Public-private partnerships have limited impact on government debt -Moody's

By Hilary Russ
Feb 22 (Reuters) - Public-private partnerships have had a
limited impact on government debt profiles around the globe,
including in the U.S. states of California, Florida and
Indiana, Moody's Investors Service said in a report published on
Monday.
The market for leveraging private dollars to build public
projects is far more mature in the U.K., Canada and Australia
than it is in the United States. Construction firms have been
eyeing the United States as the largest untapped market for such
projects globally.
Obligations from such so-called PPP, or P3, projects make up
only about 0.5 percent of the total net tax-supported debt in
California, for example.
In Florida, that number is 11.4 percent, and for triple-A
rated Indiana, it is 24.2 percent, Moody's said.
"Funding for PPP projects is often spread over a long period
of time," Moody's analyst Kathrin Heitmann said in a statement.
"Fiscal commitments are often small in scale relative to the
size of a government's balance sheet and revenue sources."
The U.S. market has been slow to develop, largely because
state and local governments can use low-interest municipal bonds
to build bridges, schools, water treatment facilities and other
infrastructure.
Even so, several massive U.S. transportation projects
underway have P3 components, including California's $68 billion
high-speed rail and Illinois' $14 billion South Suburban Airport
near Chicago. P3s are also being used and considered more often
for universities and public buildings like courthouses.
The contracts can also be long, complicated and sometimes
risky. Kentucky's $324 million P3 for statewide high-speed
internet access faces a 39 percent shortfall in the annual
revenue it needs to make bond payments, state officials said in
January, according to WDRB News in Louisville.
P3 payment obligation risks can also stress the credit
profile of procuring governments, especially in economic
downturns or for governments with poor creditworthiness, Moody's
said.
So far around the world, however, "the credit strength of
most public sector entities has proved resilient to contractual
and contingent PPP risks," it said.
Moody's report was constrained by its ability to capture
some P3 obligations in its review of debt because not all
contractual payment obligations are disclosed, it said.
The report was released in conjunction with the 2016
Institute of International Finance's G20 summit in Shanghai.