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Public-Private Partnerships And Protecting the Public Interest Preliminary Questions & Issues

Public-Private Partnerships And Protecting the Public Interest Preliminary Questions & Issues . Steve Cohen Assistant Director U.S. Government Accountability Office Northern Border Finance Conference Chicago, IL May 16, 2007. Topics.

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Public-Private Partnerships And Protecting the Public Interest Preliminary Questions & Issues

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  1. Public-Private Partnerships And Protecting the Public Interest Preliminary Questions & Issues Steve Cohen Assistant Director U.S. Government Accountability Office Northern Border Finance Conference Chicago, IL May 16, 2007

  2. Topics • What factors drive consideration of Public-Private Partnerships? • What work is GAO doing? • What issues relate to achieving public objectives and protecting the public interest?

  3. What factors drive consideration of PPPs?Mobility and financing challenges • Mobility challenges • Congestion increasing rapidly • Population and freight projections • Transportation financing challenges • GAO high risk area • Revenues not keeping pace • Traditional revenue sources may not be sustainable • Long term fiscal challenges limit options

  4. What factors drive consideration of PPPs?Long-Term Fiscal Challenges • Imprudent and unsustainable fiscal path • Known demographic trends and rising health care costs • Unsustainable deficits and debt

  5. What factors drive consideration of PPPs?Long-Term Fiscal Challenges Source: GAO’s January 2007 analysis

  6. What factors drive consideration of PPPs?Advantages Generally Cited From Public Perspective • Accelerated project delivery--projects built sooner • Access to capital • Transferring of risks (financing, construction, market, O&M, availability) • Private sector efficiencies in construction and operations • Defined operation and performance levels and timely upgrading and replacement of assets

  7. What factors drive consideration of PPPs?Trade-Offs: GAO’s 2004 PPP Report • Political accountability and control • Relinquished control over toll rates in some cases • Non-compete agreements reduced ability to improve some public roadways • Financial trade-offs • Varying degrees of public subsidy in both for-profit and non-profit projects • Foregone tax revenue in non-profit projects • Certain financial responsibilities should private venture fail (e.g., operations and maintenance)

  8. What Work is GAO Doing?PPP request from Congress • Bipartisan congressional request • Senator Inhofe, Environment & Public Works Committee • Rep. DeFazio, House Transportation & Infrastructure Committee, Subcommittee on Highways & Transit • Senator Durbin, Senate Appropriations Committee • Research objectives • PPPs and the objectives/factors that contributed to their use • Challenges private and public partners face • Results and outcomes--how public benefits are achieved and the public interest protected • The federal role

  9. What Work is GAO Doing?PPP request - Scope and methodology • Literature review of US and overseas experiences • Interviews with • U.S. DOT and state project sponsors • Financial and legal consultants • Market and industry analysts • Site visits/Project case studies Report to be issued October 2007 • Indiana • Spain • Australia • Texas • Oregon • Toronto • Chicago

  10. What Work is GAO is doing?Related GAO work • Railroad Bridges and Tunnels; June/July 2007 • Options for financing bridge and tunnel projects, including PPPs • Efficient Use of Existing Infrastructure; July 2007 • Congestion mitigation techniques and actions to use infrastructure efficiently • State Contracting Practices; October 2007 • Trends in state practices including innovative contracting/PPPs • Freight Bottlenecks; November 2007 • How freight bottlenecks are being addressed, including PPPs

  11. Key Questions For Protecting Public Interest • How do we define the public interest? • What are the key questions? • Performance • Financing • Accountability • What is the federal role?

  12. Key Questions For Protecting Public Interest Performance • What performance standards does the public require? • Construction • Operation • Maintenance • Traffic/congestion • Expansion • What metrics are we using to measure the success of PPPs? • How should effective monitoring and oversight mechanisms be structured and at what cost?

  13. Key Questions For Protecting Public Interest Financing • How are tolls set and by whom? • What level of public support (tax or otherwise) is acceptable and prudent? • What responsibility does the public have for upside or downside extremes (e.g. preventing “excess profits”)? • What responsibilities does the public have should the private venture fail?

  14. Key Questions For Protecting Public InterestAccountability • What is the appropriate term for a long term concession? • How do we protect the ability of public entities to operate an interconnected roadway “network”? • How do we protect the ability of public entities to build and operate additional (potentially competing) facilities? • What critical skills sets need to be maintained by public institutions? • What ability should public and private partners have to revisit the agreement over several generations if conditions and circumstances dramatically change?

  15. The Federal RoleIssues • Federal stewardship responsibilities • National defense, interstate commerce, homeland security • protecting the national investment in the system to date • goals of the federal program (e.g. economic growth, enhanced mobility, system performance) • Future roles and initiatives • The need for reexamination—getting the big picture right

  16. The Federal Role FiscalCrisisRequiresFundamental Reexamination • Clear federal role and mission? • Outcome-based performance measures? • Targeting investment toward greatest needs and return? • Encouraging investment from other stakeholders? • Best tools and approaches? • Affordable and sustainable?

  17. The Federal Role Framework For The Future? • A comprehensive vision for a national transportation network • Reexamination and potential realignment of the roles of federal, state and local governments and that of the private sector • A financing scheme that leverages resources to optimize performance, meet goals, and achieve results.

  18. Protecting the Public Interest inPublic-Private PartnershipsPreliminary Questions & Issues Questions? Steve Cohen Assistant Director U.S. Government Accountability Office cohens@gao.gov

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