July 2011

Private sector investment won't cover whole gap

by Frank Di Giacomo, Publisher

Many policy makers are looking to various proposals to involve private capital to close the growing gap between the available tax revenues — especially at the federal level, but also, state and local taxes dedicated to transit — and what is needed, especially to maintain rail and bus systems adequately. While private capital can help fill this gap, it will likely not be able to fill it completely. The sooner that our leaders agree on this fact, the faster they can agree on the tax increase needed to fund the U.S. transportation infrastructure crisis that is getting worse every day.

According to the U.S. Department of Transportation, more than $78 billion is needed just to bring the nation's transit infrastructure up to "a state of good repair" — in other words, just to catch up on the maintenance, rehabilitation and replacement backlog. That figure is also just for the existing systems, not including the rapidly growing demand for services to relieve congestion and address the addition of more than 100 million more people expected to live in the U.S. by 2050.

Encouraging private investment

There have been many really good proposals for encouraging private investment, ranging from subsidized and government-backed loans to more aggressive public-private partnership strategies. In recent congressional testimony, however, APTA President Bill Millar put it best: "New financing tools cannot replace the need for expanded federal investment." Others, like the U.S. Chamber of Commerce, have been even blunter: Such ideas can stretch federal dollars, but private money will only come in when they have a clear idea of what government will contribute, and so, it is irresponsible to think private funds will be any kind of solution without more tax revenue. To have more public-private partnerships, they say, you need to have exactly that — public and private support.

Save money, deliver projects quickly

Virtually every blue ribbon group who has looked at this issue has concluded that increased private participation will help save money and deliver projects quicker, and that private funds can help fill part of the investment gap, but under any realistic scenario, more federal revenue is needed. Every other country has proven that; so has transportation history in the U.S.

It has also been true at the state and local levels here. For nearly 20 years, U.S. voters have understood this; more than 70 percent of ballot propositions have passed, including those with tax increases attached. Many of these, though, assume that the federal government will also contribute a fair share. It is time for our federal leaders to stop shirking their responsibility.

 


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