The Road to Privatization: Implications of Public-Private Partnerships for Transportation Projects
Source: Maryland General Assembly, Department of Legislative Services (.pdf), Office of Policy Analysis
Beginning with the construction of the highway interstate network, highways and transit have typically been funded by federal and state aid derived from the motor fuel tax. However, given the national reluctance to increase the motor fuel tax coupled with more fuel efficient automobiles, motor fuel tax revenue growth has not kept pace with construction costs. In addition, there has been an increasing demand for transportation system preservation and new projects to meet the increasing demands of congestion. To address the needs of residents and the relative static growth in the motor fuel tax, a new national trend appears to be developing in financing transportation projects.
Specifically, a growing national interest is developing in partnering with the private sector to access cash and equity that might not otherwise be available for transportation projects. The relationship between the public and private sector is commonly known as a public-private partnership (P3). The partnership can take several forms, including the State leasing an existing revenue generating State asset to a private entity for operation in exchange for a lump sum payment. Alternatively, the private sector can construct a transportation infrastructure project, generally a toll road, for the right to collect future revenues.
....... In considering P3s and the role of private finance in transportation infrastructure, there are a number of issues for the State to consider, including the role of the legislature, the legal framework for such an agreement, and how the State should engage the private sector.