The Problem With ‘Public-Private Partnerships’

Posted on Jan 5, 2013

Nicholas_T (CC BY 2.0)

When a plan to construct the first modern privatized highway in the United States did little to ease congestion, blocked residents from making further improvements and cost taxpayers hundreds of millions of dollars, Californians had the opportunity to learn a lesson about the folly of privatizing transportation projects.

In 1995, California Private Transportation Company won a contract to complete a $130-million project using mostly private money to build express toll lanes along Orange County’s State Route 91 freeway. To recoup expenses, politicians gave the company a 35-year claim to operate the toll route, promising Californians that privatization would lead to greater safety, efficiency and savings.

The agreement did not alleviate what local traffic reporters called the “Corona Crawl,” and when state and local officials announced plans to make their own improvements, CPTC filed a lawsuit, claiming additions to the road could reduce the company’s profits. In 2003, the Orange County Transportation Authority purchased the SR-91 toll lanes for $208 million and put an end to the disaster.

In 2004, the California State Legislature stopped its experiment in highway privatization. But other states began their own projects. And in 2009, California once again authorized a “public-private partnership”—also known as “P3”—to provide highway services and other public goods.

—Posted by Alexander Reed Kelly.

Darwin Bondgraham at Dollars & Sense:

P3 is at least three things:

It is a rebranding of privatization. The phrase purposefully evokes a win-win scenario involving equal “partners” working toward a common goal. Government leaders have been sold this new kind of privatization as a solution to declining tax revenues and borrowing capacity, while private companies claim to be offering their expertise and capital in a spirit of public service.

It is the result of a long ideological campaign against public-sector unions and “big government,” which conservative think tanks, pundits, and politicians blame for growing deficits and crumbling infrastructure. This worldview, meanwhile, hails private companies and the private profit motive as the bearers of efficiency and fiscal discipline.

Finally, P3 is obviously a money-making opportunity. It is propelled by an infrastructure-industrial complex composed of global construction corporations, investment banks, private-equity firms, and elite law firms organized as vertically integrated consortiums. Allied through their own trade associations, they are actively pressing for new laws to expand the types of public infrastructure from which they can extract profits, and in recent years they have been quietly succeeding.

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