Indeed, governments are not typically known as incredibly nimble actors. But skeptics say these deals have the potential to make them even less able to adapt to changing needs. When governments are locked into long-term deals, it's hard for them to adjust their priorities. "Sixty years from now, we may totally want to redesign cities," says Donald Cohen, executive director of In the Public Interest, an organization that questions privatization and is funded by foundations, unions and individuals who generally oppose privatization. "But we're contractually tied with some entity ... to consider their interests first in many ways."
The CBO notes that P3s "can end up costing the government more than it anticipates" if it has to renegotiate a deal due to disputes over control. The New York comptroller in a 2011 report said that the deals may even cause uncertainty about such basic questions as who's responsible for snow and ice removal or accident repair. "Projects that seem worthwhile initially," the report found, "may turn out to be less beneficial than thought."
But Reinhardt of Public Works Financing doesn't buy those claims. "None of these issues are hidden," he says. "The advisers on the public side are exactly as smart as the advisers on the private side. Believe me: Nobody is getting away with nothing." But others insist that even though governments employ consultants in the negotiations, the lawmakers themselves ultimately have to approve the deal. Legislators face a huge disadvantage since few of them have negotiated those type of deals in the course of their careers. And lawmakers focused on re-election may not be as concerned with the implications of a 50- or 75-year deal, since those implications may only be fully understood long after a lawmaker has left office.
Highway P3s are concentrated in certain regions and are relatively few in number. A 2012 Heritage Foundation paper says eight states accounted for 75 percent of the value of roadway P3s over the last 22 years. Since 2008, the P3 market has represented only about 2 percent of all highway investment. That said, P3s represent some of the biggest and most expensive projects out there. Critics and advocates alike say the trend will continue.
Where does that leave a state or local official? Schank of the Eno Center warns that the public and private sector have widely different goals that often aren't aligned. The problem, he says, is that the private sector comes to the negotiating table with less to lose than the government, and it is also more willing to walk away. That needs to change, critics argue, and a healthy degree of skepticism is needed to ensure the best outcome for the public.
Chicago Mayor Rahm Emanuel's approach to the potential privatization of Midway Airport is a case worth studying. Operating under the cloud of Chicago's widely panned parking meter transaction, Emanuel took an approach that emphasized protections for taxpayers. He insisted on a shorter-term lease of 40 years. He helped develop a "Traveler's Bill of Rights" designed to ensure reasonable parking and food prices at Midway. And he required the private partner to share profits with the city. After initially receiving interest from 16 firms, the city was left with one bidder and opted against privatization, citing lack of competition.
"It's a tool that can be valuable but needs to be used very carefully and with a complete understanding," says Bob Ward, New York's deputy comptroller for budget and policy analysis. He notes that public-private partnerships aren't the only way to do big projects. "We went to the moon without a P3."
Ryan Holeywell | Staff Writer
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Distributed by MCT Information Services
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