Debate Over Public-Private Highway Partnerships Takes a New Turn

Published October 1, 2007

The latest chapter in the continuing debate about the role of public-private partnerships (PPPs) has featured uncharacteristically blunt congressional criticism and equally pointed rejoinders from the states. The argument is over who should decide how to finance state highway projects.

In a May 10 letter to governors, state legislators, and state transportation officials, House Transportation and Infrastructure Committee Chairman James Oberstar (D-MN) and Highway and Transit Subcommittee Chairman Rep. Peter DeFazio (D-OR) warned, “The Committee will work to undo any state PPP agreements that do not fully protect the public interest and the integrity of the national system.”

The letter was followed on June 4 by a position paper intended to clarify and expand on the points made in the congressmen’s May 10 letter. (See “Committee Chairs Soften Stance Against Public-Private Transportation Deals,” Budget & Tax News, August 2007.)

States React Quickly

Reaction was quick in coming. “Mr. Oberstar had good intentions, but I disagree with his letter on two major points,” said Virginia Transportation Secretary Pierce Homer. “First, we need tolling to generate critically needed revenue for transportation. Second, we need tolling to help us manage congestion. There seems to be no recognition by Mr. Oberstar of the need for congestion management, and we will engage him in a debate on this issue.”

Calling the Oberstar/DeFazio letter “nothing but Congressional posturing,” Indiana Gov. Mitch Daniels (R) expressed doubt that Congress could overturn existing concession agreements.

Texas Gov. Rick Perry (R), in a forceful four-page letter, spoke for many fellow governors: “I encourage you to examine the fundamental question of why the states are looking to engage the private sector in the first place. I will tell you that the answer in Texas is that we could no longer wait for anyone else to solve our problems.”

Fed Response ‘Unfocused’

Perry went on to question whether an increase in the federal gas tax would address his state’s needs.

“Forcing it through a system that has no meaningful congestion relief goal, pigeonholes money into inflexible categories, and then dilutes what is left through earmarks, simply does not make sense,” Perry wrote.

The governor continued, “It should be clear to you that I am not in favor of sending more of Texas’ gas tax dollars to an unfocused federal program … I am not sending my fellow citizens’ hard-earned money to Washington DC, to have it redistributed, earmarked, and locked into programs that do little to relieve congestion.”

Governors Association Weighs In

As a rule, the National Governors Association (NGA) does not take a public position on statements made by individual congressional lawmakers. But the NGA broke that tradition to respond to the May 10 Oberstar/DeFazio letter.

“We believe Congress must work with states to advance our national transportation needs in a way that respects federalism and the states’ role as the primary steward of our national transportation network,” the NGA stated in a June 15 letter to the two congressmen.

“Fiscal pressures confronting the nation’s transportation system have prompted governors to look beyond traditional funding mechanisms such as bonding and state tolling to help finance and deliver on transportation,” the letter continued. “Burgeoning capacity needs and escalating operating and maintenance costs are driving states to pursue innovative financing options to complement traditional financing tools.”

Behind the governors’ decision to take the unusual step of responding collectively to the Oberstar/DeFazio letter was a sentiment that the challenge to the principles of federalism must be answered.

Congressmen Hint at Power Play

One of the recommendations in the Oberstar/DeFazio position paper, titled “Preserving an Integrated National Surface Transportation System,” revealed, perhaps inadvertently, what many observers think is the principal reason for the two congressmen’s negative view of public-private partnerships.

The recommendation states, “Unless appropriate planning and public interest protections are incorporated into the procedures of implementing PPPs, these transactions could stimulate and accelerate the devolution of the federal program to the states.”

This suggests that behind all the lofty sentiments about “preserving the public interest” lies a congressional fear of losing control, influence, and leverage over the highway program, including the power to earmark funds for local pork-barrel projects.

If states, using public-private partnerships, assume a dominant role in funding new highway infrastructure, federal-aid funds and Oberstar’s committee will surely become less relevant and powerful.

Ken Orski ([email protected]) is editor and publisher of Innovation Briefs, a transportation newsletter in its 18th year of publication. This is a condensed version of an article from the July/August 2007 Innovation Briefs. The full article is available at

For more information …

Full text of Texas Gov. Rick Perry’s letter regarding public-private partnerships:

Full text of the Oberstar/DeFazio report: