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6 Reasons to Be Wary of Public-Private Partnerships

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During his recent visit to Miami, President Obama praised Public Private Partnerships ("P3s") and lifted up the idea of a national infrastructure bank. While most Americans support the idea of building a sustainable economy and fixing decaying infrastructure, building up a national system of public-private partnerships is a whole other animal and needs to be carefully considered. The record on P3 agreements is mixed at best.

Political cronyism and financial desperation have contributed to these six troubling trends:

  • Little or no democratic oversight: In P3 projects the decision-making power is often concentrated in the hands of a few appointed, not elected, officials. The Brookings Institution has recently recommended that the Federal Office of Management and Budget (OMB) provide guidance and oversight on P3 deals.
  • Competition stifled: Because private sector innovation and efficiencies rely on competition, the relative lack of competition in P3 arrangements is a concern. In Virginia, the controversial Downtown-Midtown-MLK P3 project was solicited by only a single bidder. Groups like Empower Hampton Roads are concerned.
  • Public sectors are saddled with the risk: Most P3 contracts contain non-compete clauses that put any future revenue-reduction risk on the taxpayer. In the infamous Chicago parking meters agreement, the public sector is required to reimburse the private entity if a street is closed or a natural disaster occurs.
  • The voice of the community is missing: Many P3 deals are pushed through quickly without community notice or involvement. Even worse, Freedom of Information Act requests are not available from private entities.
  • Opportunities missed for community benefits: Because of the timing, the lack of public leverage, and many other factors, most P3 projects miss critical opportunities to add community benefits, such as local hiring agreements, green space, funding for workforce training or economic development.
  • Absence of strategic planning: P3 infrastructure development often occurs at the whim of the free market, without the input of metropolitan planning organizations or similiar bodies. Long-term strategic planning for a region is abbreviated at best.

Other concerns such as environmental degradation, lengths of contracts, increases in user fees, and undervaluing public assets have yet to be calculated.

We desperately need the economic boost and jobs that infrastructure development can bring, but we need to make sure that taxpayers aren't left holding the bag. The Transportation Infrastructure Finance and Innovation Act and any other mechanisms that rely on the private market need to be carefully constructed with community input to make them a boon and not a boondoggle.