In The News

Congressmen note financial risks, urge DOT caution on PPPs

WASHINGTON — A couple of Capitol Hill’s most influential voices on transportation policy are cautioning the lame duck Bush administration about the pitfalls of private funding when financial markets are in distress.

Democrats James Oberstar, chairman of the House Transportation and Infrastructure Committee, and Peter DeFazio, chairman of the Highways Subcommittee, delivered an Election Day greeting to Transportation Secretary Mary Peters urging the DOT to aggressively oversee public-private partnerships — and said that without thorough safeguards, “the public interest could be seriously compromised.”

The Federal Highway Administration recently unveiled a program designed to help states help themselves to find funding for transportation projects.

The new Office of Innovative Program Delivery is set up to work with state departments of transportation “to help them explore opportunities with innovative financing and congestion pricing and tap into the $400 billion in private funds available world wide for investment in transportation infrastructure,” according to the Oct. 31 announcement.

Existing FHWA activities such as public private partnerships, innovative financing, experimental projects, and tolling authorities will be merged into the new office, according to the agency. The move is meant to improve access and communication for the states.

The new office also “will provide national leadership and advice” for states interested in such programs.

Referred to as “a rush to embrace and promote PPPs” by Oberstar and DeFazio, private financing and management agreements have been alternatives backed strongly by the Bush DOT.

The congressmen expressed particular concern over a possible lack of transparency in the deal-making between state and local governments and potential financial backers, as well as the risks and repercussions of deals gone bad.

The letter refers to private funding arrangements made by local transit authorities between 1988 and 2003 which are now exposed for up to $4 billion and being threatened with default “by private investors to exploit the financial collapse.”

The impact could be “significant” for 25 cities, the letter stated, possibly eliminating public transit in the nation’s largest urban areas.

Similarly, the letter questions the practices and viability of private firms associated with a number of public transportation projects. Insufficient oversight could mean that unanticipated crises — such as the ongoing financial freefall — would result in unanticipated consequences, particularly in long-term deals such as the widely discussed plans to put state-owned tollways and turnpikes up for bid.

Oberstar and DeFazio ask for “strong public interest protections” aimed at ensuring roadway users aren’t stuck with artificially high tolls to make up for a concessionaire’s bad business decision or to meet investors’ expectations.