Crowd Financing for Public–Private Partnerships in the United States: How Would It Work?

Abstract

The public–private partnership (PPP) model remains a tool that can facilitate private investment to partially resolve the significant funding need to respond to aging infrastructure in the United States. However, the current PPP model does not allow for broad-based public equity investment in PPP projects. The Jumpstart Our Business Startups Act in 2012 has led to a rapidly changing legislative and regulatory environment, which enables new ventures to raise equity and debt investment. This new form of investment crowdfunding, or crowd financing, provides flexibility for start-ups to raise low-cost capital from supporters of their project or business. This flexibility also can be used to enhance the PPP model. Given the approach’s novelty and its potential impact on taxpayers, it requires a comprehensive look. This paper introduces an implementation framework for the PPP crowd-financing model and builds on an earlier paper that provided a policy review of the model, with an analysis of its strengths, weaknesses, opportunities, and threats. This paper also highlights similarities between crowd-financing models that are being implemented in the real estate industry and their applications to PPPs and then describes the current regulatory framework for crowd financing. An outline is provided to show how crowd financing can be implemented for PPPs during procurement, including a discussion of investment types, U.S. Security Exchange Commission exemptions, and crowd financing–platform interaction.