Morton Marcus: Business-government partnerships hide faults

The Terre Haute Tribune Star ^ | October 29, 2016 | Morton Marcus

[Tolerance Sucks Rocks]

It was disappointing, but not surprising, to learn from the Indianapolis Business Journal (Oct. 10-16) that both John Gregg and Eric Holcomb endorse public-private partnerships (P3s). These candidates for governor are experienced in the ways of our Indiana government. Mr. Gregg has served at the highest level of the legislature while Mr. Holcomb is our Lt. Governor.

P3s are agreements between governments (national, state, or local) with private companies to assume control, but not ownership, of public assets. Hoosiers know them in the form of the new bridge over the Ohio River, connecting the east end of Louisville with Clark County. I-69 moving north from Evansville and Bloomington toward Indianapolis is a P3. The Indiana Toll Road, extending from Ohio to the Illinois state line, is a successful P3. The Chicago Skyway, used by thousands of Hoosiers traveling to the home of the Cubs, is a P3.

Business organizations assume one or more government responsibilities: planning, design, financing, construction, operation, and maintenance of public facilities. P3s are increasingly used for roads, but they can suit many capital projects.

Why do we need P3s? The usual answers are: innovation, efficiency, and superior motivation for successful management. Private companies can go where governments fear to tread.

When the Indiana Toll Road was leased (not sold) to a private consortium, it was able to do what the state could (would) not do. Toll collections were automated which reduced the need for toll collectors. You cannot imagine the state cutting employment. Tolls were raised for certain classes of users. Our legislators would not take the heat for raising tolls to make badly needed repairs and improvements.

Coming up to contemporary standards is not easily achieved by governments that do not enjoy the respect of the voters. Raising more revenue from tax payers or facility users is viewed by too many in government as electoral suicide. Let someone else, some unknown entity in the private sector, do the necessary work.

Sometimes a P3 transfers the risk for a project from government to business. A toll road or one where the business is paid by the number of users (shadow tolls) does that. It happens when the state doesn’t believe the project will be successful or publically popular. I-69 is such a road, but Indiana was spooked by any toll road, even between Bloomington and Indianapolis. Hence, the state is alone on the hook for payments to its private partners.

We need P3s when the people we elect cannot be innovative, efficient, or manage in the public interest. They are channeled into advancing partisan goals, providing aid and assistance to their ideological playmates, and securing reelection from an uninformed electorate. They surrender their ethical values when they pledge allegiance to the party banner.

P3s are a brilliant way of avoiding the responsibilities of governing. They are ideal for the legislative Caucuses of Cowardice. Too bad our candidates for governor seem willing to let the existing impotence of government persist in their administration.

[Tolerance Sucks Rocks]

Note: the only part of I-69 in Indiana that is a PPP is the part under construction between Bloomington and Martinsville.

[Alberta's Child]

I'm a civil engineer who has worked on the planning and design of some major transportation projects that were implemented through P3 arrangements. Here's my take on them:

1. A P3 arrangement is best suited for public infrastructure that has already been built but needs to be maintained or replaced over time. There are a number of reasons for this, but the biggest one is that a P3 should never be used in conjunction with an eminent domain process to forcibly acquire property from private owners.

2. I would never invest in a P3 contract for a highway project, which is ironic because these are the ones that have been most popular in the U.S. I just see an enormous unknown risk of civil liability in controlling a roadway in a country where more than 35,000 people are killed in motor vehicle crashes every year. I suspect this is why the big toll road lease deals that were done in the last decade (including the Indiana case cited in this article) involved foreign investors who probably never even considered this aspect of it.

3. A P3 arrangement is mainly a financing mechanism, and should be treated that way by all players involved. What makes them attractive to a conservative like me is that they help promote a "user pays" environment that should become standard across most public expenditures.

4. Along these lines ... you'll see a landmark shift (for the better) in this country once P3 arrangements become commonplace in one of the most disastrous institutions this country has: public education.