Editing Public–private partnership (section)

==Funding==
A defining aspect of many infrastructure P3s is that most of the up-front financing is made through the private sector. The way this financing is done differs significantly by country. For P3s in the UK, [[Bond (finance)|bonds]] are used rather than [[Loan|bank loans]]. In Canada, P3 projects usually use loans that must be repaid within five years, and the projects are refinanced at a later date.<ref name=":0" /> In some types of public–private partnership, the cost of using the service is borne exclusively by the users of the service,<ref name=":1" /> for example, by [[toll road]] users such as in the case of [[Toronto]]'s [[Yonge Street]] at the dawn of the 19th century,<ref>{{cite news |last1=Mayers |first1=Adam |date=24 March 2008 |title=When Yonge was a toll road |language=en |work=thestar.com |url=https://www.thestar.com/news/gta/2008/03/24/when_yonge_was_a_toll_road.html |access-date=4 April 2023}}</ref> and the more recent [[Highway 407]] in [[Ontario]]. In other types (notably the PFI), capital investment is made by the private sector on the basis of a contract with the government to provide agreed-on services, and the cost of providing the services is borne wholly or in part by the government.<ref>{{Cite web|title=House of Commons - Private Finance Initiative - Treasury|url=https://publications.parliament.uk/pa/cm201012/cmselect/cmtreasy/1146/114604.htm#a1|website=publications.parliament.uk|access-date=2020-05-18}}</ref>

=== Special purpose vehicle ===
[[File:Mario_Cuomo_Bridge_Overhead.jpg|thumb|One year after the completion of the [[Mario cuomo bridge|Mario Cuomo Bridge]] PPP, dozens of bolts holding its steel girders together had already failed. A whistleblower claims that the SPV responsible for its construction had knowingly delivered many defective high-strength bolts, and taken measures to hide evidence of the defects.<ref name="WRGB 2021">{{cite web|date=March 28, 2021|title=Unsealed records allege a cover up of safety concerns on Gov. Mario M. Cuomo Bridge|url=https://cbs6albany.com/news/local/unsealed-records-allege-a-cover-up-of-safety-concerns-on-gov-mario-m-cuomo-bridge|access-date=August 16, 2021|website=WRGB}}</ref>]]
Typically, a private-sector consortium forms a special company called a [[special purpose vehicle|special-purpose vehicle]] (SPV) to develop, build, maintain, and operate the asset for the contracted period.<ref name="pmid23297282">{{cite journal | last1 = Barlow | first1 = J. | last2 = Roehrich | first2 = J.K. | last3 = Wright | first3 = S. | year = 2013 | title = Europe Sees Mixed Results From Public-Private Partnerships For Building And Managing Health Care Facilities And Services | url =http://spiral.imperial.ac.uk/bitstream/10044/1/15645/2/Health%20Affairs_32_1_2013.pdf | journal = Health Affairs | volume = 32 | issue = 1| pages = 146–154 | pmid = 23297282 | doi=10.1377/hlthaff.2011.1223| hdl = 10044/1/15645 | s2cid = 36377771 }}</ref><ref>{{cite journal | last1 = Zheng | first1 = J. | last2 = Roehrich | first2 = J.K. | last3 = Lewis | first3 = M.A. | year = 2008 | title = The dynamics of contractual and relational governance: Evidence from long-term public–private procurement arrangements | url = https://www.scopus.com/record/display.url?eid=2-s2.0-41049112855&origin=inward&txGid=yXIvJQ7AsPq0YyDQfJmJLCa%3a2 | journal = Journal of Purchasing and Supply Management | volume = 14 | issue = 1| pages = 43–54 | doi=10.1016/j.pursup.2008.01.004| s2cid = 207472262 }}</ref> In cases where the government has invested in the project, it is typically (but not always) allotted an [[Ownership equity|equity]] share in the SPV.<ref>[https://ssrn.com/abstract=1087179 Moszoro M., Gasiorowski P. (2008), 'Optimal Capital Structure of Public–Private Partnerships', IMF Working Paper 1/2008]. Papers.ssrn.com (2008-01-25). Retrieved on 2011-11-20.</ref> The consortium is usually made up of a building contractor, a maintenance company, and one or more equity investors. The two former are typically equity holders in the project, who make decisions but are only repaid when the debts are paid, while the latter is the project's creditor (debt holder).<ref name=":0" />

It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services, while the hospital itself provides medical services.<ref name="pmid23297282" />

