Kim: A Public-Private Infrastructure Cooperative – A New Infrastructure Financing Paradigm

ABSTRACT:

A state-level public-private infrastructure cooperative (“iCoop”) is proposed as an effective means to finance public-private partnership (P3) transportation projects. iCoop is an independent state-level infrastructure bank dedicated to financing P3 projects and operated like a banking cooperative with guaranteed minimum returns to its investors. Its ownership is founded on public-private partnership and its initial capitalization draws upon the state’s noncapital contribution in the form of P3 participation guarantees, private capital contributions from local and global investors, and its own bank deposits. iCoop’s business model eliminates the state’s need for P3 “subsidies” due to toll-revenue shortfalls and converts them into additional debt capacity with returns for reinvestment. iCoop helps to lower the overall P3 financing costs and reduce perceived risks associated with greenfield construction financing. iCoop is also explicitly designed to mitigate key political risks underlying P3 projects. Through iCoop, the state can effectively increase its infrastructure debt capacity without jeopardizing its current debt limit and with no direct capital contributions. For global investors, iCoop provides a new vehicle to access a portfolio of infrastructure assets, thereby offering them the opportunity to further diversify their risks. iCoop gives a face to the much talked about infrastructure bank idea with sound business rationale and clear implementation strategy.

 

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