Connecticut should continue protecting itself from bad infrastructure deals

If you’re the rare person who’s heard of a public-private partnership —known as a “3P,” “P3,” or “PPP”—you’re likely familiar with the spectacular claims that often accompany them.

Supporters say that borrowing money directly from private investors rather than the traditional method of using municipal bonds is “efficient” and “innovative.” It offers “improved service” and “superior design.” It gives “customers”—note: not citizens— “superior service” and “more choice.”

Such language is floating around the State Capitol building these days, as Gov. Ned Lamont is once again proposing to loosen existing state rules governing the signing of infrastructure public-private partnerships.

Yes, like many states, Connecticut’s roads, bridges, and airports are suffering after decades of increased use and underinvestment. But such urgency calls for facts and levelheaded solutions, not buzzwords and ideology.

Here are the facts about public-private partnerships.As mentioned, they’re more expensive, with interest rates sometimes multiple times higher than those that come with cheap municipal bonds. This premium can add up over the life of public-private partnerships, which often stretch for decades.

For example, after then-Gov. Mike Pence signed off on an Indiana toll-road project in 2012, the math showed that the deal was $137.3 million more expensive than if the state had used traditional borrowing.

And how about this staggering statistic? Since 1992, public-private partnerships signed by the United Kingdom have yielded infrastructure valued at more than $71 billion. Yet, the public there will pay more than five times that amount under the terms of the contracts used to build that infrastructure.

Even the U.K.’s Conservative Prime Minister Boris Johnson, often likened to former President Donald Trump, has compared public-private partnerships to “looting.”

Then there’s the lack of transparency. Public-private partnership contracts are complex financial agreements that extend for decades. Without high standards, crucial information can be hidden from public view.

Texas residents learned this the hard way. In 2016, the private investors behind a section of tolled highway between San Antonio and Austin went bankrupt after coming up short on traffic projections. That’s even after they raised the speed limit to the highest in the nation —85 miles per hour— to attract drivers to a road that was already crumbling in places. In the aftermath, the state government declared the projections proprietary, shielding the numbers from journalists and the public. Who’s to say Texas won’t sign another overblown deal in the future?

Then there’s the risk of substantial construction delays or outright failure. You’d think that, having paid a premium for Interstate 69, Indiana would’ve ended up with an innovative toll road with superior customer service. Not exactly. In 2017, as Vice President Pence was settling into his new Washington digs, the project failed as its investors slid toward bankruptcy. Halfway built, it was taken over by the state after two years of construction delays that caused increased traffic accidents and commute times.

In 2019, Denver, Colorado, cancelled a public-private partnership for the renovation and concession management of its airport due to escalating costs and delays. Adding insult to injury, it had to pay $183 million to settle outstanding claims.

In late 2020, Maryland forked over $250 million in settlement costs to restart a stalled public-private partnership transit line project.

Fundamentally, public-private partnerships turn what should be a public good meant for everyone into a financial investment for faraway banks and investors. When user fees like tolls are involved, they turn citizens into consumers.

According to a class action lawsuit, the investors behind a pair of Virginia toll roads allegedly failed to notify drivers in time that they had missed tolls and were racking up huge fees and fines. One driver’s $4.15 in missed tolls snowballed into over $3,000.

 

Source: Ctmirror