Is Ex-Post Fiscal Support to PPPs Sustainable? Analysis of Government Loans Granted to Shadow-Toll Roads in Spain: A Case Study

Laura Garrido,José Manuel Vassallo

doi:10.3390/su13010219

Laura Garrido, José Manuel Vassallo

Open Access

https://doi.org/10.3390/su13010219

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Journal: Sustainability	Publication Date: Dec 28, 2020
Citations: 5	License type: CC BY 4.0

Affiliation: Universidad Politécnica de Madrid

Abstract

Budgetary constraints are prompting many governments to encourage private financing of transport infrastructure through public–private partnerships (PPPs). Fiscal support measures are often used to improve the financial feasibility of PPPs and to rebalance the economics of contracts to compensate for government-imposed changes. In the latter case, information asymmetry, political haste, and lack of competition may lead to poor government decisions in establishing support measures. Furthermore, lack of government support may lead to early termination of contracts and non-implementation of projects with high potential social benefits. This paper analyzes the awarding of subordinated public participation loans (SPPLs) to 10 brownfield shadow-toll highway PPPs in Spain after the government imposed additional works. It is hypothesized that, given the political importance of the projects and the viability problems they soon experienced, the government may not have set out the terms of SPPLs efficiently. This paper evaluates the financial and social impacts of awarding these loans to three of these projects to assess whether the government’s decision to support them was justified from a sustainable perspective. The results show that, while the government’s decision was reasonable, the design of the SPPL and its awarding conditions should be improved to ensure the public interest.

Highlights

Sustainability and infrastructure share a common goal: meeting the current and longterm needs of society [1,2]
This paper evaluates the awarding of subordinated public participation loans (SPPLs) to 10 highway private partnerships (PPPs) in Spain
We study the use of SPPLs as a means to rebalance the economics of a set of brownfield shadow-toll PPPs in Spain after the government imposed additional works not included in the original contracts

Summary

Introduction

Sustainability and infrastructure share a common goal: meeting the current and longterm needs of society [1,2]. How infrastructure systems are selected, designed, financed, and managed today will have a major role in how those systems affect society and the environment and in future years [2] In this respect, several authors have stressed the importance of integrating sustainability principles into the decision-making process to ensure the viability of projects from a sustainability perspective and achieve sustainable infrastructure development [2,3,4]. Since the late 1960s, 54 concessions totaling 3039 km have been awarded, 2539 km of which are state highways [52] They were awarded mainly in two different periods: between 1967 and 1975, to cope with the scarcity of quality roads in the country, the increase in road traffic levels, and the lack of sufficient budgetary resources; and between 1996 and 2008, to develop new highways while meeting the requirements of the Stability and Growth Pact in terms of public deficit and debt. The central government made use of this mechanism for the first time in 2007 when implementing the FirstGeneration Highway Plan, comprising 10 projects based on a combination of shadow-toll and availability payment approaches, and five years later with one project that relies entirely on availability payments, totaling 1042 km altogether

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