Association for Public Policy Analysis & Management

Critics of infrastructure public-private partnerships (P3s) often point out that cost of capital for P3s is considerably more expensive than traditional infrastructure procurement. However, to date no one has tested this claim by comparing the cost of capital for both P3s and traditional infrastructure procurement – namely, tax-exempt municipal bonds – on a risk-adjusted basis. In this paper I present that comparison. Using data from approximately 100 US infrastructure P3s since 2005, I compare the total cost of capital for P3s to a matched sample of similar infrastructure projects financed with municipal bonds. Initial results suggest that P3 cost of capital is comparable to traditional procurement, particularly for P3s financed primarily through syndicated loans.