Wrestling with PPPs

By John Latta

Britain’s premier war hero, Admiral Horatio Lord Nelson, victor of the Battle of Trafalgar, lost an eye in battle early in his career. Years later, he put a telescope to his blind eye, mid-battle, and reported that he saw no signal to disengage the enemy. Such willful willingness to fight is part of Nelson’s legend. In Washington, we see what the Brits might call a “Reverse Nelson.” Our politicians, rather than not seeing what is there, are seeing what isn’t there. They see various user-fee alternatives to higher fuel taxes as saviors of highway funding. Maybe. But not in this decade.

by John Latta, Editor-in-Chief, jlatta@rrpub.comby John Latta, Editor-in-Chief, jlatta@rrpub.com

We also have what we might call a “Half Nelson.” Private investment money for transportation infrastructure is out there, waiting, in very large sums. Our politicians look but don’t see it clearly. They keep adjusting their telescope’s eyepiece trying to focus on exactly where it is, who has it, how it might be invested, and on and on. But nothing is happening except talk and eyepiece fiddling.

We need to light a fire under them. A new report from U.S. DOT (CR-2011-147) Office of Inspector General, entitled Financial Analysis of Transportation-Related Public Private Partnerships, might be a dandy fire-starter. It set out “to (1) identify financial disadvantages to the public sector of PPP transactions compared to more traditional public financing methods; (2) identify factors that allow the public sector to derive financial value from PPP transactions; and (3) assess the extent to which PPPs can close the infrastructure gap.”

The report is not benign. The Reason Foundation’s Bob Poole in his Surface Transportation Innovations newsletter Number 94 has called it, among other things, biased against PPPs, “rather bizarre,” and “a very disappointing piece of work.” The report’s modeling, analysis and assumptions are subject to Poole’s sharp criticisms, and Poole says anti-PPP forces are already using it to support their case. FHWA Administration Victor Mendez, rather bravely I thought, reacted to the report by writing a memo to OIG to put his position strongly, and it is included in the report as an Appendix.

I want to be a debate crasher, barging in and stirring things up. Waving this document over my head, figuratively anyway, may just cause enough fuss, enough debate and arguing, points and counterpoints, to light some fires. It may be controversial; I certainly hope it is because that might get people out of talking mode and into doing mode.

The OIG report it is worth reading, including, especially, Mendez’s Appendix. (oig.dot.gov/library-item/5599). And so are Poole’s well-reasoned comments at https://reason.org/transportation-news/. Maybe we’ll have a three-cornered dialectic, adding a “Full Nelson” of volatile debate to the mix.