If a fledgling venture succeeds, members of the public might be able to participate in crowd-funded public-private partnerships for infrastructure projects.

Brian Ross, a former construction manager, conceived the idea in fall 2013 and formed a venture called InfraShares with Pablo Nunez, an entrepreneur with P3 experience in Europe and India. Ross envisions that individual investors will be able to peruse P3 projects and make investments accordingly, through the website InfraShares.

Through his experience with P3s in water-wastewater, Ross says, "one common criticism was that foreign firms were the main investors getting big returns, but there was no investment opportunity for the local community."

ROSS
Ross has been contacting numerous public and private infrastructure stakeholders. "The feedback is that it is a good idea, but they're not sure how the mechanics are going to work," he says. "P3s are rather new in the U.S., and crowd- funding is totally new."

Morteza Farajian, program manager with the Virginia Office of Public-Private Partnerships, last year led the writing of an academic paper on crowdfunding and P3s as part of his graduate thesis. The paper, submitted to the Transportation Research Board, notes that the 2012 JOBS Act "removed the Securities and Exchange Commission's restriction on public offerings, allowing for 'crowdfunding' equity investment in new ventures. InfraShares allows P3 developers to raise equity from a broad base of individual investors, which increases public engagement and drives political support."

Says Farajian, "This could be the next wave that comes to project delivery." He says he and Ross discussed how to get state transportation departments to embrace the concept based on Farajian's study of actual P3 projects.

The InfraShares website is targeting qualified individuals and couples that have a net worth exceeding $1 million, not including the primary residence; an annual income of $200,000 in each of the two most recent years; or joint income with a spouse exceeding $300,000.

Once InfraShares partners with a P3 developer and launches a crowdfunding campaign, an accredited investor can read about it on the site and invest as little as $500. If the funding goal is reached, the investors all join a limited-liability company. Investor revenue would come from monthly interest payments; in the case of an equity investment, from user fees or availability payments; and a share of the proceeds when the asset is sold or refinanced.

Still in the prototype phase, the website does not yet have a list of projects. Ross says he has reached out to states with active P3 efforts, such as the proposed Purple Line transit project in Baltimore, the Pennsylvania P3 bridge-bundling and Colorado's Interstate 70 project.

"SEC only just finalized the rule-making on the crowdfunding legislation. How will we implement it?" Ross asks. "I've been doing the deep dive on how this will work. I believe I've come up with solutions, but it's now a matter of perception in trying to get the broader community to accept this as a viable concept."

One inherent challenge is that, while crowdfunding can raise millions of dollars, public infrastructure projects under P3s will cost billions of dollars, notes Brad Guilmino, national director of financial services at HNTB Corp. "I think the bigger thing is for individual investors to know how to analyze this asset and understand their risk factors."

Both Guilmino and Farajian note that the perceived social benefit of a project in one's community may be a big plus. "Individual investors [may] accept a lower rate of return due to lack of pursuit risk and perceived social return," states Farajian's paper.

Public reluctance to raise the federal fuel tax to help fund projects has pushed the movement to develop user-fee-based alternatives, and this idea can help further that discussion, says Guilmino. "[With this website], you can pick and choose an asset you believe in," he says.