Empower The Private Sector To Close The Infrastructure Funding Gap


If you believe the civil engineers, then on top of current planned expenditures, the U.S. needs an additional $5.2 trillion in investment into the nation’s roads, water systems, electric grids, ports & waterways, and airports between now and 2040. While such investments may be imperative, the ability of the government to meet these obligations is questionable.

Consider their sheer size. While the expenditures would occur over more than 20 years, in total they are equivalent to the total federal, state and local government expenditures in 2016, which was $5.3 trillion. Therefore, the necessary expenditures are not an insignificant burden.

Perhaps even more problematic, unfunded obligations of the federal, state, and local governments will begin to create budget crises during the same time continued infrastructure investments are necessary. Evan a partial accounting of the federal government’s unfunded liabilities is overwhelming. Over the next several decades, the federal government must manage $14.4 trillion in debt, $12.2 trillion in unfunded obligations for Social Security, and $36.8 trillion in unfunded obligations for Medicare. States must manage nearly $2 trillion in debt and unfunded retirement obligations.

Meeting these obligations while simultaneously investing in the nation’s infrastructure will be difficult to achieve at best. Alternatives to government funded infrastructure are necessary, and it is past time to seriously consider empowering private sector firms to rebuild the nation’s infrastructure. And, in fact, there is growing momentum in Washington D.C. to allow public private partnerships, ultimately financed by tolls, to improve to the nation’s roads and bridges.

One privately owned bridge in Alabama exemplifies the benefits private roads and bridges can create. There is currently only two ways to drive between Alabama’s island beaches along the Gulf Coast and the mainland – drive over the state-owned I-59 or drive over the Foley Beach Express (aka the BEX). The I-59 is free to cross, but less convenient. The BEX is a privately owned and operated bridge that is a shorter route to Gulf Shores and Orange Beach, but imposes a toll.

Despite the required toll, during the congested summer tourism season, the BEX can suffer from heavy congestion – a plight all too common for many summer beach goers. As with any market, the heavy use of the bridge is an indication that the toll bridge is providing value to residents and tourists.

To help alleviate the congestion problems, particularly on the I-59, the private company running the BEX (American Roads) has lowered fares and announced an expansion that will increase the capacity of the bridge. Further, the expanded capacity will not require the $30 million in state expenditures that would have been required to build a new bridge – one of the alternatives to alleviate traffic – and also ensures that the users of the bridge are the ones who pay for its construction and maintenance.

The toll road model has proven itself elsewhere in the country. As Chris Edwards of the Cato Institute noted, a public private partnership in Virginia built the relatively new express lanes around the capital beltway that has helped ease the region’s notorious traffic congestion.

Due to the public-private-partnership arrangement, the state only had to pay one-fifth of the costs, the remainder was financed by the private company. The private company completed the project efficiently, on time, and on budget. It will attempt to recoup its investment by charging tolls to access the more convenient express lanes as an alternative to traveling on the sometimes more congested, but toll-free, beltway.

The market discipline that private firms face is the crucial advantage of relying on private roads and bridges. Incented by the profits earned by providing valuable roadway services on time and on budget, private companies can deliver the necessary capital investments to address many of the nation’s investment needs more efficiently.

Further, recouping these costs via tolls ensures that those people who are using the infrastructure are the same people who are paying for the infrastructure. In the case of the BEX, the drivers to the beach resorts will bear the cost, and benefits, of the expanded bridge capacity. Ostensibly, earmarking gasoline taxes toward publicly financed roads is supposed to ensure that the construction and maintenance of roads are paid by those people who use the roads. It rarely works this way.

In these times of tight budget constraints, prioritizing infrastructure investments toward the highest valued projects is more important than ever. Thinking differently about how many roads and bridges are financed and operated can substantially improve the nation’s infrastructure while not imposing unaffordable burdens on the already stressed federal, state, and local government budgets.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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