February 16, 2014
Some 500 crumbling bridges in Pennsylvania,
including 33 in Lancaster County, are in line for repairs that might
start by 2015 and be finished by 2020.
And it won't cost state government anything up front.
As a Sunday News story last week reported,
the Rapid Bridge Replacement program aims to take advantage of a 2012
law authorizing so-called P3 — for public-private partnership —
initiatives. Instead of the government financing transportation projects
and hiring contractors to do the work, the government grants a
concession to a private firm that designs, builds and sometimes operates
the project. In return, the private partner gets a quid pro quo from
the government, whether that involves collecting tolls from motorists or
payments from the state.
What a deal! The state doesn't have to borrow
money — the private sector does that. The state doesn't have to design
or build the roads or bridges — the private sector does that. The state
might not even have to maintain the roads or bridges — the private
sector does that.
So what does the private sector get out of the deal?
That's why we can't help but remember the adage: If it sounds too good to be true, it probably is.
Pennsylvania is among 30 states with P3 laws. The
benefits of some projects are obvious -— especially major ones like the
Capital Beltway HOT Lane. Virginia's highway department estimated that
widening Interstate 495 near Washington, D.C., would cost $2.68 billion
to $3.25 billion. Not to mention the fact that 300 homes and 32
businesses were in the path of the expansion.
Enter a private partner, which eventually brought
in the project at $2.1 billion and developed an innovative road design
that minimized the disruption to neighboring property owners.
The private contractor is getting toll revenue from I-495. That's a straightforward quid pro quo.
How are the private firms potentially interested
in a bundle of 500 deficient bridges in Pennsylvania going to get a
return on investment?
The private partners must be expecting to make money. Otherwise they wouldn't take the risk.
Pennsylvania's Rapid Bridge Replacement
initiative doesn't envision tolls on the rebuilt spans, but it offers
"availability payments" to private contractors. The U.S. Transportation
Department defines that arrangement as annual payments to the private
partner, based on how well the project performs. (Think pothole repairs,
That means the state would have to cough up cash every year to its private partner.
In traditional financing, governments borrow
money through long-term bond issues to pay for roads and bridges. Does
the state intend to issue bonds to pay P3 partners over 25 to 35 years —
the anticipated length of the Rapid Bridge Replacement concession? If
not, where is cash-strapped Harrisburg planning to come up with the
P3 partnerships aren't fool-proof. Policy
Alternatives, a progressive think tank in Canada, is harshly critical of
P3 projects in that nation, pointing out that in several cases private
partners have required bailouts to stay financially solvent and that in
other cases the projects wound up costing more under the P3 model than
they would have with typical public-sector financing.
We'd like a clear explanation to taxpayers of the
private sector's revenue stream, and the potential long-term costs to
the public sector, before the state enters into a P3 contract.
Yes, the private sector can do some
public-benefit jobs more efficiently and effectively than the government
itself can. P3 partnerships are intriguing from that perspective.
But we also know that the private sector isn't
going to give the public sector a free lunch — or a free bridge. So if
it sounds too good to be true … maybe it is.