The SPV links the firms responsible of the building phase and the operating phase together. Hence there is a strong incentives in the building stage to make investments with regard to the operating stage. These investments can be desirable but may also be undesirable (e.g., when the investments not only reduce operating costs but also reduce service quality).<ref>{{Cite journal|last=Hart|first=Oliver|date=2003|title=Incomplete Contracts and Public Ownership: Remarks, and an Application to Public–Private Partnerships*|url=http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp61.pdf|journal=The Economic Journal|language=en|volume=113|issue=486|pages=C69–C76|doi=10.1111/1468-0297.00119|issn=1468-0297}}</ref>

=== Financial partners ===
Public infrastructure is a relatively low-risk, high-reward investment, and combining it with complex arrangements and contracts that guarantee and secure the [[cash flow]]s make PPP projects prime candidates for [[Project Finance|project financing]]. The equity investors in SPVs are usually institutional investors such as pension funds, life insurance companies, sovereign wealth and superannuation funds, and banks. Major P3 investors include [[AustralianSuper]], [[OMERS]] and Dutch state-owned bank [[ABN AMRO]], which funded the majority of P3 projects in Australia. [[Wall Street]] firms have increased their interest in PPP since the 2008 financial crisis.<ref name=":0" />

=== Government ===
Government sometimes make in kind contributions to a PPP, notably with the transfer of existing assets. In projects that are aimed at creating [[Public good (economics)|public good]]s, like in the [[infrastructure]] sector, the government may provide a capital subsidy in the form of a one-time [[Grant (money)|grant]] so as to make the project economically viable. In other cases, the government may support the project by providing revenue subsidies, including [[tax break]]s or by [[Annuity (finance theory)|guaranteed annual revenues]] for a fixed period.<ref>{{cite journal|last1=Cardenas|first1=I.|last2=Voordijk|first2=H|last3=Geert|first3=D.|year=2017|title=Beyond theory: Towards a probabilistic causation model to support project governance in infrastructure projects|url=https://zenodo.org/record/3505324|journal=International Journal of Project Management|volume=35|issue=3|pages=432–450|doi=10.1016/j.ijproman.2017.01.002}}</ref><ref>{{cite journal|last1=Cardenas|first1=I.|last2=Voordijk|first2=H|last3=Geert|first3=D.|year=2018|title=Beyond project governance. Enhancing funding and enabling financing for infrastructure in transport. Findings from the importance analysis approach|url=https://research.utwente.nl/en/publications/beyond-project-governance-enhancing-funding-and-enabling-financin|journal=European Journal of Transport and Infrastructure Research|volume=18|issue=4|doi=10.18757/ejtir.2018.18.4.3261|doi-access=free}}</ref>

===Risks===
Within public-private partnerships (PPPs), there are various risks associated. One risk common within PPPs is the lack of proper or accurate cost evaluation. Oftentimes the estimated costs of a project will not properly account for delays or unexpected events, leading to the costs to be larger than what was projected.<ref>{{cite journal |last1=Hodge |first1=Grame A. |title=The risky business of public-private partnerships |journal=Australian Journal of Public Administration |date=2004 |volume=63 |issue=4 |page=39|doi=10.1111/j.1467-8500.2004.00400.x }}</ref> Another risk within this area is with change of governance from differing political representatives could lead to projects being diminished or reduction of the allocated budget. This is common within PPPs as different political actors are likely to scrutinise their opponents based on their ideological positions.

=== Profits ===
Private [[monopolies]] created by PPPs can generate a [[rent-seeking]] behavior, which leads to spiraling costs for users and/or taxpayers in the operation phase of the project.<ref name="Weimer and Vining" /><ref name=":0" />

Some public–private partnerships, when the development of new technologies is involved, include profit-sharing agreements. This generally involves splitting revenues between the inventor and the public once a technology is commercialized. Profit-sharing agreements may stand over a fixed period of time or in perpetuity.<ref name="TorStar Donovan July 2019">{{cite news|last1=Vincent|first1=Donovan|date=1 July 2019|title=Who should share in the risks and rewards of Sidewalk Labs' smart city on Toronto's waterfront? {{!}} The Star|language=en|work=thestar.com|publisher=Toronto Star|url=https://www.thestar.com/news/gta/2019/07/01/who-should-share-in-the-risks-and-rewards-of-sidewalk-labs-smart-city-on-torontos-waterfront.html|access-date=1 July 2019}}</ref>