Privatize It

Bucking the knee-jerk reaction of "more taxes!" Steven Malanga's commentary in today's Wall Street Journal offers an alternative solution to improving the country's infrastructure: privatization (sub req):

Nearly a fifth of America's roads are now considered in poor shape and about one-in-four bridges is rated "structurally deficient." The U.S. Department of Transportation estimates that the cost to fix these problems is a staggering $460 billion. The tab grows far larger when you add in the hundreds of billions to build the new transportation infrastructure that's needed to handle the country's growth.

Part of the problem is that big increases in state and local spending for politically popular programs, especially Medicaid and education, as well costly public employee pensions and benefits, have crowded out infrastructure -- even as some traditional sources of financing for roads and bridges, such as the proceeds from gas taxes, haven't kept pace with demand.

It's unlikely that public funds alone will supply what's needed. Rising gasoline prices have made it politically unpalatable to increase fuel taxes, while some state and local budgets are already groaning under the weight of decades of borrowing, making massive new debt offerings more and more difficult. More federal transportation money? The problem is that 98% of our bridges and 97% of our roads are owned and operated by state and local governments -- and that these governments have often used past increases in federal transportation aid simply to replace their own infrastructure spending.

Instead, a few states and cities are now creatively turning to the private sector for help. They are partnering with private investors to build from scratch new toll roads, bridges and other infrastructure that the private owners -- not government -- will finance and operate. A few cash-strapped cities and states are also replenishing their transportation trust funds -- so that they can pour more money into repair and maintenance -- by auctioning off existing toll roads and bridges to private operators, who are bidding far more for these assets than most experts would have predicted.