Anti-Business Bias Could Derail Infrastructure Fix

Anti-Business Bias Could Derail Infrastructure Fix

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When did our business community become the bad guys? 

The Obama administration and several of its allies in Congress have thrashed bankers, insurers, oil companies, utilities and other corporate interests that oppose the president’s policies; the message is that profit-seeking businesses are not working in the best interests of the nation. 

This point of view is costly to the country. The climate of distrust and fear has arguably slowed the nation’s recovery — contributing to a slide in consumer sentiment and weak business investment and hiring. Possibly as important, the nation may also be less willing to tap the private sector for funds sorely needed for infrastructure repair; repairs that would increase our competitiveness and that would also boost jobs.

Just this week, the country’s cash crunch threatened to claim another important victim — an $8.7 billion train tunnel slated to run under the Hudson River and into an expanded Penn Station. New Jersey Gov. Chris Christie has ordered a 30-day review, claiming that cost overruns and tight budgets may make the project prohibitively expensive. The tunnel is part of a larger plan that would double the number of commuters able to ride to New York — a “boon to property values and income-tax revenues,” according to Nicole Gelinas of City Journal.

In 2009, the American Society of Civil Engineers (ASCE) gave our nation’s infrastructure a “D” grade, saying it “is in crisis” and in need of a five-year $2.2 trillion facelift. They noted that the estimate does not take into account population growth, and also that much of the monies already allocated across the country for needed repairs have been “raided to pay for other programs.” The gap between what is available and what is needed was put at $1.1 trillion. Where, one wonders, will that money come from?

Private-Public Partnerships
One possibility — indeed, some say the only possibility — is private-public partnerships (PPPs). Under such arrangements, private firms supply capital and know-how, and often assume the operating risk of a venture, in return for profits. States and towns typically save on costs and can leverage their available capital. Unfortunately, with the Obama team portraying the corporate sector as untrustworthy and irresponsible, taxpayers may well greet proposed joint ventures between local governments and private companies with skepticism. That could be a disaster.

The mayors and governors whose jobs are to fix what is broken are increasingly embracing the concept. Congress, whose rhetorical feet seldom reach the actual ground, is caught up in preserving public employee paychecks. The National Governors Association recently sent a letter to numerous senators pitching the need for public-private partnerships. In it, they argue against a proposed House bill which creates yet another new federal agency — the “Office of Public Benefit” — to review partnership projects already approved by individual states, a provision which the governors say “would chill innovative financing options for states and local governments.” The group says that “fiscal pressures, burgeoning capacity needs, and escalating operating and maintenance costs are forcing states to pursue innovative financing options to complement traditional financing tools.” They also argue that “states have been careful and prudent in their analysis, negotiation and oversight of public-private partnerships …” In other words, lay off the oversight.

Richard Norment, executive director of the National Council of Public-Private Partnerships (NCPPP), says the use of PPPs has “gotten a lot of traction at the state level.” His organization brings together local authorities, investors and developers to educate all constituents about the benefits of working together. He says PPPs can leverage limited state budgets by accessing private funds, and can save taxpayers money. “PPPs get the job done quicker,” says Mr. Norment. “That’s the biggest cost savings.” This is backed up by a 2010 paper from the Society for Marketing Professional Services. Authors Sluger and Satterfield cite (among other case studies) the $28 million construction of a geriatric treatment center in Virginia, which was completed in 26 months — “approximately one-third the time the project would have taken under traditional procurement.” They note the cost came down because of the time saved.

Three reports from early last decade highlight the need for repairing and maintaining our infrastructure. The ASCE estimated that 75 percent of America’s school buildings need replacing or repair. The Congressional Budget Office projected $232 billion to $402 billion over 20 years for drinking water; the EPA said another $300 billion to $450 billion would be required for wastewater infrastructure. Whether it is easing congestion on our clogged roadways or providing expanded harbors to accommodate the latest generation of supertankers, the amount of needed capital is staggering.

Americans are going to have to encourage partnerships between local governments and the private sector in order to get these jobs done. With the “us versus them” attitude prevailing today in Washington, that’s going to be tough.