Managed Road PPP is the Key for Jobs, Low Taxes and Congestion Relief

02 Aug 2010 -- Eight groups eye Puerto Rico’s first toll road deal. A potential concession for two of the island’s toll roads drew interest from a mix of infrastructure funds, including those managed by Morgan Stanley, JPMorgan and Goldman Sachs.

This is five years after the spectacular failure of installing a heavy rail system on the island city of Jan Juan. San Juan rail had a 100% overrun in construction costs and five years after opening achieved far less than 50% of the forecast daily ridership for the opening year.

Roads both bring congestion relief and private money. Managed roadways are a win-win for commuters and taxpayers.

Here is a more eloquent take on solving congestion, providing jobs and keeping taxation in check by Economics Professor William A. Galston of the University of Maryland and fellow with the Brookings Institution.

"The traditional response is to use the federal government's taxing authority to raise infrastructure funds, and appropriations to fund specific projects. This model has hit a wall: not only will it be very difficult to raise taxes in current or foreseeable circumstances, but there's also the problem of how local and special interests influence, even determine, project selection for reasons that have nothing to do with economic efficiency."

"Over the past generation, we have systematically underinvested in the foundation of an efficient economy and society — namely, infrastructure. Anyone who has traveled in recent years knows that our systems of transportation and information are no longer world-class."

Today, we have trillions of dollars of capital sitting on the sidelines earning almost no return, and millions of long-term unemployed workers who would be thrilled to receive a steady paycheck again. The task is to bring these two factors of production together around projects that make sense.

• To attract private capital, projects must earn a reasonable return, which means increased reliance on user fees (tolls or levies per unit consumed) rather than general taxation.
• Because most infrastructure projects generate public goods (such as economic growth in the areas it opens up) as well as private goods (such as easier commutes).
• To promote economic efficiency and growth, projects must be chosen on economic rather than political grounds. The new model requires a shift away from congressional dominance of the selection process toward an empowered board substantially insulated from day-to-day political pressures.