Editorial: Beware of P3s

Link to article here.

A caution on P3s: Let elected officials and the public beware
August 17, 2014 12:00 AM
By the Editorial Board
Pittsburg-Post Gazette

When it comes to public-private partnerships, so-called “P3s,” the old adage — let the buyer beware — needs to be updated for governments planning to join with private companies to do public work or assume a public function.

Let the public deal-maker beware. Let the public beware, too.

Those P3 deals that look great in theory can be bad in reality. So demonstrated the report by the Post-Gazette’s Len Boselovic, who took a detailed look at the practice in a four-part series, “The P3 Dilemma,” that debuted last Sunday.

P3s look attractive to elected officials who need to repair infrastructure but are reluctant to raise taxes to do it. They are tempted to take the upfront money from private interests and run from responsibility. P3s even allow politicians to pose as small-government advocates, though P3 deals often depend on federal government loans, a subsidy by any other name.

It’s easy to find examples of P3 deals that turned sour. Texas State Highway 130 was a private toll road, but toll revenues did not live up to expectations and private investors defaulted on bank loans. A similar story unfolded with the South Bay Expressway in San Diego, which went bankrupt and was resold. Chicago turned its parking meters over to a private company and rates increased dramatically.

Yet some P3s do well — and that is what creates the dilemma. Baltimore upgraded its port to accept larger ships through a 50-year lease to a private investor, an improvement that could not have been done otherwise in the midst of recession.

As Pennsylvania was typically slow in coming to the P3 trend, it is in a position to learn from the mistakes of others as it moves forward. With 4,200 aging bridges needing repair, the Department of Transportation is seeking private companies to design, build and finance about 600 mostly small bridges (more than 100 in Western Pennsylvania are under consideration). Private investors won’t lease them and won’t toll them, so this deal may be an ideal P3 arrangement.

But the Post-Gazette report argues that great care must be taken. It seems that the more governments lose control of their core responsibilities for long periods, the more trouble they invite. Let everybody beware.

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