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Our Old Friend, Public-Private Partnerships Our Old Friend, Public-Private Partnerships

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Our Old Friend, Public-Private Partnerships

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President Obama announces new national infrastructure initiative at the Port of Wilmington, Delaware. Photo by Jessica Kourkounis/Getty Images

Three years ago, a veteran Republican transportation staffer told me that the ideal role for the federal government in public-private partnerships would be as technical advisors to states and cities who are trying to make deals with private investors to build roads, bridges, or transit systems. The aide said that cities and states are better brokers of their local deals because they are intimately familiar with the tics of their own communities, but they desperately need help analyzing the complex metrics of the financing and modeling. Private infrastructure firms are giants compared to most city governments, and the feds could help mitigate a potential David and Goliath scenario.

Last week, President Obama unveiled an investment center to be housed in the Department of Transportation that looks much like what this GOP congressional staffer described. The " Build America Transportation Investment Center" is intended to serve as a "one-stop shop for cities and states seeking to use innovative financing and partnerships with the private sector to support transportation infrastructure."

 

The center will provide easy access to DOT credit programs that might assist cities and states in their high-priority projects. It will offer technical assistance to states that are just beginning to experiment with public-private partnerships, in part by sharing the best practices of states that are more accomplished in that arena.

The Transportation Department and the Treasury Department also will team up to form an interagency working group to coordinate government financing with state and private investors. If this part works, it could be a boon to private-sector firms trying to break into the infrastructure market. They say differences between their financing models and the government systems are so huge that trying to bridge them often isn't worth the investment.

These are great initiatives, but the jury is out on whether they will accomplish anything of significance. As I wrote back in 2011, both Republicans and Democrats both love the idea of public-private partnerships as one way to bolster infrastructure, but they have very different ideas about how they should work. Republicans want private investors to have more options, and by extension, more control, over our national infrastructure. Obama wants the opposite. When he began talking about a $50 billion infrastructure bank in his first term, he envisioned it as a big government program in which private sector businesses played a supporting role. Here's how I described it then:

 

"Obama and his team won't turn away investors that want to put up their own money for transportation projects. But the president's vision of a federal infrastructure bank doesn't leave much room for businesses to maneuver. Washington would dictate the priorities for funding. Obama is steering clear of inviting Wall Street to invest in projects that would oblige the government to later pay the money back with interest. But the government is certainly interested in working with companies that want to offer upfront private capital for projects where tolls or other revenue streams would be available. The unspoken message is clear. Businesses are welcome to come and play but only on the government's terms." (National Journal subscribers can view the full story here.)

Obama's new investment center is a far cry from the infrastructure bank that he has yet to convince Congress to pass. If this new initiative delivers what it promises, it could be a big help to state transportation officials and the private investors they are trying to lure. But these aren't even baby steps in the grand scheme of things. If some of the regulatory barriers to private investment don't change, it's hard to see a big jump in private-sector cash.

Compiling best practices from states, as Obama proposed, may be the most important single action that the administration can take. Some states, like California and Virginia, are well ahead of others when it comes to public-private partnerships. As it turns out, state governors hold most of the cards when it comes to those deals. It only makes sense to model the leaders. (See my profile of Virginia's public-private partnership program here.)

Give Obama credit for coming up with ideas that don't depend on Congress to improve our infrastructure. The initiatives he put forth last week are some the best examples of what good government should be doing. But a skeptical Republican—my GOP staffer fits the bill—would withhold applause until it actually gets going. If it's another bureaucratic office, investors won't be jumping.

 

For our insiders: What do you hope Obama's investment center will provide that you don't have now? How important is it that the Treasury Department will be involved in the working group on financing? Can Obama streamline the DOT's financing procedures in a way that will change the business environment for infrastructure? What do state and local governments truly need to foster more public-private partnerships?

[Note: This is a moderated blog on transportation issues. Comments are approved on a case-by-case basis. Contact me if you want to be a regular commenter.]

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