Analyst: PPPs are good for transportation infrastructure, bad for real estate
Public-private partnerships (PPPs) work well for surface transportation infrastructure projects, but not so well for government real estate development, according to a new study from the Washington-based Competitive Enterprise Institute (CEI). In transportation projects, PPPs improve efficiency, but in real estate development they can increase the risk for taxpayers and are more beneficial to the private developers, the report contends.
In CEI’s “The Limitations of Public-Private Partnerships: Recent Lessons from the Surface Transportation and Real Estate Sectors,” land-use and transportation policy analyst Marc Scribner looks at several PPP case studies in both the surface transportation and real estate sectors. Scribner cites transportation PPPs in California, Illinois, Indiana, Texas, and Virginia, and real estate PPPs in Minnesota, New Jersey, New York, Pennsylvania, and Washington, D.C. “In the case of surface transportation infrastructure, innovative new private-sector financing, management, and ownership regimes have much to offer in terms of minimizing taxpayer exposure to risk, capturing user revenues, and creating an efficient transport network,” Scribner says in the report. “In contrast, government’s recently expanded role in real estate development has increased taxpayer exposure to risk, socialized costs, and concentrated the benefits into the hands of select private developers and special interests.”
Instead of using PPPs to promote redevelopment, Scribner recommends cutting bureaucratic impediments, such as land-use regulations and business licensing. He recommends continuing the use of PPPs in transportation. “In essence, both require reducing political intervention and expanding market opportunities,” Scribner says. “Only when policy makers realize their own limitations will these sectors be free to maximize wealth creation that could potentially bring about a new era of American prosperity.”
Read “The Limitations of Public-Private Partnerships.”