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Innnovation and Reform: Public-Private Partnerships in Virginia

By Neal Modi | March 27, 2012 | No Comments

In Virginia today, public-private partnerships appear to be everywhere and gaining in popularity among local and state governments. From tunnel projects in South Hampton Roads to road improvements to the addition of HOT lanes on Interstate 95, these partnerships, otherwise known as P3s, appear to hold a promising future.

And rightly so. Our state and local governments recognize the distinct advantages these partnerships present. For instance, according to Baruch Feigenbuam of the Reason Foundation, P3s can raise large sources of needed capital, shift risk from taxpayers to private investors, take advantage of private-enterprise innovation, and most significantly, provide an infrastructure sooner rather than later. On paper, P3s are a win-win solution. They relieve a burden from state and local governments, curtail imposing higher taxes, promote commerce, and strengthen core infrastructure networks.

And fortunately, Virginia, in many ways, is the P3 leader nationwide. For instance, Virginia’s enabling legislation – the Virginia Public Private Partnership Act – is one of the most robust and oldest of its kind. Likewise, the state’s Office of Transportation - Public-Private Partnerships, cited by the Brookings Institution as a successful and genuine example of needed public-private partnership units, indicates how Virginia is ahead of the curve when it comes to P3s. Furthermore, our state government recently has aggressively pursued these types of endeavors. In fact, Governor Bob McDonnell has made P3s a priority and beginning in 2011, had $1.5 billion of state funds allocated to P3s.

Yet while P3s can be adopted to most projects, from its most common utilization – transportation – to less common, such as water maintenance, Virginia should be vigilant to ensure to avoid letting P3s become an ideology — in other words, we need to know exactly how they operate and whether they’re serving the public good, rather than preconceived and inflexible notions.

For anyone living in Hampton Roads, for example, the past six months has been full of public debate, newspaper stories, and op-eds about the recent public-private partnership that seeks to impose tolls on the Midtown and Downtown tunnels. At the heart of this debate is not only the toll fare, which many fear will have a disastrous impact on both personal pocketbooks and the region’s economy at-large, but also the way in which the project came about.

Many in Tidewater have complained, and rightly so, of the lack of public input and transparency in the negotiation process.

On the one hand, citizens have a right to know how these major projects (and at times, their accompanying tolls) will affect them. Since they are the major consumers of such projects, it seems right that they have a hand in deciding which projects are implemented and how they are done so.

On the other hand, however, public-private initiatives are, and some say should be, shielded from public input. In part to protect the integrity of the complex negotiations between the two parties but also to ensure that private parties do not fear backlash in bringing to local governments capital and projects, the public is usually left out of the equation.  Many in this camp say that transparency and disclosure must be balanced by the reality that it would be complicated if the public were included in all steps of negotiation.

This needs to change. Just because private entities are involved should not screen public governments from allowing citizens to become involved. Indeed, the fact that P3s are providing a public, as opposed to a private, good or service is central to such an argument.

Another issue is P3s’ ability to bypass the customary method of approving and certifying projects. In Virginia, the Commonwealth Transportation Board (CTB) must first approve transportation projects in the state before construction or even proposals are drafted. The ability of P3s to circumvent this entity is wrong on two fronts. First, the ability of P3s to skirt the CTB can mean disastrous planning consequences.

If the CTB had made renovating the Midtown and Downtown tunnel a low priority, yet a P3 wished to renovate those roadways immediately, other priorities might be overlooked — and could impede the completion or undertaking of future projects. Secondly, evading the CTB is wrong for the same reason discussed above. The CTB has the public interest in mind and circumnavigating around this public interest is damaging to the project itself, its popularity, and its perception. More so, it is also damaging to the reputation of P3s themselves.

P3s are a great tool that can and should be utilized effectively yet properly by our state and local governments. They infuse much needed capital, innovation, and cost-saving mechanisms that may not be realized if left to the state. However, they have shortcomings. Most serious  is their lack of public input, transparency, and openness. Put simply, these elements need to be reformed, whether through amending the Virginia Public Private Partnership Act or through instituting strong conditions to P3 contracts.

Indeed, the reputation and long-term longevity of P3s depend on it. After all, if the public is rarely included, we may see the repeal of P3s as fast as some of their projects come into fruition.

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