Thursday, April 29, 2010

Public-Private Parternship - An Alternative Tranportation Policy?

In the debate over future transportation policy, the jurisdictions are faced by the need for new revenues and have largely avoided gas taxes, carbon taxes, or other mechanisms that could solve budget problems. One frequently proposed option is infrastructure privatization–for instance, leasing a public highway to private investors and giving them the right to collect tolls in order to turn a profit. Although only a small portion of surface transportation routes offer profit opportunities for the private sector, these “public-private partnerships” are being touted as a major way to deal with transportation budget shortfalls.

The Texas Department of Transportation has implemented a Comprehensive Development Agreement (CDA) that encompasses public-private finance. A CDA is an agreement with one entity (the developer to design, develop, construct, finance, acquire, operate and/or maintain certain kinds of facilities. The right to price and collect revenues from toll roads is leased to a private entity for a finite but rather long period of time in exchange for providing local and state governments with a quick influx of cash and/or additional infrastructure.

TxDOT claims that CDAs have many benefits including,
  • Private companies should have a proven advantage over the public in providing this particular good or service and offer a clear and long-term added value–not just temporary budget relief or political expediency.
  • Accommodate rapid growth of VMT
  • Accelerate construction, and complete projects sooner
  • Increase highway efficiency by reducing current congestion and allowing for faster and safer transportation of freight and people.
  • Attract private investment to Texas.
However, there are critiques of CDAs. For instance,
  • The public will not receive full value for its future toll revenues. The upfront payments that states receive are often worth far less than the value of future toll revenue from the road. Analysis of the Indiana and Chicago deals found that private investors would recoup their investments in less than 20 years. Given that these deals are for 75 and 99 years respectively, the public clearly received far less for their assets than they are truly worth.
  • The public loses control over transportation policy. Private road concessions in particular result in a more fragmented road network, less ability to prevent toll traffic from being diverted into local communities, and often the requirement to compensate private operators for actions that reduce traffic on the road, such as constructing or upgrading a nearby competing transportation facility.
  • Public officials cannot ensure that privatization contracts will be fair and effective when leases last for multiple generations.

One project that was introduced after the CDA was the Trans-Texas Corridor in 2005.It was a proposed multi-use, statewide network of transportation routes across Texas that would incorporate a network of broad corridors linking major cities, with toll roads for cars and trucks, tracks for freight and passenger rail, and space for pipelines and power lines. However, the project was dropped in 2009 after so much public resistance.

Even though there is a dire need for alternative transportation finance models, even new methods are being met with resistance. Texas Governor Rick Perry said he will continue to look at public-private partnerships to build roads, including toll roads."The name Trans-Texas Corridor is over with. We're going to continue to build roads in the state of Texas," he said. "Our options are relatively limited due to Washington's ineffectiveness from the standpoint of being able to deliver dollars or the Legislature to raise the gas tax. So, we have to look at some other options."

Above is an artists rendering of the Trans-Texas Corridor.

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