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The Pros and Cons of PPPs

Last month I blogged about public-private partnerships (PPP) in transportation and provided a brief definition and several working examples. This month, I want to cover a bit of the U.S. political landscape around PPPs.

In May 2007, Congressmen James Oberstar (D-MN) and Peter DeFazio (D-OR) released a letter addressed to governors, state legislators, and state transportation officials that strongly discouraged them from entering into PPP agreements that are not in the “long-term public interest� and they stated that they will “work to undo any state PPP agreements that do not fully protect the public interest and the integrity of the national [transportation] system.�

These strong statements created a “buzz� among stakeholders in the transportation community, government officials, and among others who work to promote free-market solutions to public problems. The “buzz� mostly complains that the Congressmen had only negative things to say about PPPs and that they were “butting� into state-level business where they don’t belong.

Whether or not Reps. Oberstar & DeFazio agreed with these critiques or took them to heart, they released in June 2007 a position paper with recommendations on how best to enter into a PPP agreement that backed away from the strong language in their previous letter. They even offered a more positive take on PPPs, stating, “Under the right circumstances and conditions, public-private partnerships can lead to more efficient and effective construction, management, operation, and maintenance of transportation facilities.� But they offer this positivity with a caveat: “Where private financing is involved, PPPs can supplement – but not provide a substitute for – public investments in transportation improvements.�

Discussion seemed to dwindle after the summer of 2007 until election day of this year, when Reps. Oberstar and DeFazio released another letter, this time addressed to Mary Peters, Secretary of the U.S. Department of Transportation, in which the Congressmen warned that the current financial crisis has “heightened our concerns with [PPP] arrangements, and the lack of adequate transparency and public interest protections under these deals.� Are these “heightened� concerns warranted? What, if anything, is at stake for U.S. states? Perhaps only time will tell.

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