06 - Public Private Partnership - DME
06 - Public Private Partnership - DME
Public financing
Necessity: There are Important infrastructure investment needs due to:
- Structural deficiencies of economy
- Having to cover needs not covered by private sector
- Increase efficiency of public sector
There are 3 ways of public financing:
- Direct:
- The administration finances and manages the investment
- Deferred:
- The financial burden is delayed
- Indirect:
- Administration finances but does not manage the investment (EU funds)
Types of public funding
Direct public funding
In Direct public funding, the government raises funds immediatly and pays for a project directly.
For example, building a new highway funded by government bonds.
Deferred public funding
In Deferred public funding, the financial burden of the project is delayed to a future date.
For example, a company builds a hospital and the government pays for it over 20 years.
Indirect public financing
In Indirect public financing, the public, more than paying, makes incetives, through garantees, subsidies, without directly raising or spending funds.
For example, offering tax breaks to developers who invest in renewable energy projects.
Some models
Public funds to public entities
A way of [[#Indirect public financing]] an infrastructure.
A public or private agent is created for the sole purpose of managing and executing a project. The public administration funds this entity.
This can happen in 3 different ways:
- [[#Public funds to public entities from chapter VII]]
- [[#Public funds to instrumental societies]]
- [[#Contributions to public business entities or state owned companies under chapter VIII]]
Public funds to public entities from chapter VII
Capital transfers taken from the budget to whoever is managing the project.
Public funds to instrumental societies
Create a company or other public entity for the sole purpose of managing a project with NO commercial income. Public funds reimburse all expenses annually.
Contributions to public business entities or state owned companies under chapter VIII
Similar to [[#Public funds to instrumental societies]] but the company has commercial income. It needs to be profitable.
Deferred or fraction payment
There is a Construction contract such that, in exchange for a single price, the contractor finances the cosntruction, then, when the work is done, it gets payed back.
English model - shadow toll
It's a concession system in which the private sector is funded receiving from the public administration a toll or fee proportional to the use of the infrastructure. This happens until the project is completely paid back.