States Seeking Private Sector Solutions to Public Sector Headaches

While much of the nation is stuck in a deep freeze from the recently hyped polar vortex, state Departments and Agencies of Transportation around the country are quietly at work making plans to begin their summertime agenda, one that is the bane of commuters and travelers alike – highway and bridge maintenance. Though routinely decried by motorists everywhere, it is generally accepted that these projects are a necessary evil. Healthy roads and sturdy bridges are crucial to the commercial economy and private commuter experience, making it one of the few decidedly non-partisan issues in today’s hyper-partisan political atmosphere.

With nearly everyone is in agreement that proper upkeep of the public infrastructure is necessary, and revenues to do so from traditional sources like gas taxes dwindling in the face of new and emerging technologies, legislators are taking a new approach to save money and raise revenue for infrastructure improvements. Public Private Partnerships, or P3s, have emerged over the past several years as one of the key tools used by legislatures to deliver quality infrastructure maintenance programs at a fraction of the traditional cost. The concept is simple – the state enters into an agreement with a private sector entity to design, build, construct or maintain critical transportation infrastructure for an agreed upon cost. This type of agreement aims to be beneficial for both parties as the state gets necessary work done for a fraction of the cost. While not all PPPs follow the same scope or method of action, the goal is always the same – to save the state money while encouraging investment in the private sector.

To date, 33 states have enacted legislation that allows for private sector participation in public sector endeavors; another eight have bills pending that would do the same. While the West Coast and Southern states have embraced PPP-enabling policies, many Midwestern and Northeastern states, which are ravaged annually by winter-related transportation costs, have yet to do so. Some currently pending proposals include:

  • New Jersey AB 1558 is pending in the Assembly Transportation and Independent Authorities Committee and would authorize the Commissioner of Transportation to select transportation projects to be used as demonstrations of PPP agreements.
  • New York SB 4846 is pending in the Senate Finance Committee and would authorize state agencies to contract with private entities and sets strict requirements related to rulemaking, regulations and reporting requirements related to PPPs.
  • Oklahoma HB 2898 is pending in the House Government Modernization Committee and would allow the Department of Transportation to enter into PPPs and sets guidelines regarding procurement of proposals and guidelines for PPPs.

PPPs will likely be one of the keys to reducing cost and improving quality of life for both citizens and governments in the coming years, however, they are unlikely to be the end-all to state transportation infrastructure costs. As former Kansas Republican Governor Bill Graves remarked, “PPPs are one of the many tools that can be used to help address America’s infrastructure deficiencies. PPPs, however, are not the panacea for infrastructure funding.” Moving forward, responsible legislators and executives must learn how to properly leverage the use of PPPs as part of a comprehensive approach to infrastructure maintenance.

As PPP-enabling policy continues to evolve and flourish expect to spend less time in traffic next time you decide to take a week off for your summer vacation.