As President-elect Barack Obama unveils plans for a massive economic stimulus package that includes $25 billion in direct public funding for infrastructure, state and local governments should think twice about privatising their infrastructure assets, according to a recent report by public policy think tank Century Foundation in New York.
“Fundamentally, I think there is reason for skepticism on the part of the public sector,” said Anthony Shorris, former executive director of the New York New Jersey Port Authority who authored the report for the foundation.
The report is the first in a series that will cover the topic of upgrading US infrastructure, which is receiving increased attention from politicians as President-elect Barack Obama unveils plans for a long-term economic stimulus package that could reportedly top $500 billion, including $25 billion in direct public funding for infrastructure.
Shorris argues that, as public goods, infrastructure assets deserve and demand public support rather than private capital. By its very nature, private capital must answer to its owners and pursue its best interests, which inevitably will conflict with the public interest, Shorris said.
Privatisation of infrastructure requires the sort of “very patient capital” that many investors are unable to provide, Shorris said. He points to the 2000 privatisation of New York’s Stewart International Airport by UK transport provider National Express Group as an example. Six years after the transaction, the concessionaire put the 99-year lease on sale and eventually the state repurchased it for $78.5 million.
Local, state and the federal government need to find ways to fund infrastructure spending needs rather than turning to the private sector, Shorris said. Some ways to do that include the creation of tax-exempt regional infrastructure enterprises with dedicated revenue streams, like the Tennessee Valley Authority, which was created by President Franklin Roosevelt during the Great Depression.
Organisations like the TVA are designed to take on longer-term projects, he said, and have more leverage to get all stakeholders across local and state jurisdictions to agree on funding for projects.
“In the end, if we want great public works to reflect public policy objectives rather than maximising the profits of their private investors, public goods must be publicly funded,”Shorris said.