Remember: Public-Private Partnerships Aren't Free

Started by cpzilliacus, March 24, 2017, 11:27:38 AM

Previous topic - Next topic

cpzilliacus

CityLab.com: Remember: Public-Private Partnerships Aren't Free - Roads, bridges, and trains jump-started by investor dollars always come looking for public ones, eventually.

QuoteEveryone wants sparkling new roads, bridges, airports, and transit systems. But most Americans aren't willing to crank up tax rates to pay for those projects, and many politicians aren't eager to try and convince them. That's why a growing chorus of elected officials, both liberal and conservative, are singing the praises of public-private partnerships.

QuoteThere are many ways to define this term, but the most common understanding is an arrangement where a private investor–think Morgan Stanley or TIAA-CREF–plunks down a big chunk of a project's upfront cost. Theoretically, with all that upfront private capital on hand, a highway, water system, or transit line can be built much more quickly than it would be if it were relying on a slow trickle of public funds or government bond sales. The project may also cost less, since, theoretically, companies have a bigger incentive to build efficiently. A local government can also build price/quality assurance check-points into the contracts they write. If the project fails, the Monopoly men are theoretically the ones who've taken on most of the risk, rather than the public.

Opinions expressed here on AAROADS are strictly personal and mine alone, and do not reflect policies or positions of MWCOG, NCRTPB or their member federal, state, county and municipal governments or any other agency.


kalvado

So what are other options? Borrow against future tax revenue and build, borrow against future toll revenue and build (in both cases - bail out if revenue doesn't meet expectations), and not build at all?
I don't see a very winning strategy in terms of infrastructure - people take it for granted and are not willing to pay...

cpzilliacus

Quote from: kalvado on March 24, 2017, 12:02:44 PM
So what are other options? Borrow against future tax revenue and build, borrow against future toll revenue and build (in both cases - bail out if revenue doesn't meet expectations), and not build at all?
I don't see a very winning strategy in terms of infrastructure - people take it for granted and are not willing to pay...

I actually like the model used by many states that pre-dates the Interstate Act of 1956 - state toll road agencies that borrow from the private sector (and  sometimes public infrastructure banks) to fund construction of new toll roads and toll crossings.

There is more accountability to the public with public-sector toll roads.
Opinions expressed here on AAROADS are strictly personal and mine alone, and do not reflect policies or positions of MWCOG, NCRTPB or their member federal, state, county and municipal governments or any other agency.

AMLNet49

My impression of the president's plan for infrastructure sounds like how Texas does it. Save money to build with tax dollars, while simultaneously handing out contracts to build other roads to private companies which then toll the new roads. This model also works with the Chicago Skyway/Indiana E-W Toll Rd. Is the problem that voters in other states wouldn't be as open to private toll roads?

J N Winkler

Quote from: kalvado on March 24, 2017, 12:02:44 PMSo what are other options? Borrow against future tax revenue and build, borrow against future toll revenue and build (in both cases - bail out if revenue doesn't meet expectations), and not build at all? I don't see a very winning strategy in terms of infrastructure - people take it for granted and are not willing to pay...

The strategy many states have already tried, with some success, is to raise the fuel tax and constitutionally bind themselves to spending the revenues only on highways, or at least on transportation-related purposes.  It is only at the federal level that raising the fuel tax has so far proven to be a political impossibility.  (It won't necessarily continue to be so; we had the Interstate map in hand in 1944 but it took until 1956 to secure agreement to build it out through a federal fuel tax dedicated exclusively to highway-related purposes.)

Quote from: cpzilliacus on March 24, 2017, 12:23:35 PMI actually like the model used by many states that pre-dates the Interstate Act of 1956 - state toll road agencies that borrow from the private sector (and  sometimes public infrastructure banks) to fund construction of new toll roads and toll crossings.

There is more accountability to the public with public-sector toll roads.

In many states at least, the public toll authority we could get now is not the same as we could get back in the 1950's.  We now have a history of (1) toll authorities being used as slush funds to guarantee loans for, if not actually pay for, services or projects unrelated to the toll facility and often indeed to transportation in general (Meadowlarks, Tamarack, Act 44); (2) abusive cross-pledging to soak through traffic for marginally toll-viable projects; and (3) well-poisoning with dishonest traffic and revenue studies.  (In regard to the last, the Wilbur Smith firm became especially notorious for them and I suspect this was a factor in their merging with CDM in 2011 to form CDM Smith.  This was quite a comedown for a firm that was founded by and took its name from a well-respected traffic engineering professor who helped compile the first few urban thoroughfare plans in the 1940's and served as associate director of the Yale Bureau of Highway Traffic.)

More generally, because of the issue of double-charging and traffic diversion to less safe facilities, I really couldn't support toll finance except in the near vicinity of large metropolitan areas where it would support the additional purpose of congestion management.  Internationally, a commitment to toll finance as the primary mechanism for highway development is often linked to an undertaking to tolerate widespread congestion as a necessary evil, and while this is a battle that has been decisively lost in many of our large metropolitan areas, by no means has it been lost everywhere.
"It is necessary to spend a hundred lire now to save a thousand lire later."--Piero Puricelli, explaining the need for a first-class road system to Benito Mussolini

J N Winkler

Quote from: AMLNet49 on March 24, 2017, 12:54:44 PMMy impression of the president's plan for infrastructure sounds like how Texas does it. Save money to build with tax dollars, while simultaneously handing out contracts to build other roads to private companies which then toll the new roads. This model also works with the Chicago Skyway/Indiana E-W Toll Rd. Is the problem that voters in other states wouldn't be as open to private toll roads?

The Texas approach (which has now been de-emphasized in favor of developing consumption taxes as new revenue sources for highways) was sold very aggressively on the presumption that raising the fuel tax to proceed with the then current model, using the gas tax to add new free capacity rurally and in smaller cities while leaving new tolled capacity to three urban toll road agencies, was DOA.  In spite of this high-pressure sales job, attempts to build interurban toll roads as through facilities largely failed (cf. TTC), and even the periurban toll facilities that are not close to the cities they serve (like SH 130) are struggling.  Most of the CDAs (a type of P3) that are still alive are in or near the large urban areas like DFW, Austin, and Houston.

The Indiana Toll Road and Chicago Skyway were a different type of P3.  They were leaseback arrangements on existing facilities, designed to provide one-time up-front cash to make good on deferred maintenance and capital expansion.  The money has now run out but the needs have not.
"It is necessary to spend a hundred lire now to save a thousand lire later."--Piero Puricelli, explaining the need for a first-class road system to Benito Mussolini

Brandon

News flash, there is no free lunch.  In other news, the sky is blue, things fall to earth, and the Pope is Catholic.  Then, coming up at 10, bears actually shit in the woods.
"If you think this has a happy ending, you haven't been paying attention." - Ramsay Bolton

"Symbolic of his struggle against reality." - Reg

Pink Jazz

Note that the FHWA's legal definition of a P3 doesn't specifically require private financing.  Arguably the simplest form of P3 is a design-build project, but most states don't consider DB projects as P3 projects.  One type of project legally recognized as a form of P3 by the FHWA are design-build-(operate)-maintain projects.  ADOT for example is promoting its South Mountain Freeway project (a DBM project) as its first P3 project.

Rothman

PPP = "Let's give contractors even more money through less competitive processes!"
Please note: All comments here represent my own personal opinion and do not reflect the official position(s) of NYSDOT.



Opinions expressed here on belong solely to the poster and do not represent or reflect the opinions or beliefs of AARoads, its creators and/or associates.