While the recently signed highway bill pledges to maintain current funding levels for the next 27 months—a move funded by borrowing almost $20 billion, mainly from pensions—many states and cities are pursuing innovative public-private partnerships (PPPs) rather than follow Uncle Sam’s “borrow from Peter to pay Paul” strategy. As a recent AP article noted, many of our nation’s roads, tunnels and bridges were constructed over 50 years ago, and the recession has left states and cities without the revenue bases—or the credit ratings—needed to make the improvements their residents need and deserve.
Luckily, private companies (and investors) are willing to step into this financial breach—paying significant up-front fees to state and local governments, quickly financing and completing transportation improvements, and using the fees from tolls to maintain these projects. For more information on how PPPs function, check out this Reason Foundation report. And with the recovery continuing to limp along, it’s reassuring to know that financial analysts see a stable future for toll roads as an industry here in the US. Though unfortunate that cities and states don’t share that strong financial outlook, PPPs offer a bright spot in an otherwise rather gloomy economic picture.
P3 consortia are considered “White Knights” by some and “Pied Pipers” by others. They are a little bit of both, which is why full transparency and accountability are required for these alternative ways to finance and deliver major infrastructure projects to succeed for both their public sponsors and private investors.