The Case for Public Private Partnerships Samuel R. Staley, Ph.D. Director, Urban and Land Use Policy, Reason Foundation (e) Presentation given to the “Preserving the American Dream” annual conference, San Jose, California 11 November 2007.

11 Nov 2007 Reason Foundation, 2 By 2030, 12 urbanized areas will have congestion levels equivalent to today’s levels in Los Angeles

11 Nov 2007 Reason Foundation, 3 The gas tax is not a viable funding alternative (Decline in real value of the fuel tax $1997) Average Cents per mile

Where will the money come from? Public Private Partnerships

11 Nov 2007 Reason Foundation, 5 Are roads still “public” goods?

11 Nov 2007 Reason Foundation, 6 Transportation’s “Brave New World” Open road tolling Open road tolling Dynamic tolling Dynamic tolling Private equity Private equity Oregon’s charge per mile Oregon’s charge per mile

11 Nov 2007 Reason Foundation, 7 Technology, pricing and the stages of road privatization Limited access highways (now) Major arterials (10 years) Local roads (20 Years?) 1 2 3

11 Nov 2007 Reason Foundation, 8 Paris A86 Extension ($1.5 billion)

11 Nov 2007 Reason Foundation, 9 Viaduc de Millau: $536 million

11 Nov 2007 Reason Foundation, 10 What are PPP’s? Agreements with private companies to design, build and operate roads and other infrastructure Agreements with private companies to design, build and operate roads and other infrastructure Lease, not sale of asset Lease, not sale of asset Source of new capital Source of new capital Typically raise more money than public agenciesTypically raise more money than public agencies Upfront fees and/or toll revenue sharingUpfront fees and/or toll revenue sharing Better management Better management Life cycle managementLife cycle management New infrastructure faster New infrastructure faster Minimize risks to taxpayers Minimize risks to taxpayers

11 Nov 2007 Reason Foundation, 11 How They Work Private firm designs, finances, builds, operates for N years Private firm designs, finances, builds, operates for N years Concession agreement protects public interest Concession agreement protects public interest Length of leaseLength of lease Credible toll revenue streamsCredible toll revenue streams Timeline for improvementsTimeline for improvements Specify toll rate increasesSpecify toll rate increases Competitive selection processCompetitive selection process

11 Nov 2007 Reason Foundation, 12 Concerns about PPPs Potential concerns: Potential concerns: PrivacyPrivacy Rent SeekingRent Seeking “Efficient” socialism“Efficient” socialism Red herrings Red herrings Property rights/Eminent domainProperty rights/Eminent domain Foreign ownershipForeign ownership Monopoly pricingMonopoly pricing

11 Nov 2007 Reason Foundation, 13 Conclusion: PPPs are an important step forward, but they are not the “end game”