Former NSW Premier Bob Carr on Mobilizing Private Capital for Infrastructure

Reason Foundation’s Innovators in Action 2009 features an article by former New South Wales (Australia) Premier Bob Carr (PDF version here) in which he describes how his administration embraced privately financed toll roads as a means of delivering infrastructure better, faster and cheaper than traditional government approaches:

But here’s the remarkable feature: the six major motorway projects opened in Sydney since 1995â??that is, under my governmentâ??represented a total capital value of AUD$5.4 billion in new infrastructure. Of that grand total, AUD$4.6 billion came from the private sector. The capital cost to government was only AUD$800 million.

In other words, by far the bulk of capital was mobilised from private sources. The ring road system is a working example of how public bodies can leverage PPPs to achieve important mobility and capital investment goals.

I know the arguments from the inside. After seven years leading the Labor Party in Opposition, I was elected Premier of NSW in 1995 by a one seat margin in a state assembly of 99. I was elected on a promise, among others, of lifting the tolls on two private roads built by the previous conservative government: the M4 and M5 linking the city to the western suburbs. It was not the decisive issue in the election campaign but it was, as election promises go, a reasonably prominent one.

Within months of taking office, my government was in negotiations with t

he owners of the toll roads. We aimed to remove the toll gates and pay the consortia shadow tolls from the state budget based on vehicular traffic numbers. To our surpriseâ??to everybody’sâ??we found that the consortia would need to be compensated for an additional amount equal to the tax advantage that accrued to them from their tollway investment. This would have doubled the cost of keeping our promise.

Read the whole thing for details on how Carr’s administration resolved this issue and how an administration that entered office on a platform to remove tolls from privately financed roads ended up reversing course and becoming one of the foremost champions of tolling and public-private partnerships.

For other examples of innovative policy and management approaches in government, don’t miss the rest of Innovators in Action 2009.