Aubrey Layne, Virginia's secretary of transportation, is a self-described private sector guy in a very public role.
After a 30-year business career in which he was a president of large retail and real estate companies, Layne, who has overseen Virginia's seven transportation agencies since 2014, has furthered his state's reputation as a leader in creating public-private infrastructure projects.
That is not quite privatization, in which a government makes an outright sale of a public asset to a private company. A public-private partnership acts as it sounds, with governments working with companies to build, repair, and manage roads, bridges, and airports.
President Trump is encouraging public-private partnerships as part of his $1 trillion infrastructure plan, proposing an incentive program in which the federal government offers up to $200 billion to state and local governments that enter into the agreements and other private sector deals.
As the Trump administration makes its case, Layne has been testifying before Congress and consulting with White House officials, managing expectations around a concept that induces extreme reaction from supporters and opponents, even though a public-private partnership by definition exists as a middle ground.
"These partnerships have been praised in some circles as the solution to all of our transportation problems and condemned in others as a corporate giveaway," Layne told the Washington Examiner in an interview. "The truth is P3s are not the answer to America's infrastructure needs. They are a part of the answer."
Virginia is an outlier in the U.S. with its deep experience with public-private partnerships, which are known as PPPs or P3s in transportation circles.
Since 2007, the state has closed five public-private partnership deals worth more than $9 billion collectively, with more than $2.5 billion coming from private equity, less than $1 billion in public funds, and the remaining from privately-backed debt.
But in the U.S., the public-private partnership market is barely formed.
For example, public-private partnerships accounted for just 1 percent of all spending between 1989 and 2011 on toll roads, where the agreements are used the most, according to a report by the Congressional Budget Office.
Layne says 30 states, including Virginia, have laws that allow for some sort of public-private partnership agreement.
Experts say America's lack of experience with public-private partnerships is because the U.S. is one of a few nations that exempt the interest on state and local bonds from federal taxes, making public financing of infrastructure more affordable.
"The P3 market is in its infancy," Scott Zuchorski, a senior director in Fitch Ratings's global infrastructure group, told the Washington Examiner. "But there is more of an education process that is going on now. Dollars are stretched thin at state [transportation departments], so they are looking at alternatives for procuring projects."
Some companies say there is plenty of opportunity, if they were incentivized, as the Trump administration is proposing to do.
The Australian investment bank Macquarie, one of the biggest global funders of infrastructure projects, is already partnering in public-private arrangements throughout the country.
In New York, Macquarie is leading a consortium engaged in the Goethals Bridge replacement project, linking Elizabeth, N.J., to Staten Island.
Under the deal, the Port Authority of New York and New Jersey will make annual payments to the Macquarie consortium, which agreed to build and maintain the bridge, with money the state captures from toll revenue. The payments will be about $56.5 million a year for 40 years once the bridge opens.
"There is no shortage of private capital looking to invest in U.S. infrastructure," Geoff Segal, manager of government advisory and affairs for Macquarie Capital, said in an interview with the Washington Examiner. "There are billions upon billions literally available in dry powder sitting in infrastructure funds waiting to be invested. The challenge has been a lack of opportunity for those private investors to invest their capital."
Aaron Renn, a senior fellow with the Manhattan Institute who studies public-private partnerships, says the deals can be more efficient, faster, and entail less taxpayer risk if the agreements are structured properly.
But he said they are financially complex, which public officials can struggle to understand, leading to agreements that don't work out.
"While P3 deals are theoretically attractive in some cases, they often end up blowing up," Renn told the Washington Examiner in an interview. "One of the most important reasons why you want to do a P3 is the private sector takes on some of the risk of the project. Too often today, the government keeps all the risks and gives the private company all the profit."
As an example of a poorly-conceived partnership, Renn points to Chicago's parking meters.
In December 2008, Chicago entered into a 75-year deal with a private company for control of its 36,000 parking meters in return for $1.15 billion.
The deal was rushed through politically, Renn said, and the city's inspector general estimated that government underpriced the value of the meters by about $1 billion.
Chicago agreed to a non-compete clause that prohibited it from opening off-street parking lots to compete with the meters, unless rates were three times higher than on the street. Meters initially did not accept credit cards, and hourly rates rose, leading to protests and vandalized meters.
Renn and other experts caution that public-private partnerships are better suited to new projects, rather than to reinvest and repair existing infrastructure.
"The biggest need for infrastructure in America is maintenance, not new construction, and I believe private money can play role in select projects, but ultimately a preferred means is we have to bite the bullet and fund this stuff," Renn said. "You won't have some massive pool of private money that will rehab our crumbling roads."
Michael Sargent, an infrastructure analyst at the Heritage Foundation, said it's a tough political sell to pursue a public-private partnership on existing infrastructure.
"People are used to getting roads or other assets 'for free,' and trying to turn it into something you can monetize, or give private industry the work and right to operate, will face some political resistance," Sargent said in an interview. "I don't think you will have a lot people jumping out of their seats turning existing bridges into toll bridges just to do basic maintenance."
Some experts argue that the partnerships face tougher obstacles in rural communities, because it's difficult for companies to generate the revenue there needed to sustain the project.
"Trump talked about building in rural communities in the Rust Belt, but these communities don't have a lot to pay," Renn said. "You can't hire a private company to replace all of Flint's [Michigan] water pipes. Your water rates will go up, and the people in Flint can't afford that."
Layne has expressed similar concerns to Congress and to the Trump administration itself, he said.
"The P3 industry is very good at selling their product, but it is fallacy to say a P3 can be done without an income stream," Layne said. "In a rural area where tolling doesn't make sense, I don't see how P3s from a financing perspective make a lot of sense."
Zuchorski and Sargent disagree. They say rural states and localities can engage in what's known as availability payments, where they contract with a private company that receives a regular payment from the state or locality that can be raised or lowered based on performance.
"Availability pay would work just fine in a rural area," Zuchorski said.
Layne says states and localities can make the partnerships work if they tailor the project to an area's needs and encourage competition.
In 2014, Virginia revamped its process to require the state to calculate the cost of doing a project itself before agreeing to a deal. The process requires the state to negotiate with more than one bidder. Only if the private sector can offer better terms will Virginia engage in a partnership, Layne says.
He says Virginia's most recent public-private partnership, a 2016 deal to expand the Interstate 66 express lanes, will save the state $2.5 billion and requires zero upfront public funding.
"I can step in front of taxpayers and say, 'They [private industry] can do this less expensively than we can,'" Layne said. "That's [the] biggest part of reform we did. It brings certainty to it."