The stink over public private partnerships is just starting to heat up. Last month, the federation of state Public Interest Research Groups (PIRGs), an influential American lobby group, published a report warning governments to take a cautious approach to toll road privatisation because the short-term benefits are unlikely to outweigh the long-term costs.
The report’s co-author, Phineas Baxandall, has been making the same arguments for years, and his opponents at the Reason Foundation, a free market think-tank, have been disputing them for years. But the squabbles do give the lie to claims the political argument over public private partnerships is over. On the contrary, with Congress set to debate the surface transportation spending bill in the coming months, things might just be heating up in the US.
PIRG argues that (what it calls) privatisation transfers “significant control over regional transportation to individuals who are accountable to their shareholders rather than the public”. It looked at the Indiana Toll Road and Chicago’s Skyway toll bridge and found that private investors would probably recoup their investment in less than 20 years, even though the deals are for 75 and 99 years respectively. It took this as evidence that the public sector got a raw deal while the private sector rode off to the bank on streets paved with gold.
“In order to argue that is, you have to make some pretty heroic assumptions about the efficiency and rationality of the public sector’s financing abilities,” counters Sam Staley, director of urban growth and land use policy at the Reason Foundation.
“Politicians can be shortsighted in these things,” says Baxandall.“It’s like in Indiana, where the governor can feel very happy for having funded a 10-year transportation plan, but it’s a 75-year lease (see p.13).”
It’s the sort of argument that has raged for years in Europe, and continues even in the UK, which kick started the PPP market over a decade ago. Voters don’t like selling control of their assets, whatever the financial arguments. And that’s something the industry should remember.
The political battle over privately funded infrastructure is far from over in America