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Public Works Financing

PPPs Gaining Broad Support in Transportation Community

Growing acknowledgement that private capital and increased use of tolling are needed to help close the funding gap

Robert Poole
November 1, 2007

Last May Reps. Jim Oberstar (D, MN) and Peter DeFazio (D, OR) followed up DeFazio's series of hearings on public-private partnerships in transportation by sending a letter to all 50 state governors and departments of transportation. The letter warned them against "rushing" into PPP deals that might not fully protect the public interest. Ominously, they warned that "The [Transportation & Infrastructure] Committee will work to undo any state PPP agreements that do not fully protect the public interest and the integrity of the national system."

As unprecedented as the letter was the strong, bipartisan defense of PPPs the following month from the National Governors Association and a number of individual governors and heads of state DOTs. Now I'm happy to say that this initial response has been followed up by a growing number of others, all supporting PPPs (such as toll concessions) as a vital tool for hard-pressed states seeking to meet the enormous challenge of coping with highway modernization and expansion in an era of limited fuel-tax resources.

This broadening of support was on display at the annual conference of the Public-Private Ventures division of the American Road & Transportation Builders Association (ARTBA) November 1-2. ARTBA president Pete Ruane kicked off the PPV conference by declaring that PPPs are a vital key to solving the country's infrastructure problems. ARTBA is on record supporting the full spectrum of tolling and PPP options, including congestion pricing, HOT lanes, and TOT (truck only toll) lanes. But that's about what you would expect the head of ARTBA to say at their big PPV conference. What's so encouraging is the growing range of other transportation organizations that are getting comfortable with these approaches.

Two of the biggest—AASHTO and AAA--also had senior people speaking at the ARTBA conference. The American Association of State Highway and Transportation Officials represents state DOTs. AASHTO executive director John Horsley, while supporting an increase in the federal fuel tax, also declared that "every state should be given all options possible in the areas of tolling and public-private ventures, so those states can determine for themselves what is in the best interests of their citizens."

Joining the pro-PPP chorus, though slightly more qualified, was Robert Darbelnet, president of the American Automobile Association. "I am here to say that AAA believes that these partnerships have a role to play," he declared, referring to the qualified support for tolling and PPPs in AAA's recently promulgated Motorists' Bill of Rights. That statement supports PPPs for new capacity and even PPPs for the leasing of existing toll roads, provided that the proceeds are used for transportation, that public oversight is maintained, and that the roads provide high levels of service—points with which I certainly agree.

Recent weeks have seen additional organizations acknowledge that private capital and increased use of tolling will be essential in closing the funding gap between what we need to build (for both congestion relief and increased goods-movement) and what the existing fuel-tax system is likely to yield in coming decades. The Coalition for America's Gateways and Trade Corridors—representing major cities, ports, railroads, and engineering companies—has just issued its guidelines for using PPPs for goods-movement projects. Its position paper, authored by former DOT Secretary Mort Downey and Ray Chambers, was published in the Nov. 5, 2007 issue of Traffic World. Echoing AASHTO's Horsley, they wrote that transportation planners "should have access to the largest possible toolbox of financing mechanisms, strategies, and options. Accordingly, there is an important—indeed a necessary—role for PPPs as part of an overall infrastructure program." And like AAA, they argued that proceeds from sale or lease of existing transportation facilities "should be reinvested in transportation projects, not diverted to other areas."

And there's more. The week before, Engineering News-Record sponsored a Construction Business Forum, at which the U.S. DOT's Tyler Duvall said, "The time is right to introduce reform concepts harnessing private capital; it's out there." Federal Highway Administrator Rick Capka and FedEx Freight's Douglas Duncan also weighed in, supporting PPPs.

Public sector officials are also speaking up. Last month saw a submission from the California Association of Councils of Government, representing 36 metropolitan planning organizations (MPOs) in California, to the two federal commissions looking into the future federal role in transportation infrastructure and its financing. Their letter called for "broad federal enabling authority for states and their political subdivisions to be able to expand their transportation system through user-based financing, including but not limited to (1) new toll roads, bridges, and lanes on the Interstate System, and (2) imposition of broadly based container or other port fees. We also urge inclusion of broad authority for public private partnerships, whereby revenue from these new fees together with fare box revenue . . . may be utilized to attract private investment." These themes were also in evidence at the first annual PATH/University of California Transportation Center conference in Berkeley, Oct. 29-31.

When Reps. Oberstar and DeFazio sent their anti-PPP broadside to all 50 governors and state DOTs last May, they probably thought they would be tapping into a broad, Lou Dobbs-like backlash against tolling and PPPs. I'm sure they never expected such a groundswell of support for these vitally important approaches to addressing our huge transportation infrastructure needs.

My prediction, at this point, is that when Congress gets around to reauthorizing the federal program in 2009, transportation PPPs will have such solid support in the transportation policy community that Oberstar and DeFazio will find little support for "undoing" any PPP deals, or even imposing one-size-fits-all federal regulations on such deals.


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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