Public-Private Projects on the Rise
For the past few months, President Trump has been concocting a plan regarding the country’s infrastructure. It is no secret that the United States is falling behind in their infrastructure and that there needs to be some major improvement, but how will that be done. His administration is encourage the solution of having local governments works with private corporations, also known as public-private partnerships, to help build, repair, and renovate the deteriorating infrastructure.
There are several potential benefits that could come with a public-private partnership. Companies will have the ability of completing projects in a timelier manner and cheaper than the government alone. Allowing a private industry take the lead can also help limit the amount of debt that cities and states will have to take on during these projects. Although, it may seem more logical to invest in a public-private partnership, only a small fraction of infrastructure spending is allocated towards this option. This partnership is commonly found on projects regarding toll roads. Experts believe that public-private partnerships can result in near-term shavings, but are not sure if they will perform well with time. Either way, taxpayer will be contributing to the projects, just as they would in a government run project.
Public-private partnerships are more common in Canada as well as a number of European countries. The main reason for this is because America is one of the few counties that exempt interest that is put on local and state bonds from federal taxes. This results in the nations municipal bond market to be bigger as well as more developed that most countries. Because of this, public financing on infrastructure is much more popular.
But when it comes to the issue overall, both the government and companies have different concerns. The government is concerned and wants to address as many issues as possible such as, regional transportation, reducing traffic, and reducing pollution. Whereas the companies have more specific concerns such as maximizing financial returns. When engaging in a public-private partnership, it is crucial for it to be done correctly in order to avoid any difficulties in the coming future. Many projects have succeeded in the short term, but have encountered setbacks and issues in the future. Agreements that in the end will guarantee their private partners payment are not uncommon. Leases that also extend longer than the project like can also help redirect extra revenue from the public to the private sector. The main goal is to ensure that both the public and private sectors are benefiting in some way or another.
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