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Dec. 09, 2010

Driving Money Home for Transportation Projects

Public-private partnerships become an attractive option for some states. 

State lawmakers closed a cumulative budget gap of $83.9 billion while crafting their FY 2011 budgets. While revenues in many states are starting to gain momentum, legislatures are still struggling to meet growing transportation infrastructure needs. Some states have turned to partnerships with private entities as an attractive option.

Public-private partnerships (PPPs or P3s) are agreements that allow private companies to take on traditionally public roles in infrastructure projects, while keeping the public sector ultimately accountable for a project and the overall service to the public. In PPPs, a government agency typically contracts with a private company to renovate, build, operate, maintain, manage or finance a facility.

“Public-private partnerships can be a valuable tool for states when they are developed by the executive and legislative branches in a collaborative atmosphere. Equally important is the obligation to involve the public. It is critical that elected officials educate themselves and the public when considering P3s against traditional procurement approaches,” said Indiana Representative Terri Austin, co-chair, NCSL Partners Project on PPPs.

The National Conference of State Legislatures (NCSL) has developed a tool kit for lawmakers that promote good governance and a sound public policy approach when considering PPPs. Even though there is a growing interest in these types of projects, the debate over their use has become somewhat polarized. The NCSL toolkit contains nine principles of a sensible public policy approach to these partnerships. The guide can help state legislators navigate the controversies and serves as a balanced, neutral and bipartisan source of information.

“This toolkit is an excellent resource for states about to embark on a PPP program, as well as those states that already are building a P3 program,” said Representative Rick Geist of Pennsylvania. “I consider it required reading for legislators and policymakers who want to do it right.”

Twenty-nine states and Puerto Rico have passed laws authoring a framework for transportation PPPs, and more than $46 billion has been invested in these projects over the last 20 years. The trend grew in 2010 as 21 states and the District of Columbia considered 52 legislative measures on transportation PPPs.

“Solid enabling legislation is the key to thorough consideration and success of PPP projects,” said NCSL’s executive director, William Pound. “The focus of the report is on promoting good governance and a sound public policy approach for states to consider when evaluating these types of projects.”

Though these types of projects are not ideal for all transportation projects, they have been shown to reduce upfront public costs through accelerated or more efficient project delivery. PPPs don’t create new money for states, nor are they a free ride. The public sector will still have to pay back the private investment with revenue that can come from various places, such as tolls. In this era of fewer viable choices for moving ahead with critical infrastructure development, PPPs are an option many states are willing to consider.

NCSL’s toolkit is a product of the NCSL Foundation Partners Project on PPPs for Transportation. NCSL formed this working group of state legislators, legislative staff and representatives of private sector entities in 2008 to assemble reliable information and to identify effective tools for considering PPPs in the context of overall transportation funding decisions.

A copy of the NCSL toolkit is available online. In addition to the nine principles, clear explanations of PPP approaches, benefits and controversies, and roles and responsibilities are also provided. The appendices have a wealth of specific legislative information and detailed instruction on PPP issues.

NCSL is a bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.