P3’s are a tool, not a panacea

February 23, 2012

As legislators at last seem to be making headway in advancing a public-private partnership bill, it behooves us to keep some perspective on how much P3’s can contribute to a solution to Pennsylvania’s transportation funding woes.

Many federal and state elected officials suggest that private-sector financing holds significant promise as a funding solution.  The transportation construction industry agrees that a comprehensive solution should include the opportunity for private investment, but there are several things about privatization that everyone should consider and understand.

First is the scope of the funding problem.  Pennsylvania’s Transportation Advisory Committee calculated the state’s funding gap for PennDOT, public transit and local roads at $3.5 billion annually.  It is not realistic to believe that market-driven private sector investment will solve the entire problem, or even a significant portion of it.

As the Pennsylvania Economy League’s transportation study noted six years ago, a comprehensive solution certainly must include a wide variety of funding mechanisms, including increased user fees, local taxing authority and prudent use of debt, as well as private investment.

Private financing options will introduce market forces into transportation services.  However, there are limited projects in a few geographic areas that make market sense for the capital risk associated with privately financed projects.

The success of privately financed projects in other states underscores the public’s willingness to pay for transportation services.  All private finance arrangements – whether leasing existing toll roads or building new bridges and high occupancy toll lanes – introduce a mileage fee or toll system paid by the road user.

If the last several years have shown us anything, it is that there is no panacea for the transportation funding problem.  Pennsylvania’s needs have far exceeded the resources required to address this problem, and a solution without significant cost is impossible.

On the bright side, it is clear from the continuing public opinion research that Pennsylvanians are willing to make an investment in safer and less congested highways, as well as efficient public transit systems.  Nearly everyone agrees that the transportation system needs to be fixed, and an adequately funded transportation program would create 50,000 jobs in Pennsylvania, mostly in sectors other than highway construction. 

For these reasons, we are optimistic this issue is finally ripe for a lasting solution.  But that lasting solution will need to be much more than public-private partnerships.


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