CG/LA Infrastructure's InfraBlog

No dough for roads: Lack of funds for transportation is a worldwide problem


Posted Wednesday, May. 22, 2013


LEIPZIG, Germany — Facing tight budgets and political pressure, the United States and many other countries are missing on a chance to invest in transportation, economists said Wednesday.

“I think of freedom as important and, to me, freedom is the capacity to move around,” Harvard University economist Amartya Sen told more than 1,000 people attending the first day of an International Transport Forum in Leipzig.

Sen, who won a Nobel Prize in economic sciences in 1998, laid out a multi-pronged, 20-minute argument in favor of investing in roads, rail lines and other modes of transportation to move people to and from their jobs, shopping and other tasks.

He briefly touted transportation as a proven path to prosperity for developing countries and a tonic for bringing developed but stagnant economies out of recession.

But noting that progress has been slow in many budget-weary countries, Sen said leaders from those nations need to take the time necessary to help residents determine “a public reasoning,” a mutually agreed path to better mobility.

John Micklethwait, editor-in-chief of The Economist, cited political pressures in many countries, where elected leaders are looking to tighten their belts, rather than invest in projects whose benefits won’t be realized for years.

“If you look at the West in particular, you can make the case really rather strongly that we’ve not invested in this particular recession, in this time of need, in those projects as we expected to,” Micklethwait said.

Micklethwait was particularly critical of the U.S., saying: “Their infrastructure is lousy. Most of it was built 50 or 60 years ago. It’s amazing that it’s been only five years since that bridge collapsed in Minnesota, claiming 13 lives, and despite that America still has 70,000 bridges found to be structurally deficient.”

Much of the discussion on the first day involved countries exploring alternatives to traditional, tax-supported transportation projects.

An emerging popular alternative is a type of funding known as a PPP, or public-private partnership. That’s a bit of a geeky name, but Texans are familiar with inviting private developers to help pay for projects in return for allowing them to make a profit on them.

In Dallas-Fort Worth, private developers are being used to build the North Tarrant Express, a $2.5 billion project that involves overhauling Loop 820 and Texas 121/183 and adding toll lanes. Also, Texas officials have approved a plan to add the expansion of Interstate 35W to that project and to apply for a federal transportation infrastructure loan to make it work.

But such partnerships can quickly fail if public officials don’t carefully negotiate contracts with developers to ensure that all parties involved understand who is financially responsible for all the risks.

For example, the Saudi Land Bridge in Saudi Arabia, connecting the Persian Gulf to the Red Sea, was initiated as a public-private partnership, but the partnership was canceled because the parties couldn’t agree on issues such as who would assume financial risk. The project is now being pursued as a publicly funded project, said Frank Beckers of Symbulos Infrastucture Consultancy in Dubai.

Another project, the South Bay toll road in the San Diego area, went bankrupt, and one of the factors was that original traffic projections were too high, said Jonathan Gifford, a professor at George Mason University in Virginia. The project was backed by a transportation infrastructure loan, which normally is the last of debts to be serviced on a project, but because of “springing lien” language in the agreement the federal loan was moved to the top of the repayment list during the bankruptcy process.

Gifford said the South Bay project, now owned by the San Diego Association of Governments, “is a success.”

“It’s a success in the sense that those who put their money at risk absorbed the loss,” he said. “Of course, those who put their money at risk do not consider it a success.”

Despite those setbacks, public agencies are becoming smarter in learning how to negotiate public-private partnership agreements, several panelists said.


Taken from Star-Telegram:


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