Remember: Public-Private Partnerships Aren't Free

Everyone wants sparkling new roads, bridges, airports, and transit systems. But most Americans aren’t willing to crank up tax rates to pay for those projects, and many politicians aren’t eager to try and convince them. That’s why a growing chorus of elected officials, both liberal and conservative, are singing the praises of public-private partnerships.

There are many ways to define this term, but the most common understanding is an arrangement where a private investor—think Morgan Stanley or TIAA-CREF—plunks down a big chunk of a project’s upfront cost. Theoretically, with all that upfront private capital on hand, a highway, water system, or transit line can be built much more quickly than it would be if it were relying on a slow trickle of public funds or government bond sales. The project may also cost less, since, theoretically, companies have a bigger incentive to build efficiently. A local government can also build price/quality assurance check-points into the contracts they write. If the project fails, the Monopoly men are theoretically the ones who’ve taken on most of the risk, rather than the public.