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Privatizing Public Infrastructure

This article in the Business section of the New York Times reports on how you may begin to see many of those public infrastructure projects turn to private funds for financing.

Private funds’ “strategy is gaining steam in the United States as federal, state and local governments previously wary of private funds struggle under mounting deficits that have curbed their ability to improve crumbling roads, bridges and even airports with taxpayer money.”

Chicago’s Midway Airport and the Flordia Turnpike are two projects that could be partially funded with private monies.  From the article:

“This fall, Midway Airport of Chicago could become the first to pass into the hands of private investors. Just outside the nation’s capital, a $1.9 billion public-private partnership will finance new high-occupancy toll lanes around Washington. This week, Florida gave the green light to six groups that included JPMorgan, Lehman Brothers and the Carlyle Group to bid for a 50- to 75 -year lease on Alligator Alley, a toll road known for sightings of sleeping alligators that stretches 78 miles down I-75 in South Florida.”

But how will taxpayers take to this method of financing public projects?

“And then there is the odd romance between Americans and their roads: they do not want anyone other than the government owning them. The specter of investors reaping huge fees by financing assets like the Pennsylvania Turnpike also touches a raw nerve among taxpayers, who already feel they are paying top dollar for the government to maintain roads and bridges.  And with good reason: Private investors recoup their money by maximizing revenue — either making the infrastructure better to allow for more cars, for example, or by raising tolls. (Concession agreements dictate everything from toll increases to the amount of time dead animals can remain on the road before being cleared.)”

There’s a need out there and limited money to do it.  According to the article, the ASCE…

…”estimates that the United States needs to invest at least $1.6 trillion over the next five years to maintain and expand its infrastructure. Last year, the Federal Highway Administration deemed 72,000 bridges, or more than 12 percent of the country’s total, “structurally deficient.” But the funds to fix them are shrinking: by the end of this year, the Highway Trust Fund will have a several billion dollar deficit.”

“The prospect of steady returns has drawn high-flying investors” , but time will tell whether the investment will be worth the wait on return and whether the politicians can get the public’s support.

Read the full article here.

September 4, 2008 | Filed Under In the News 

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