Public-Private Partnership Initiatives

Econintersect:  One area where partisan bickering is being overcome with bipartisan action is in the area of public-private partnerships.  Michael B. Likosky, Director, Center on Law & Public Finance, New York University has provided us with a number of examples of how such activities are swimming against the tide of negativity that has consumed so much of the political dialog in the twenty first century.  He maintains that both presidential candidates, every governor and almost every large employer is vigorously in support of partnering.  Support among political factions includes those who identify themselves as Democrats, Republicans, Tea Partiers, Independents and others, according to Likosky.

Likosky told Econintersect:

Throughout the country, innovative public-private-partnerships are driving growth.  Investors and entrepreneurs are partnering with federal, state and local governments to make infrastructure, energy and manufacturing projects happen.

Likosky says he will be following such endeavors and will share them with us as more specific details develop.  As of today he has four specific areas on which to report, which follow.

Indiana Toll Road

Indiana Governor Mitch Daniels (R) recently described a process which created a state owned public utility out of the Indiana Toll Road.  The utility is operated by a private enterprise licensed by the state.  Some Democrats (including Sen. Jeff Bingham, D, NM) criticized what Indiana did as a sell-out of state property.  Daniels replied with a complete description of what actually has transpired in an Op Ed in the Charleston Daily Mail:

The factual errors in Sen. Jeff Bingaman’s recent attack on Indiana’s infrastructure program are rivaled only by their conceptual backwardness.

First, the facts.

The New Mexico senator writes that Indiana “sold” its toll road.

False. The state still owns the road.

We have simply converted it to a regulated utility, under a 432-page agreement that tightly controls everything from toll rates to how long the operator has to remove dead animals from the roadway.

In addition to generating nearly $4 billion in cash for the state, our transaction committed the road’s operators to an additional $4.4 billion in improvements to the road itself.

It now has electronic tolling, new lanes to reduce congestion, 25 additional state troopers and other enhancements that have brought it to the best condition and service levels in its history.

Bingaman, D-N.M., labels our action “short-term expediency.”

False again. Every penny of the bonanza we reaped goes into long-term investments in new capital projects.

Not a cent went to current operations. We balanced Indiana’s budget, cut taxes, built a sizable surplus, and achieved a AAA credit rating through old-fashioned frugality.

After paying off the debt Indiana incurred to build the toll road, we protected the rest of the deal’s proceeds for roads, bridges and other infrastructure projects.

What Indiana did was transform an inefficient cash operation into an infrastructure bank.

Actual Bipartisan Action Possible in Congress

Likosky pointed us to a recent article by John Avalon of CNN which outlined three proposals that actually have a chance of passage in the summer session:

• The BUILD Act is a bipartisan bill that would create a a public-private bank to seed investment in America’s aging infrastructure, improving our resilience and competitiveness over the long term while spurring the economy in the near term.

• The Start-Up 2.0 bill would allow Ph.D. or master’s graduates in science, technology, engineering and math to receive green cards to work in the U.S., while also lifting the per-country cap on skilled worker visas.  Co-sponsors are Republican Sens. Marco Rubio (FL) and Jerry Moran (KS) along with Democratic Sens. Mark Warner (VA) and Chris Coons (DE).  In support of this act, supporters point out that 40% of Fortune 500 companies were started by immigrants and these companies have created tens of millions of new job.

  The bill would also create new tax incentives and reduced taxes going forward for start-up companies.

• The Small Business Jobs and Tax Relief Act of 2012 would create tax credits for new hiring and pay raises this year, as well as advantaged capital investment write-offs.  Although the bill is backed by two Democrats (Majority Leader Harry Reid of Nevada and Chuck Schumer of New York) the bill has a good chance of Senate passage without filibuster.  The question remains whether the Republican controlled House will pass this very Republican bill.

Avalon says that lobbying interests that are opposing these three efforts come primarily from unions and industries that do not want any dilution of special treatment they are getting under the current tax code.  He also says that extreme partisans in both parties do not want progress before the election on the theory that they can push more blame onto the other party.

Infrastructure Banks are Emerging Across the Country

Likosky pointed us to an article by Neil Peirce, National League of Cities, which details a list of infrastructure banking and investment support plans underway by state and city governments.  Peirce says that the Obama proposal for a national infrastructure bank to fund the development and improvement of our public infrastructure (roads, rail and water systems) may be stalled by Congress but state and city governments are striking out on their own.  Among the activities he cites:

• Chicago Infrastructure Trust has been started, aiming for $7 billion in funding both from government and top private sector investors — America’s first city-based infrastructure bank.

• California is combining its 13-year old infrastructure bank with key state efforts aimed at key workforce and small business promotion efforts.

• New York state is setting up an independent and prestigious task force to

ride herd on the state’s 45 agencies and authorities and their separate priorities, insisting that new capital projects not only promise significant returns but glue together regions and interests.

This means, for example, that decisions on bridges and highways, waste water and dams, renewables and energy-efficiency systems, parks and university systems be made in mutually reinforcing ways. And that business-like procurement principles be applied across departments.

New York is also looking to establish the new professional oversight as a leveraging platform to encourage private sector investment at a high ratio to public fund investment, by up to 20:1.

Likosky says that the New York state effort is the “most dramatic” of the efforts he mentioned.  He called it a “dramatic turn on dual fronts.”

John Lounsbury

Sources:

Michael B. Likosky, communication to Global Economic Intersection

• Mitch Daniels:  What Indiana did with its toll road (Mitch Daniels, Charleston Daily Mail, 22 May 2012)

• 3 bipartisan bills that could get the economy moving (John Avalon, CNN, 09 July 2012)

• Infrastructure Banks Star in State-Local Test Runs (Neil Peirce, National League of Cities, 29 May 2012)