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Senate Bills Threaten States' Ability to Tap Private Infrastructure Investment

Leonard Gilroy
June 5, 2009, 10:35pm

Americans for Tax Reform has a helpful new policy brief explaining how two pieces of legislation introduced by U.S. Senators Jeff Bingaman and Chuck Grassley—S.884 and S.885—would seriously undermine states' ability to enter into infrastructure public-private partnerships and discourage private investment in transportation infrastructure:

As cash-strapped states look to improve their infrastructure, they increasingly look towards public private partnerships (P3s) – collaborations between governments and private companies. These collaborative projects prove to be an efficient strategy to modernize or expand the transportation infrastructure.

The word "privatizing" often carries a negative or extreme connotation. Public private partnerships however, remove the taxpayer burden of paying for infrastructure improvements, while leaving oversight and accountability functions in the hands of government, thereby striking a balance between full state-ownership and outright privatization. At the same time they yield taxpayer savings in terms of cost and time.

And while nearly two dozen states have enacted or are debating legislation to facilitate such public private partnerships, a federal legislative effort put forth by Senators Jeff Bingaman (D-MN) and Chuck Grassley (R-IA) would undermine states' ability to enter into these partnerships. A report issued by several private equity firms estimated earlier this year that there are roughly $180 billion in private dollars targeted for infrastructure investment, which could finance some $450 billion in projects.

However, much of that money will likely be invested in Europe and Australia due to more favorable conditions for public private partnerships, and the two bills introduced by Sens. Bingaman and Grassley will serve as a further disincentive for private capital to flow to the United States for such projects.

Read the whole thing for an excellent summary of the bills and their implications. For more context on the Bingaman/Grassley bills, see Sam's recent post here, as well as this.

» Reason's Transportation Research and Commentary


Leonard Gilroy is Director of Government Reform


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