Posted on 01/05/2017 7:16:37 AM PST by Tolerance Sucks Rocks
PRESIDENT-ELECT Donald Trump has proposed a $1 trillion plan to fix America’s infrastructure. It relies on public-private partnerships as its primary source of financing.
Our country’s complex transportation network needs an overhaul, but private investment is not the answer, mainly because of the returns that investors expect.
Public-private partnerships can be an excellent procurement tool, but selecting the right project is key.
Virginia has been a national leader in such deals since the General Assembly passed the Public Private Partnership Act in 1995. The law was designed for the partnerships to be used as an option for certain projects if taxpayers could get a better deal. They were not meant to be a default funding method. Virginia can finance projects less expensively with such deals, thanks to our AAA credit rating and tax-exempt status.
Over the years, Virginia officials fell into a misguided ideology that such partnerships were the transportation solution. They lost sight of the taxpayers’ best interests. The assumption was that the private sector would always deliver better results than government. It’s true in some cases, but not in all.
In the Trump plan, the private sector would get $140 billion in tax credits for equity invested in projects. This would yield a revenue-neutral $1 trillion program. However, private sector teams expect to get a rate of return on the money they invest. The revenue stream to make this possible comes primarily from tolls. Tolls do not work for the vast majority of transportation projects in which funds are needed to repair or upgrade existing facilities. Only a limited number of projects in the United States would support a revenue stream necessary to entice private investment.
When a public-private partnership is forced on the wrong project or negotiated without putting the public interest first, taxpayers may be left holding bag. U.S. 460 was supposed to be a privately financed toll road that ended up a traditional public project because toll revenues were too low for the private sector to realize a return on any investment. Virginia officials went ahead and signed the deal and had the private sector begin the project before adequately pursuing the permitting process. After it was evident that a federal permit for the project would not be granted because of the effects on wetlands, the contract was cancelled.
The Midtown and Downtown tunnels project, which was much needed in Hampton Roads, had tolls added to it before any improvements were made or additional capacity was created. The 58-year contract requires the state to reimburse the private sector should any competing facilities be built that would jeopardize toll revenues.
In both projects, the private sector protected the investors’ interests. That makes sense. However, the state’s fiduciary responsibility is to the public.
Virginia has since overhauled the public-private partnership process so that taxpayers are protected. Before considering such a partnership, the law now requires that the state first evaluate the cost to deliver the project with public funds. Before Gov. Terry McAuliffe’s administration, this wasn’t done. The assumption was that the private sector could finance and deliver projects better than the state. Risk was not adequately assessed. Politics drove the deals.
Once a base cost estimate is determined for a project, the state develops business terms based on what is best for the public, not solely for the private sector. If the state determines that the private sector can build the project in a way that is in the best interest of the taxpayers, using this funding method makes sense.
Virginia followed these guidelines when financing the $2.5 billion construction of express lanes on Interstate 66 outside the Beltway in Northern Virginia. The state set a baseline and was prepared to deliver the project without private investment. That proved a powerful negotiating position. Private investors competed with each other throughout the negotiation. The winning team will finance the entire deal and will pay the state $500 million at closing. There are no restrictions on adding new projects in the area. In fact, the deal will pay for transit and other corridor improvements.
Public-private partnerships can be the right tool to finance the right project. But we need more robust resources, with sustainable public funding as the key source, to fund the country’s transportation needs.
Aubrey Layne Jr. is Virginia’s secretary of transportation.
PING!
Yes it is, because the money will go to infrastructure and not unions.
Sounds like a typical government elitist.
Only I know what will work.
IMHO: If private funds are willing to pay for it, then it is necessary. Yes they will channel the money to fix problems that will benefit their business, but if it benefits that business it will most likely benefit many more. If it helps businesses, it helps the city with jobs. It entices other business to locate there.
It saves the State money that can be used elsewhere.
oh. it's a meaningless suck up piece.
Just another “must keep the graft flowing” Democrat. Democrats have tried this way for the last 70 years. Hows that working out for you all living in dark blue areas?
Maybe rather then cling to failed dogmas, we start doing some out side the box thinking
Don’t know who this yon is
Agree, government messes everything up
Of course it is not a Magic Bullet. As Arlen Specter asserted: that is what killed JFK.
But remember the liberal’s never-ending plea: There is no problem that this government can not solve if we just spend more taxpayer money for the sake of “the children”.
ANYTHING that Trump does will exceed the results of Obama’s efforts.
Only thing we saw out of Obama was a plethora of “Shovel Ready Project’” signs plastered all over the country.
He even put signs on items that were COMPLETED under George Bush.
Obama has been a faker from his birth....
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