A "Model" Scheme? (P3's)

[froggie]

http://www.truth-out.org/news/item/25540-a-model-scheme

Interesting article that goes into the weeds of the transportation Public-Private Partnership, especially Virginia's.  Some damning numbers on the Capital Beltway HO/T lanes project, and how taxpayers will likely wind up footing the bill.  A Government Accountability Office (GAO) report suggests that there is really little benefit to the public taxpayer from P3's, and that they're stuck with the bill due to the Federally-backed bonds that the private entity often does not pay back due to bankrupcy and/or too-low traffic projections (the VA 895/Pocohontas Pkwy in Richmond being a classic example of the latter).

The article also takes Design-Build (which P3's often are) to task for being a source of expensive change orders, often with little choice for the transportation agency.  Whatever cost savings the public realizes from faster construction is lost to the change orders.

[wxfree]

I really don't get P3s.  Government gives up future surplus revenues to the private sector. I don't think of myself as a communist but it seems to me that profit from a public project should be public.  They often contribute tax money to the project (at least here in Texas).  And the people still bear the risk of high tolls, bailouts, and bad road conditions if the company can't afford maintenance.  The worst part, to me, is that it's a thought scam.  They do this for the sake of reducing public debt, as if the future tolls paid by the people are somehow different because they're paying the debt owed by a private business rather than government.  No actual money is saved, tolls often end up higher, and any profit goes to shareholders instead of the public.

[lordsutch]

The article also takes Design-Build (which P3's often are) to task for being a source of expensive change orders, often with little choice for the transportation agency.  Whatever cost savings the public realizes from faster construction is lost to the change orders.

The issue as I see is it is that the states and feds need to find a way to structure their projects so they get the benefits of fast project delivery that fully-private or mostly-private projects deliver on. For example, somehow 41 miles of SH 130 sections 5-6 in Texas got built in about two years,* while it's taking state DOTs across the country years, sometimes decades, longer to deliver similar public projects (I-49 from Texarkana to Shreveport springs to mind, a project in similar rural terrain; you could add Mississippi's part of I-269, or for that matter Tennessee 385, which I think was originally proposed in the early 1980s and only just was finished last year).

If it isn't design-build, what is it? Shadow tolling? Bonding instead of pay-as-you-go?

* SH 130's investors are taking a bath, but that's rather beside the point; after all, I-49 or I-269 would lose money too as standalone projects without some sort of cross-subsidy.

[cpzilliacus]

http://www.truth-out.org/news/item/25540-a-model-scheme

Interesting article that goes into the weeds of the transportation Public-Private Partnership, especially Virginia's.  Some damning numbers on the Capital Beltway HO/T lanes project, and how taxpayers will likely wind up footing the bill.  A Government Accountability Office (GAO) report suggests that there is really little benefit to the public taxpayer from P3's, and that they're stuck with the bill due to the Federally-backed bonds that the private entity often does not pay back due to bankrupcy and/or too-low traffic projections (the VA 895/Pocohontas Pkwy in Richmond being a classic example of the latter).

The article also takes Design-Build (which P3's often are) to task for being a source of expensive change orders, often with little choice for the transportation agency.  Whatever cost savings the public realizes from faster construction is lost to the change orders.

Adam, I disagree with the assertion that taxpayers will pick-up the costs on Virginia PPTA projects in the event of default.  They won't. 

The owners of the project and the bondholders are the only ones at risk in the event of a default.

[Anthony_JK]

Except that the bond holders can use their political juice to induce lawmakers to pass on the excess risk onto the public in the form of either higher tolls or other means of recouping the losses (such as diverting from other essential public services or raising "user fees".

The only reason why private firms can build projects quicker is because of the innate conservative bias against public funding of public highways and towards privatization. If public infrastructure had adequate funding, they could be built just as quickly....with benefits to everyone rather than just a lucky few able to afford paying jacked-up tolls while public structures are left to wither and decay.

[cpzilliacus]

Except that the bond holders can use their political juice to induce lawmakers to pass on the excess risk onto the public in the form of either higher tolls or other means of recouping the losses (such as diverting from other essential public services or raising "user fees".

Virginia has let the bondholders on several PPTA projects twist in the wind, doing absolutely nothing to "save" them or the money they loaned to several PPTA toll road projects, including the Pocahontas Parkway (Va. 895). 

The only reason why private firms can build projects quicker is because of the innate conservative bias against public funding of public highways and towards privatization. If public infrastructure had adequate funding, they could be built just as quickly....with benefits to everyone rather than just a lucky few able to afford paying jacked-up tolls while public structures are left to wither and decay.

To some extent I agree with you.  The Virginia PPTA was pushed-through during the administration of George Felix Allen (R), quite probably the most-conservative governor of the Commonwealth since the end of public school segregation in the early 1970's.

Toll projects can be built rather quickly by public-sector toll road agencies if the powers that be in the state are behind the project.