Congress should direct the Transportation Department and industry to develop criteria to identify and protect national interests in future public-private partnership deals that states and localities enter into to build public highways, the Government Accountability Office said in a report.
“In developing these criteria, the [transportation] secretary should identify any additional legal authority, guidance, or assessment tools required, as appropriate and needed, to ensure national public interests are protected in future highway public-private partnerships,” said the report, which was released late Friday. “The criteria should be crafted to allow the department to play a targeted role in ensuring that national interests are considered in highway public-private partnerships, as appropriate.”
The report comes as lawmakers have been critical of Transportation Secretary Mary Peters for encouraging states to explore so-called P3s, as traditional funding sources such as the federal gas tax have failed to keep up with needs. States are increasingly exploring P3s for roads, including leases for as much as 99 years with teams of private firms to design, build, operate, maintain, and finance projects. In return the private group collects the tolls on the road for the length of the lease.
“While direct federal involvement has been limited to where federal investment exists, and while the Department of Transportation has actively promoted them, highway public-private partnerships may pose national public interest implications such as interstate commerce that transcend whether there is direct federal investment in a project,” the report said. “However, given the minimal federal funding in highway public-private partnerships to date, little consideration has been given to potential national public interests in them. GAO has called for a fundamental reexamination of federal programs to address emerging needs and test the relevance of existing policies. This reexamination provides an opportunity to identify and protect potential national public interests in highway public-private partnerships.”
Rep. James L. Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, has been a particularly vocal critic of the DOT’s P3 agenda. He believes that encouraging states to make their own deals with private partners would produce a national transportation network of varying quality from region to region.
While some, including Oberstar, have called for increasing the current 18.3 cent-per-gallon gas tax before shifting to a new transportation funding system in about 20 years, Peters has argued that increased use of tolling and private financing is a better interim financing program because federal gas tax dollars are not likely to be spent on projects that will relieve congestion.
The GAO report cautions that there are many pitfalls in P3s, including what rate of return is reasonable and at what point profits should be shared with the public entity. Also, tolls on privately run roads are more likely to go up at steeper rates than under publicly managed roads.
Benefits of P3s include construction of new roads with no use of public funds and transferring and sharing risk associated with building roads, the report said.
Other countries where P3s are more frequently used could serve as a model to help transportation decision makers draft public interest criteria.
“Governments in other countries, such as Australia, have developed systematic approaches to identifying and evaluating public interest and require their use when considering private investments in public infrastructure,” the report said. “While similar tools have been used to some extent in the United States, their use has been more limited. Using up-front public interest evaluation tools can assist in determining expected benefits and costs of projects; not using such tools may lead to aspects of protecting the public interest being overlooked.”