Out of Control Policy Blog

Infrastructure Partnerships Can Benefit New York State

I've written recently on the New York State Commission on State Asset Maximization, whose recent report charted a path for the accelerated use of public-private partnerships (PPPs) to deliver infrastructure across a variety of asset classes—roads, k-12 education facilities, higher education facilities, energy, IT, etc.

In an op-ed for the Binghamton Press & Sun-Bulletin, Commission Chairman Sam McCall highlights some important benefits of PPPs: for New York State.

New York can also utilize public-private partnerships to deliver infrastructure faster at lower costs and with greater attention to safety, maintenance and operations over the long-term. Currently, the state takes on almost all project risks, bearing responsibility for construction, design and project delivery costs, thereby assuming the burden for changes in raw material prices, schedule delays, project changes, etc. These factors often cause the final cost of a public works project to grossly exceed the budgeted cost.

Through thoughtfully structured public-private partnerships, however, the state can transfer these risks and utilize private-sector ingenuity to provide economical fixed-price contracts.

Infrastructure assets can generate stable, inflation-protected returns that are largely shielded from market volatility. Consequently, the fiscal crisis has not disrupted the flow of private investment into this sector as it has for others. Between 2006 and 2008, total private equity commitments to infrastructure grew from about $60 billion to $180 billion in the United States.

In the face of this growing demand for infrastructure investment, New York has stood on the outside looking in. While other states captured this private sector investment, New York lacked an entry point for private sector ideas and innovation.

That is why the commission recommends creating a board to facilitate public-private partnerships and to provide critical oversight that ensures New York's public policy goals are kept intact. The commission has also recommended a list of 25 specific projects, representing more than $30 billion in needed infrastructure investment that is geographically diverse and spans all asset classes.

In order to capitalize on available private-investment dollars, the state must be empowered to engage the private sector, gathering its ideas and harnessing its ability to share risk. Now is the time for us to be bold, to think creatively and to stretch our taxpayer dollars to build the future for New York State.

I couldn't agree more, as I wrote in the New York Post last fall when the SAM Commission was first established. It's really encouraging to see how far they've advanced the discussion in just nine short months.

» Reason's Transportation Research and Commentary

Leonard Gilroy is Director of Government Reform


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