6 Reasons to Be Wary of Public-Private Partnerships

Posted by Laura Barrett on April 4, 2013

During his recent visit to Miami, President Obama praised Public Private Partnerships ("P3s") and lifted up the idea of a national infrastructure bank.  While most Americans support the idea of building a sustainable economy and fixing decaying infrastructure, building up a national system of public-private partnerships is a whole other animal and needs to be carefully considered. The record on P3 agreements is mixed at best.

Political cronyism and financial desperation have contributed to these six troubling trends:

  1. Little or no democratic oversight: In P3 projects the decision-making power is often concentrated in the hands of a few appointed, not elected, officials. The Brookings Institution has recently recommended that the Federal Office of Management and Budget (OMB) provide guidance and oversight on P3 deals.
  2. Competition stifled: Because private sector innovation and efficiencies rely on competition, the relative lack of competition in P3 arrangements is a concern. In Virginia, the controversial Downtown-Midtown-MLK P3 project was solicited by only a single bidder. Groups like Empower Hampton Roads are concerned. 
  3. Public sectors are saddled with the risk: Most P3 contracts contain non-compete clauses that put any future revenue-reduction risk on the taxpayer. In the infamous Chicago parking meters agreement, the public sector is required to reimburse the private entity if a street is closed or a natural disaster occurs.
  4. The voice of the community is missing: Many P3 deals are pushed through quickly without community notice or involvement. Even worse, Freedom of Information Act requests are not available from private entities.
  5. Opportunities missed for community benefits: Because of the timing, the lack of public leverage, and many other factors, most P3 projects miss critical opportunities to add community benefits, such as local hiring agreements, green space, funding for workforce training or economic development.
  6. Absence of strategic planning: P3 infrastructure development often occurs at the whim of the free market, without the input of metropolitan planning organizations or similiar bodies. Long-term strategic planning for a region is abbreviated at best.

Other concerns such as environmental degradation, lengths of contracts, increases in user fees, and undervaluing public assets have yet to be calculated.

We desperately need the economic boost and jobs that infrastructure development can bring, but we need to make sure that taxpayers aren't left holding the bag. The Transportation Infrastructure Finance and Innovation Act and any other mechanisms that rely on the private market need to be carefully constructed with community input to make them a boon and not a boondoggle.
 

(Photo by I am I.A.M. CC BY-NC)

About the author more »

Laura Barrett is the National Campaign Director for Gamaliel and Transportation Equity Network.

COMMENTS

João Freitas
16 Apr 13, 9:07 am

“We desperately need the economic boost and jobs that infrastructure development can bring, but we need to make sure that taxpayers aren’t left holding the bag. “

You should make sure. In Portugal we were left holding a very expensive bag, full of vicious contracts drafted by the most prestigious law firms. Guaranteed annual return of 13%, guaranteed cash payments in case of low traffic volume, the list piles on.

CV Gal
18 Apr 13, 2:18 am

In California, PPPs are not working and our LA County Metro doesn’t care.  They are actively soliciting investors for highway projects and soon all of our roads will be tolled.  The taxpayers had to buy back a project in Orange County due to a non-compete clause and the toll road did not relieve congestion.  The city was not able to fix the problem.  And in San Diego County, the private partner filed bankruptcy and again the citizens had to pick up the tab.  We must stop this borrowing from our grandchildren and work toward more sensible solutions.

Bill
19 Apr 13, 10:48 pm

In the case of parks, when private entities are given too many concessions, they start dictating the park agenda and goals, e.g., building parking garages on park land, etc.  After a while, the park starts to look more like an amusement park.

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