Regulatory Reform

Public-Private Partnerships Forge a Path Forward for Infrastructure Investment

America’s roads, bridges and tunnels have a significant impact on our nation’s economic health. According to a recent study by the American Society of Civil Engineers (ASCE), deficiencies in America’s infrastructure cost households and businesses nearly $130 billion in 2010. The same ASCE study found that if current infrastructure is not improved, it could cost 400,000 jobs by 2040. As our country faces the challenges of economic recovery, states need creative and proven solutions to ensure their transportation and infrastructure needs are not overlooked.  A major part of the solution can be found by partnering with the private sector.

A recent survey of top-level infrastructure executives in both the private and public sectors found that 93% believe the United States lacks an overall strategy for infrastructure investment. However, these individuals overwhelmingly agree on how to correct our infrastructure woes. The answer? Private investment and financing.

States can help infuse private sector funds into their transportation and infrastructure systems through policies that enable and encourage the participation of private sector entities. ALEC’s Establishing A Public-Private Partnership (PPP) Authority Act provides an example of how states can leverage private sector funds to improve their infrastructure systems. Public-private partnerships (PPPs) are contractual agreements between public and private sector partners that allow for more private participation than is typical.

Although not the entire answer to state infrastructure shortcomings, PPPs offer many benefits to states that choose to implement them. In addition to providing access to additional project financing, PPPs provide higher quality goods and services on a faster delivery schedule while transferring investment risk from taxpayers to private investors. They introduce competition to the bidding process, provide more innovative solutions to complex infrastructure problems and bring together public and private sector entities whose varying areas of expertise complement each other for the benefit of the project.

Virginia, for example, has successfully utilized PPPs to improve and maintain its infrastructure. Since 1995, Virginia’s Office of Public-Private Partnerships has developed and implemented PPPs across all modes of transportation. Working across state agencies, the Office of Public-Private Partnerships has implemented nearly $1 billion in major transportation projects and has another $5-6 billion under construction. Private sector financing and innovation has allowed Virginia to successfully implement projects such as the Capital Beltway HOT Lanes, Midtown Tunnel/Downtown Tunnel/MLK Extension Project and the I-95 HOT Lanes. Several states around the country have followed Virginia’s lead and have also recognized the potential for cost-savings and innovation that comes from pairing with the private sector.

State fiscal crises and the diminishing likelihood of federal transportation funds mean that states need creative solutions to finance their infrastructure projects. Private sector investment can help. Leaders in the infrastructure industry and several states have already recognized this solution; it is now up to the rest of the states to do the same.

 


In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and …

+ Regulatory Reform In Depth