RALEIGH – The General Assembly’s decision to adjourn its 2007 session without making any significant changes in highway-funding policies is reportedly going to “force” the North Carolina Turnpike Authority to seek private investment in some of its high-priority projects, such as the Western Wake Expressway in the Triangle region.
Well, if that’s the story that will make it easier to form these public-private partnerships, great. But there’s no reason to conclude that North Carolina is being “forced” to do something contrary to its interests. In fact, employing private capital and management to complete and operate the state’s new wave of toll roads would likely have been the best alternative in any event. And if the legislature does decide, as some are suggesting, to hold a special session on state transportation issues later in the year, I hope they will seek not to block public-private partnerships but instead to help fashion goals and procedures for their immediate and effective use in addressing North Carolina’s huge backlog of necessary, congestion-relieving projects.
For those unsure how such partnerships function in modern transportation, Steve Malanga’s Saturday piece in the Wall Street Journal should be must reading. Malanga reports on the widespread use of private infrastructure investment in other countries and, increasingly, in the U.S. He also explains how private firms can afford to put up the initial capital, often in the many billions of dollars, for assets that they must still operate under state guidelines and price caps:
Such deals bring welcome benefits to the transportation sector. A 2002 government study in Britain, where public-private transactions are more common, found that while 70% of construction undertaken by the government came in late, just 24% of projects contracted by government to private builders finished behind schedule.
Nevertheless, opponents of privatizations and private-public partnerships argue that private operators can only make money “at the expense of” taxpayers, and that the new owners will skimp on maintenance and repair work in order to squeeze profits out of these operations. These objections typically ignore the significant restrictions and operating requirements written into the contracts — here in the U.S. and around the world — which allow governments to cancel the deals, take back the roads and bridges and keep the cash if operators don’t live up to the terms.
Taxpayers are protected by an even more powerful mechanism, namely consumer choice. The majority of toll roads, to take one example, are built as high-speed alternatives to already existing routes. If the roads become too expensive or unpleasant to drive, their owners risk losing business that they are counting on to make their investments successful.
Obviously, officials in the North Carolina Department of Transportation need to structure carefully any partnerships to build new tollways in the Triangle, Wilmington, Charlotte, and other areas. Just as obviously, past mistakes invite the question of whether DOT officials can do the job. That’s why thoughtful legislative oversight — dare I dream? — will be essential to the process, as will soliciting advice from private-sector experts, within and beyond North Carolina, who have the relevant experience.
Fairly early in the deliberations, expect some opportunistic politician or interest group to play the xenophobia card. Because most of the companies with expertise in public-private tollway projects are overseas, the argument will be made that North Carolina should not let “its” roadways be “taken over” by “foreigners.” It’s one of the oldest tricks in the book, if you’re reading the how-to manual for economic stagnation, but that doesn’t mean it won’t work on the gullible – of which North Carolina has, I fear, no shortage.
Hood is president of the John Locke Foundation.