Public-Private Partnerships Will Not Save U.S. Infrastructure

Virginia's HOT lanes were held up in the U.S. Senate this week as an example of public-private partnerships done right. But is this what you really want out of the transportation system? Image: VDOT Office of Public-Private Partnerships
Virginia's HOT lanes were held up in the U.S. Senate this week as an example of public-private partnerships done right. But is this what you really want out of the transportation system? Image: VDOT Office of Public-Private Partnerships

This week, while Donald Trump ensnares himself in the most serious threat to his presidency to date, Congress is, to some extent, continuing with the typical business of government. A series of hearings during “Infrastructure Week” are focusing on the administration’s rumored infrastructure plan.

Although the White House has been talking up private infrastructure investment as a replacement for public funding, a panel of experts told Congress that, even with perfectly executed public-private partnerships, the federal government still needs to provide its own support — especially for projects, like transit lines, that aren’t guaranteed to generate toll revenue for profit-seeking investors.

This morning, Transportation Secretary Elaine Chao appeared before the Senate’s Environment and Public Works committee. Chao didn’t reveal much, but she did say that the White House will release a statement of “principles” about infrastructure later this month before handing off an actual infrastructure plan to Congress sometime later this summer.

Whether that’s actually going to happen is anybody’s guess. So far, the administration has given two substantive clues about its infrastructure agenda. One is a budget proposal that guts transit programs. The other is a campaign white paper that recommends using tax cuts to promote private financing of public infrastructure projects.

While Chao was circumspect, both topics got airtime at a Senate subcommittee hearing yesterday, where a panel of experts weighed in with advice on privately financing infrastructure.

Public-private partnerships have a role, said Virginia Transportation Secretary Aubrey L. Lane, but they are not a silver bullet that allows taxpayers to get something for nothing. The public pays for infrastructure one way or another, whether through tolls, taxes, fares, or fees, and it’s up to the government to make sure taxpayers are getting the best deal possible.

Virginia’s state DOT has done five public-private partnerships since 2007 — all for tolled highway expansions. For HOT lane construction on Interstate 66, Lane said, VDOT modeled how it would pay for the project using public financing before asking the private sector if it could come up with a better solution. That way, the state had a fallback position during negotiations with private firms.

Not every state has the know-how to navigate these complex negotiations. And not every project is going to generate the profits that will attract interest from the private sector. In fact, there are just 42 public-private surface transportation projects in the entire United States, according to FHWA statistics Lane cited. There are 35 states that have never had a single public-private transportation project.

With so much talk about promoting public-private partnerships coming out of the Trump administration and Congress, Lane is concerned that federal incentives could tilt the playing field to private financing, even if it isn’t the best deal for taxpayers. “Many of these concepts would provide an incentive that is only available if a project is financed privately,” Lane said in his testimony. “This creates distortions in procurements that will undercut the public’s negotiating position.”

Even with an expertly negotiated public-private deal, transportation projects ultimately require taxpayer dollars.

Los Angeles Mayor Eric Garcetti, who chairs the U.S. Conference of Mayors’ newly-formed infrastructure task force, said that means pairing dollars raised locally, like with the multi-modal Measure M ballot initiative in Los Angeles, with a reliable source of federal funds. “In the election in November, when everyone was focused on the presidential election, in cities throughout America, $230 billion in infrastructure initiatives were approved by voters,” Garcetti testified, referring to ballot initiatives that primarily fund transit. He added later: “Could we have our federal tax dollars along with our local tax dollars to make this happen?”

Supporters of urban transit like Garcetti weren’t the only ones looking for a reliable partner in the federal government. “Long-term, consistent federal funding remains vital,” testified Tim Gatz, executive director of the Oklahoma Turnpike Authority. “States must be able to anticipate the availability of resources in order to plan, design, and build projects.”

“The binding constraint facing state and local governments is insufficient tax revenue. Public-private partnerships and investor tax credits do not solve this problem,” Kevin DeGood, director of infrastructure policy at the Center for American Progress, told the subcommittee. “There are no shortcuts to rebuilding America’s infrastructure.”

  • Vooch

    fully privatize the interstates – sell the land and improvements completely.

    then and only then will the subsidies to mass motoring. transit will never have a fighting chance as long as mass motoring is subsidized.

  • Aarond

    Pretty much this. Not much else to say, blue states would jump on even a modest Interstate tolling plan and within a decade we’d see a massive revitalization of American mass transit which would also cause co2 emissions to drop as both people and freight move back onto rail.

    Trump has his issues, but the FREEway system has to end.

  • Tom B

    Brilliant stupidity while any investor in highways could charge a fortune in tolls and fees to trucking companies and motorist to make goods cost go through the roof!America runs off of trucking while your silly plan would cost people trillions of dollars for every good they purchase in the US at any location.You have some serious issues in your head while you have never thought about the consequences for everyone involved which is 320 million + people in the US.

  • SS Trumptanic

    This is what your party wants. Privatized everything.

  • DiegoVan

    This is NOT what we want. There are things that should be private. Economic goods and services are better off private because of the decision making that is needed.

    Govt services, such as police, courts and military should stay govt. They involve the use of force and the use of due process and regard for civil rights.

    Roads are intermediate. Acquiring titles involves constitutional issues of eminent domain. Building them and maintaining them is better contracted with private companies. Owning them and paying for them is a govt function because it is nearly impossible to access all users fairly, much less at all.

  • Hal Lemoyne

    Hey Stephen Miller

    You do have a right to your strong spoken opinion

    ??but it doesn’t that your opinion is truthful??

    it’s not

    and President TRUMP awesome proposal to overhaul all our US traveling infrastructure regardless small and great

    and this is nothing but Jobs Jobs Jobs

    so Stephen Miller, do you have a US infrastructure proposal??

    ??if not??

    then shut your criticism head hole up permanently NOW!!!

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