Larry Summers uses the deferred-maintenance-as-expensive-debt in recent post:

“Borrowing to finance maintenance should not be viewed as incurring a new cost but as shifting from the fast-compounding liability of maintenance to the slowly compounding liability of explicit debt.”

OK, I certainly agree with the debt analogy. But regarding the proposed (implicitly obvious) solution that on-balance sheet borrowing is cheaper, this is true but an ivory-tower observation. The problem is that although “explicit debt” will almost certainly have a much lower interest rate than deferred maintenance accrual cost, it is also on-balance sheet (using up statutory debt capacity), requires fixed repayment and is less flexible.

And not as if budget flexibility is getting less important – here’s Moody’s view in a recent Governing column:

“As a result, revenues become more unpredictable and policymakers have to become more cautious. Unfortunately, it looks like that dynamic is here to stay.”

I think “more cautious” does not mean “more prudent” in the long run but is in fact consistent with leaving expensive liabilities in place if they’re off-balance and flexible and the only alternative is traditional debt.

Both of these observations point to possible role for innovative P3s that are debt-like (i.e. cheap like an availability payment) but also flexible for in effect refinancing deferred maintenance (along with financing upgrade/expansions too) on existing social infrastructure.

So I guess that’s the case for brownfield P3s — not really a “sale”, or a “monetization” or “asset recycle” — but in fact more like transferring credit card balances from a stupidly-expensive card to some other relatively flexible (but much cheaper) form of borrowing.  Not exactly complicated?