Obama’s down with PPP… and so are we?

Tunnel Boring Machine at PortMiami

As we all know, federal funding for transportation infrastructure projects is a thing of the past. The recession of 2008 still lingers in the federal budget cuts and the resistance to raise user-base fees. The primary funding source for transportation projects, the highway trust fund, has seen rapid decline in recent years due to lower vehicle miles traveled and stagnant gas tax rates. While there seems to be no money for transportation, there has never been a time when transportation is so in demand. State and local governments are struggling to keep their current systems in good condition, while also trying to fund new and innovative transit technologies. This disconnect is reason enough for the federal government to start taking action. This action has taken the form of public-private partnerships (PPPs).

Since federal funding seems to be out of the question, the new answer appears to be federal financing. In April 2013, Obama made a public appearance at the PortMiami tunnel project in Miami, Florida to show his support for PPP financing. Miami is currently working with two private firms who are in charge of the construction and design of the tunnel project.  At the event, the president proposed a $21 billion infrastructure plan that would create a national infrastructure bank, increase TIFIA credit, raise the cap for private activity bonds and fast-track approval processes for projects. By increasing federal support of PPPs, making the approval process quick and easy, and creating an infrastructure bank, the financing world of transportation projects just got interesting again.  

The Federal Highway Administration has already jumped on the PPP wagon by producing several documents to help state and local governments develop PPPs for transportation projects. “P3’s” are said to bring “creativity, efficiency and capital to address complex transportation problems”. The National Conference of State Legislatures also has a PPP for Transportation Toolkit. As governments begin to accept PPPs as part of the fabric of transportation financing, special consideration should be taken for the risks associated between public and private sectors relationships. Dean Papajohn surveyed Department of Transportation’s in states that currently allow PPPs and found that some of the risks that occur include but are not limited to “traffic demand, right-of-way, environmental issues, operation and maintenance costs, political and governmental issues, loss of owner control, and delays because of legal issues.” The most common risk, however, is that the private financier will fail to complete the project, leaving the burden on the public.

There are other major concerns for PPPs that should be considered as more state and local agencies take them into normal practice. Since PPPs are still new and are only being utilized by a small number of firms, there is danger that they might stifle competition or only capture special interest groups. Europe has seen these types of misuses more than the US. Since there are usually a very small number of bidders (sometimes only one) for projects, many times projects happen outside of the public eye. This also creates little oversight and transparency for partnerships of this nature.

Another important factor is the lack of community involvement inherent in PPPs. The current ways PPPs occur do not encourage public outreach because the number one priority for governments is securing financing and not thinking ahead to outcomes of such deals. Many times citizens do not know about a project until it has already been signed off by local authorities. This makes the community benefits less important than they should be when producing public transportation projects. It becomes harder to advocate for community space or economic development if projects are passed through with little to no public oversight. Projects are picked for their investment opportunities rather than their long-range planning benefits to the community.

It is time for transportation projects to be supported and funded by all willing players. Large projects like the ones in the transportation industry are great economic boosters and job creators for states and regions all over the country. As we begin to embark on the world of public-private partnerships, we must advocate for community involvement to make sure that taxpayers do not get beholden to private interests and the costs of business if anything were to go wrong. As the federal government starts to push for PPPs are the solution to our transportation problems, input, transparency and smart planning are essential for success.