Nov. 04--This spring, the Washington newspaper Politico published a column touting steps the federal government could take to solve the funding crunch that's led to underinvestment in infrastructure. Invoking imagery of Lincoln's railroads, Eisenhower's highways and Kennedy's space program, the authors concluded that governments must allow the private sector to play a greater role in building public infrastructure, lest America fall behind the competition. To illustrate the concept, the authors highlighted a deal the Puerto Rican government made with a private consortium to operate San Juan's airport for 40 years. "It's time," they wrote, "for government at all levels in the United States to partner with the private sector to bring our transportation infrastructure back to world-class levels."
A similar boost for public-private deals came this summer when a Senate subcommittee held a hearing on "innovative financing." Four of the five featured witnesses were there to press the feds to do more to facilitate public-private deals. Several of the witnesses discussed the daunting price tag for upgrading the country's infrastructure to a decent condition_$3.6 trillion by 2020, according to the American Society of Civil Engineers.
The message was clear: America's infrastructure is struggling, but the private sector can help. "No one wants another bridge to collapse, as did the I-35W Mississippi River Bridge," testified a Morgan Stanley official. That tragedy, which killed 13 people, underscores the need for expanded new, federally subsidized financing tools, he told Congress.
Public-private partnerships (P3s) are clearly on a roll. Last year's congressional highway authorization vastly expanded the scope of federal mechanisms that provide low-interest loans for projects that typically involve privatization. In addition, the number of states that have passed legislation to enable privatization is on the rise. Many people see P3s as a game-changer: the best, and possibly only, way to repair and replace the country's public works. "The only way we will be able to advance our system is with public-private partnerships," said Jeff Austin, a member of the Texas Transportation Commission, at a recent event in Washington.
Little, however, is said about the downside. The Politico column, for instance, did not point out that the airport deal was opposed by the governor and deemed so one-sided that critics have called it a "giveaway." (It also failed to mention that the authors' employer, Highstar Capital, was a partner in that very deal.)
There's a growing cadre of academics, activists, and state and federal auditors who question these public-private deals, but their voices aren't always heard. At that Senate hearing, for instance, none of those dissenting views was represented on the panel. Nor did the hearing highlight what the governments' own accountants say about P3s_namely that they are unlikely to solve the country's infrastructure funding gap and, in some cases, may carry risks for state and local governments. "Whenever I see advocacy [for P3s], I look for real economic analysis that justifies privatization," Cate Long, a municipal finance blogger for Reuters, recently wrote. "It's never there."
Increasingly, it seems the discussion of P3s isn't about whether it's wise for governments to enter the deals; it's about how governments can best facilitate them. Although former Congressman Jim Oberstar, who chaired the House Transportation Committee from 2007 to 2011, argued that P3 deals would trample the public's interest, today criticism from most lawmakers "has almost disappeared," says Robert Puentes, a P3 expert at the Brookings Institution. "It's not even political anymore."
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