Policy Study

The Role for Public-Private Partnerships in Modernizing and Expanding Nebraska’s Transportation System

Platte Institute for Economic Research/Reason Foundation Policy Study

The global environment for transportation policy is entering a new paradigm. Like many states, Nebraska finds itself at the convergence of two intersecting trends that demand attention. First, growing transportation needs are outstripping available capacity, and second, the need for maintenance and renovation of existing systems is eating up available financial resources. A failure to address these twin challenges will lead to even greater congestion in various forms and lowered reliability of service in the future. By any measure, these realities impact Nebraska’s economic competitiveness and its citizens’ quality of life.

Nebraska has made major strides in improving its highway system in recent years, but the state’s looming transportation funding gap threatens to unravel these gains. Further, absent new funding and procurement mechanisms, Nebraska would be faced with having to close the infrastructure funding gap without some of the tools available to other states. The transportation challenges are confronting a state that is unable to deal with them outside of the traditional means of gas taxes, vehicle fees, and government subsidies, which challenge the ability of the state to keep the overall transportation system ahead of the curve.

To keep Nebraska moving forward and position itself for the modern economy, the state will need to adopt successful transportation strategies from other states and strive to innovate in ways that will best serve Nebraskans. Even though the vast majority of transportation projects around the country continue to be funded from traditional sources—gas and vehicle taxes—a new funding paradigm is rapidly emerging. State and local transportation agencies are increasingly looking to supplement these sources with private investment through public-private partnerships (PPPs). PPPs are just one “tool in the box,” but this promising and valuable option available to policymakers has been relatively untapped in Nebraska.

PPPs offer a way to leverage private capital and expertise to provide a public service, and states are increasingly using them to deliver needed new transportation capacity while stretching limited taxpayer dollars. Although often thought of simply as “private toll roads,” transportation PPPs actually allow for many options to finance, construct and/or maintain new and enhanced transportation facilities. PPPs come in many forms, including the development of new infrastructure, the maintenance of existing infrastructure, and the operation of existing services. PPPs are never going to completely replace the traditional means of funding transportation, but they are a very promising method in which to augment traditional transportation revenue sources and provide more transportation project delivery options and cost savings to Nebraskans.

Nebraska currently lacks broad enabling legislation for these partnerships. Over the last two decades, over half of the states have now adopted legislation authorizing the use of PPPs for the design, construction, financing, and operation and maintenance of transportation facilities. Workable legislation is generally needed to entice private sector investment. The reality is that transportation projects are going to states like Virginia, Florida, and Georgia that have created a solid legal foundation for PPPs—where the law facilitates PPPs and where private investment and participation is welcomed and embraced.

Nebraska policymakers should embrace the considerable potential of the emerging PPP paradigm for highway funding and operations. Policymakers are no longer forced to choose between increasing costs to taxpayers or reducing services to motorists. PPPs, when implemented properly and carefully, can benefit both the State and its citizens. Op-portunities for PPPs exist in Nebraska in many important facets of transportation, including constructing new highways, building new bridges, and competitive contracting for additional local and state road maintenance and operations. In fact, PPPs may offer a viable means of financing some of the state’s large-scale capital improvement projects that currently lack a funding source, such as the $175 million Highway 2/Lincoln South Beltway project and the $145 million Highway 34/75 Missouri River Crossing.

Embracing PPPs would represent a new way of thinking for Nebraska and can help the state address its looming transportation funding shortfall in order to keep people and goods—and ultimately the state economy—moving forward.