With the release of Revenue Procedure (Rev. Proc.) 2016-44 on August 22, 2016, amended on September 2, 2016, public owners should much less frequently face the costly choice between using tax-exempt finance and capturing life-cycle benefits. The availability of tax-exempt financing comparable to that under a DBB model should eliminate any argument against the P3 model based on the difference in cost between tax-exempt public financing and taxable private financing.
This Revenue Procedure facilitates public owners' use of the P3 model in combination with the same type of direct, tax-exempt borrowing in the US municipal finance market that they could achieve using the DBB or a design-build (DB) model. At first blush, Rev. Proc. 2016-44 would seem a powerful catalyst for widespread adoption of the P3 model, facilitating a potent combination of low-cost, tax-exempt financing and life-cycle benefits. However, it has yet to be hailed by P3 market participants as such a "game-changer."