	Introduction

Growing demands on the transportation system and constraints on public resources have led to calls for more private sector involvement in the provision of highway and transit infrastructure through what are known as "public-private partnerships" or "P3s." P3s can offer a means of injecting additional resources into highway and public transportation systems while reducing costs, project delivery time, and public sector risk. A wide variety of public-private partnerships in highways and transit exists, but this report focuses on the two types that are generating the most debate: (1) the leasing by the public sector to the private sector of existing infrastructure, sometimes referred to as "brownfield" facilities; and (2) the building, leasing, and owning of new infrastructure by private entities, sometimes known as "greenfield" facilities. Types of Transportation Public-Private Partnerships

In the traditional method of providing transportation infrastructure, known as "design, bid, build," the public sector decides there is a need for a new facility, plans its development with a wide variety of community input, organizes the funding and financing, lets out contracts to design and construct the facility, and operates and maintains the facility after completion. In addition to the designing, building, and operation of an infrastructure project, these types of P3s transfer to the private sector much of the long-term financing responsibility. This involved a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan of $589 million and $589 million in tax-exempt private-activity bonds. The program explicitly provided for private investment. The most recent surface transportation authorization law, the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. Some, including GAO, have suggested that a more systematic approach to identifying and evaluating the public interest in P3s needs be developed and employed, as has been done in other countries such as Australia. Tolling, both public and private, accounts for about 5% of highway revenues. Diversion of resources may also be of more general concern in that new private resources attracted to transportation infrastructure may substitute for public resources in the transportation sector rather than supplementing them, with no net gain in funding. One major risk is that construction will cost more and/or take longer than foreseen. What Are the Effects of P3s on Operation of the Highway Network? It is generally assumed that projects for which proposals are solicited from the private sector will have come through a public planning process. There are two broad policy options for expanding use of P3s. The first would be to actively encourage P3s with program incentives, as was done in MAP-21, but with relatively tight regulatory controls. The second would be to aggressively encourage the use of P3s through program incentives and deregulation, particularly in the areas of tolling and financing. The proposed Surface Transportation Authorization Act (STAA) of 2009 would have made P3s involving federal-aid highway funds subject to various federal requirements, including a weighing of the costs and benefits of the P3 against traditional public delivery methods. The proposal also contained requirements regarding public information and public involvement and a prohibition against non-compete clauses in P3 agreements. A national infrastructure bank could be designed to promote development of P3.
Growing demands on the transportation system and constraints on public resources have led to calls for more private sector involvement in the provision of highway and transit infrastructure through what are known as "public-private partnerships" or "P3s." A P3, broadly defined, is any arrangement whereby the private sector assumes more responsibility than is traditional for infrastructure planning, financing, design, construction, operation, and maintenance. Some P3s involve the leasing by the public sector to the private sector of existing infrastructure, while others provide for a private role in designing, financing, building, and operating new infrastructure.
P3 proponents argue that, in addition to injecting additional resources into surface transportation infrastructure, private sector involvement potentially reduces costs, project delivery time, and public sector risk, and may also improve project selection and project quality. Detractors, on the other hand, argue that the potential for P3s is limited, and that, unless carefully regulated, P3s will disrupt the operation of the surface transportation network, increase driving and other costs for the traveling public, and subvert the public planning process.
Evidence suggests that there is significant private funding available for investment in surface transportation infrastructure, but that it is unlikely to amount to more than 10% of the ongoing needs of highways over the next 20 years or so, and probably a much smaller share of transit needs. With competing demands for public funds, there is also a concern that private funding will substitute for public resources with no net gain in transportation infrastructure. The effect of P3s on the planning and operation of the transportation system is a more open question because of the numerous forms they can take, and because they are dependent on the detailed agreements negotiated between the public and private partners. Many highway and bridge P3s involve tolling, raising questions about equity and traffic diversion and, more broadly, concerns about whether there is a national public interest justifying federal oversight of P3s.
This report discusses two broad policy options for Congress as it considers reauthorizing federal surface transportation programs. The first would be to actively encourage P3s with program incentives as has been done in the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), but with relatively tight regulatory controls. This might include a requirement for an evaluation of the costs and benefits of the P3 against traditional public delivery methods, new requirements regarding public information and public involvement, and a prohibition against non-compete clauses in P3 agreements (which could prevent public authorities from providing new, competitive infrastructure near a privately controlled facility). The second broad option would be to aggressively encourage the use of P3s through program incentives and deregulation. This might include fewer restrictions on the tolling of Interstate Highways and the enhancement of existing financing programs that encourage P3s, such as the TIFIA (Transportation Infrastructure Finance and Innovation Act) program and private activity bonds, or new initiatives, such as the creation of a national infrastructure bank.