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Is private ;nancing of
public infrastructure a
is the director of
policy research for
the California Policy
is the author of
Chain of Title: How
Americans Uncovered Wall Street’s
Fraud ( The New
not available at
HISTORICALLY, AMERICANS have expected state and local governments
to shoulder most of the cost of building and maintaining transportation,
water and sewer systems. But, today our public agencies are deeply in debt and
the federal government even more so—to the tune of ;;; trillion (excluding
With this level of debt, it is hard to see how state and local governments
can afford to build and maintain adequate infrastructure.
Piling on more debt at any level of government is simply unfair to our
children and grandchildren, and heightens the risk of fiscal crises that have
hit nations like Greece and cities like Detroit. Printing money to pay for new
infrastructure, as some suggest, could trigger inflation, which devastated the
U.S. economy back in the ;;;;s and is ravaging Venezuela today.
Rather than saddle current and future taxpayers with more debt, a better
solution is to turn to the private sector to build and operate the facilities we so
desperately need. While no one likes to pay tolls and other user fees, charging
those who directly benefit from new infrastructure is fairer and more efficient. It also works: Recently a private company completed a large desalination plant in Carlsbad, California, freeing a large portion of San Diego County
from water insecurity by removing salt from Pacific Ocean water. The plant
opened ahead of schedule, and costs matched pre-construction estimates.
While private companies have an incentive to build facilities on time
and on budget, governments often execute large projects poorly. The San
Francisco–Oakland Bay Bridge cost five times as much as expected and
opened several years late. Other cases of public works projects coming in late
and over budget are Boston’s Big Dig and New York’s Second Avenue Subway.
Let’s leverage private capital and the profit motive in service of the public
good, by allowing companies to build, operate and maintain more of our infrastructure assets. C
THE IDEA THAT private investment can unlock capital for infrastructure
neglects how projects are currently paid for. Private investors already purchase state and local infrastructure bonds, made attractive through tax-exempt status.
But public-private partnerships, where outside investors finance and
acquire public assets, don’t save money. They merely outsource tax collection
to the private sector.
Private companies aren’t charitable foundations; they expect a return on
investment when they put their dollars on the line. With infrastructure, that
comes from tolls on roads and bridges, or a surcharge on your water bill. It’s
not an investment as much as a loan of upfront money, in exchange for lucrative user fee payments over time.
Not only does this mean that public-private partnerships can cost more
than their publicly funded counterparts, but it ensures projects get funding
based on what can reap the most profit. A bridge connecting a wealthy suburb,
where users can afford a large toll, makes more sense than a sewage upgrade
in a poor rural hamlet or inner city. The places where infrastructure is needed
the least are the ones most likely to get the upgrades.
Public-private partnerships also cede control to for-profit actors for
design, operation and maintenance, without the transparency demanded of
government projects. Substandard engineering or contractual surprises can
occur without public accountability. Outsize claims of usage rates nearly always
fall short, and recent projects—from the Pocahontas Parkway in Virginia to
the Detroit–Windsor Tunnel in Detroit—have led to a slew of bankruptcies.
In the aftermath, taxpayers must step in to pay off bonds and supply upkeep.
Public-private partnerships don’t bring more money to the table; they
just use the lure of instant cash to concentrate power and sell off the building
blocks of our society. C
Should art and artifacts be
returned to the country of
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