New York: PPPs could help fund $250bn infra gap

A report by Comptroller Thomas DiNapoli calls PPPs a ‘good option’, but argues the terms of some PPP agreements, such as the Chicago Skyway and Indiana Toll Road, would be punitive to taxpayers in the long-term.

New York State Comptroller Thomas DiNapoli, who controls the state’s $133 billion public pension fund, believes public-private partnerships could help New York fund its infrastructure needs, which he says total $250 billion.

In a recently published report, DiNapoli provides insight around a question that comes up “time and again”: whether PPPs could help solve some of the state’s problems, according to a spokesperson for DiNapoli.

DiNapoli described PPPs as a “good option” but cautioned they weren’t “risk free”, according to a statement issued with the report. DiNapoli believes the sharing of risks between public and private sectors could be a benefit from PPPs, while the “introduction of a private profit motive into the public’s cost equation” requires “caution and foresight”.

DiNapoli uses Chicago’s and Indiana’s PPP deals to present a hypothetical example of the need for caution. If the New York State Thruway had been leased under the same terms as the Chicago Skyway and Indiana Toll Road, DiNapoli estimates tolls would have increased by 2,514 percent since the Thruway’s opening in 1954, as opposed to the actual increase of 254 percent. 

“This is an example of a [PPP] agreement that makes economic sense to the private partner, but should be seriously questioned when it comes to the public impact,” the report concludes.

Availability payments – annual fees from the public sector to a private partner in return for operating and maintaining an infrastructure facility – may also be problematic because “the public partner may be in the position of signing a contract for future payments without knowing exactly how much those payments might turn out to be”, DiNapoli said.

New York does not have a statewide regulatory framework governing the use of PPPs. The New York State Legislature had previously considered establishing a State Asset Maximisation Board that would have the authority to foster PPP opportunities across the state. The idea was dropped in 2010 amid scandal and upheaval in Albany and remains in limbo.  

However, New York City has been considering the possibility of privatising its parking assets, a move that other cities like Pittsburgh, Indianapolis and Los Angeles have also contemplated. To date, though, Chicago remains the only large US city to successfully privatise its parking assets.  

DiNapoli’s report also brought up a recommendation the comptroller’s office offered in a November 2010 report: the creation of a Capital Asset and Infrastructure Council, which would address capital planning across the state agencies and local governments. 

In August 2009, DiNapoli estimated local infrastructure needs faced a shortfall of about $80 billion over the next 20 years. While those figures have not been updated, DiNapoli’s office said the shortfall has likely increased since then. The statewide infrastructure spending gap of $250 billion also did not change from the August 2009 estimate.