Many months ago, I promised a two-part series on public-private partnerships. Part one was previously published and today I wrap up the series with post two. As we head in to 2011, public-private partnerships will play a vital role in replacing the non-existent state funds for necessary public works projects. Here is part two on public-private partnerships:
We have already revealed Secret No. 1 about public-private partnerships: there is bi-partisan support for PPPs. I promised to reveal Secret No. 2 about PPPs. In hindsight, I should have probably not labeled this a secret as it is more an observation verging on opinion. Some of you that do not support public-private partnerships will not agree with this observation.
Secret No. 2: There appears to be no viable alternative to public-private partnerships.
If you work in the construction industry, you probably know that the U.S. infrastructure is in dire need of renovation and repair. According the American Society of Civil Engineers (ASCE), the U.S. infrastructure is in absolute disrepair based on its 2009 U.S. infrastructure grade card:
Drinking Water D-
Hazardous Waste D
Inland Waterways D-
Public Parks and Recreation C-
Solid Waste C+
America’s Infrastructure GPA: D
Further, the ASCE has concluded that an investment of $2.2 trillion would be required over the next five years to improve our infrastructure. Assuming the ASCE is correct, repairs to our infrastructure will require substantial investments by the states charged with infrastructure upkeep.
But states have no money.
Check out the grim outlook for state budget shortfalls from the Center on Budget and Policy Priorities:
The worst recession since the 1930s has caused the steepest decline in state tax receipts on record. State tax revenues were 8.4 percent lower in the 2009 fiscal year than in 2008, and an additional 3.1 percent lower in 2010, while the need for state-funded services did not decline. As a result, even after making very deep spending cuts over the last two years, states continue to face large budget gaps. At least 46 states struggled to close shortfalls when adopting budgets for the current fiscal year (FY 2011, which began July 1 in most states). These came on top of the large shortfalls that 48 states faced in fiscal years 2009 and 2010. States will continue to struggle to find the revenue needed to support critical public services for a number of years, threatening hundreds of thousands of jobs.
From my vantage point, I see an extreme need for infrastructure upgrades and I see public bodies that do not have the financial ability to fund the upgrades.
If the public sector cannot fund infrastructure improvement, isn’t the only other solution private sector investment through public-private partnerships?
Photo credit: Barbour