Private firms eyeing public projects
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KAI RYSSDAL: More of us were buying couches and computers last month than the experts had been guessing. The Commerce Department told us today orders for what’re called durable goods rose almost a percent and a half in July. That’s a pretty good jump the way things have been going. And those higher estimates for tomorrow’s last report on Q2 gross domestic product are a result.
But real estate prices are in the still in dumps. The stock market’s stuck. So, investment banks and private equity firms are looking for places to spend their money. All they need to do is look out the window. By one estimate, financially strapped cities and states need $1.5 trillion to fix up our crumbling bridges, roads and utility plants.
Taxpayers have traditionally been hit up to pay for those kinds of projects. But Marketplace’s John Dimsdale reports governments are increasingly heading for Wall Street to get the job done.
JOHN DIMSDALE: Next month, the Pennsylvania legislature decides whether it will earn $13 billion leasing the nation’s oldest toll road, the Pennsylvania Turnpike, to private investors. Florida and Chicago are also asking for bids on a highway and airport.
I asked Steve Steckler, of Infrastructure Management Group, why would local governments want to turn their infrastructure over to private operators?
STEVE STECKLER: Because the fact is their assets may be more valuable in someone else’s hands. Someone may be able to manage the facility more efficiently, market it more effectively. It’s the same equation whether you’re dealing with public or private entity.
But Robert Puentes at the Brookings Institution asks why can’t local governments run those projects just as efficiently. He thinks they have another motive.
ROBERT PUENTES: We know there is considerable reluctance to raising gas taxes or highway tolls to pay for infrastructure. So in some ways this could be a way to outsource the raising of transportation revenues from the public to the private sector.
Investment banks and private equity firms have amassed $250 billion to spend on public infrastructure. But Steve Steckler says it’ll be a while before that happens.
STECKLER: The amount of money that has been raised to this point vastly exceeds the volume of deals out there into which money can be placed.
But that could be changing as governments consider leasing water and sewer projects, electricity plants, even prisons and college dormitories.
In Washington, I’m John Dimsdale for Marketplace.
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