making generational improvements to the northeast corridor," Sean Duffy, U.S. Secretary of Transportation, said during a Senate appropriations subcommittee hearing on the fiscal 2027 DOT budget. "That means cleaning up Union Station, investing in Union Station, and [a] transformative investment in New York's Penn Station ? $8 billion, by the way."