P3s also make way for innovative pricing that can reduce congestion and decrease emissions, says Geddes. He also argues that they would bring private capital and new jobs to communities direly in need of both. Private funds can be used to build new highways from scratch, or be employed to take over existing roads, using two similar but different payback scenarios. And once privatized and commoditized, roads could become investment opportunities for such entities as pension funds, bringing even more private capital to bear on infrastructure.
“Most importantly, P3s turn motorists into consumers instead of merely users of America’s roadways. As consumers, motorists have the power to demand the services they need.” Presumably the argument also holds good for the trucking companies that deliver most of America’s freight. Citizens, Geddes maintains, own the vast majority of America’s roads “and deserve a competitive return on their investment.”
While existing P3s have shown that they can increase competition in such areas as facility design and construction, more competitive benefits would come in areas such as facility finance, maintenance, expansion and operation with the expansion of P3s, according to Geddes. To the relatively common claim that P3s decrease public control over critical transportation assets, Geddes argues that properly structured, they can improve public control and oversight, compared to roads that are publicly owned and operated.
“Some observers also assume that P3s can only be used on facilities that generate enough toll revenue to make them profitable. This is false,” Geddes writes. “Even if a facility loses money, competitive bidding through P3s ensures that the public pays the least possible subsidy required to keep it in operation – an approach that has been used in other countries. Noting that “much of America’s federal transportation spending today is directed by political calculations rather than by benefits to motorists and taxpayers,” Geddes argues that private money will go to high-volume needs because that’s where the return is. This approach would surely worry rural politicians and others who have few roads to attract investors, although the author’s “least possible subsidy model” may work in these cases. It would also massively upset the ubiquitous earmarkers in Congress who would rather have the money arrive in a grateful community with their name emblazoned on the bag.
Earmarks have, of course, gone over the top in transportation spending. Only 10 earmarked projects appeared in the 1982 highway bill, but 6,371 of them were in the 2005 bill. For earmark opponents, there is a lot of evidence that they do more harm than good; for example, providing only part of a project’s costs and forcing state and local agencies to find the rest of the money somewhere, being used for nonpriority projects and counting against Federal funds. They also often go unspent for years, creating even more headaches for funding (see story page 62).
Private investing is one of three major changes Geddes suggests be made in approaching transportation infrastructure financing. The other two are charging road users based on how much they use roads and congestion or value-pricing, which hikes road use charges during periods of peak demand.
Which option(s) may be used to find more funds?
We know the purchasing power of the Highway Trust Fund is dropping. We know the money flowing into it from fuel taxes is woefully inadequate. What we don’t know with any degree of certainty, or detail, is what other sources of revenue could effectively boost the HTF coffers back to a level where it can adequately fund bridge and highway building, maintenance and repair across the country.
A new report goes into detail on a wide range of options and puts numbers to them to try to stimulate pre-reauthorization discussion (see AASHTO chart at bottom). A new surface transportation bill with only existing income options will not provide enough funds to even keep our transportation system in the shape it’s in now.
The recent Forum on Funding and Financing Solutions for Surface Transportation in the Coming Decade Conference focused on:
near- and medium-terms funding options for the Federal surface transportation programs, current and potential future applications of federal financing tools, and funding and financing initiatives that are working at state or local levels.
The American Association of State Highway and Transportation Officials (AASHTO) Center for Excellence in Project Finance convened the forum for members of Congress, Congressional staff and transportation industry stakeholders. Speakers included members of Congress, state and local government representatives, education professionals and private-sector transportation organizations and businesses.
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