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Privatization

The American Society of Civil Engineers (ASCE) estimates that more than $2 trillion are needed to rehabilitate and expand America’s existing transportation infrastructure.

The Issue

Over the past few years, states have undertaken new partnerships with private companies to help fund and manage new and existing infrastructure projects, an arrangement known as a public private partnership (P3). Long popular in Europe, Canada and Australia, P3s have several advantages over traditional projects, allowing for easier funding, design and construction, all while freeing up taxpayer dollars on other programs and services.

Under a P3 agreement, the government allows private companies to undertake construction or management of infrastructure projects while keeping the public sector accountable. In a typical P3, a government agency contracts with a private company to renovate, build, operate, maintain, manage or finance a facility. This passes many of the risk of a project, including design, operation and long term maintenance to the private company.

In a 2014 Heartlander article, Kenneth Orski argued P3s allow for an improved funding source that may prove more stable over time, while lowering upfront costs. “In turning away from ‘pay-as-you-go’ funding and toward project financing, states are emulating a long-established practice in the private sector. All of the nation’s privately owned infrastructure has been, and still is, financed by borrowing front-end capital and repaying it over time rather than by relying on current cash flow. Now, states are adopting the same approach toward public infrastructure, convinced they no longer can count on a reliable, stable, and generous flow of federal transportation dollars.”

Our Stance

P3s have become increasingly popular, according to the National Conference of State Legislatures, “As of Dec. 2010, twenty-nine states and Puerto Rico had legislated an authorization framework for transportation PPPs, and more than $46 billion had been invested in these projects over the last 20 years. The legislative trend grew in 2010 as 21 states and the District of Columbia considered 52 legislative measures concerning transportation PPPs.”

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