Friday, October 10, 2008


The Private Role in Public Infrastructure
By Secretary of Transportation Mary Peters , 10/6/2008 8:50:43 AM

This speech by U.S. Secretary of Transportation Mary Peters was given at the Manhattan Institute in New York, NY on October 2, 2008'''

Good morning. Thank you, Larry Mone, for that kind introduction. And thank you for inviting me to be part of this timely forum on the private role in public infrastructure. It is heartening that the Manhattan Institute—an organization which has done so much to advance policy in areas such as welfare reform, education, and public safety—is putting their intellectual capital to work on infrastructure issues.

Your leadership will be pivotal in making sure that the United States completes the transition to a 21st Century transportation policy that can keep New York and our country competitive, our people mobile, and our infrastructure in good working order.

America's transportation programs today labor under the burden of policies, approaches, and even equipment designed more than fifty years ago. We are living with the result: New Yorkers, for example, deal every day with airline delays, lengthening daily commutes, and growing gridlock that makes a trip across midtown Manhattan about as predictable as the next Top Chef.

Like Wall Street itself, we are battling a crisis of confidence in transportation. Every year, Americans routinely reject new taxes and new debt for transportation projects. It is not that they don't want better commutes. They just have no confidence in the government's ability to deliver better results. They know the current approach is failing badly.

But around the country, innovative leaders have begun demonstrating that congestion does not have to be a fact of urban life.

There are roads, like California's Highway 91 in Orange County, that deliver reliable commutes—every day—by using congestion pricing to keep traffic flowing.

There are cities like Chicago, Minneapolis, and Miami that are relieving stubborn bottlenecks almost overnight—without building a single mile of new roadway. Thanks to sensor technology on HOT lanes and even on parking meters and lots, they are able to use the power of pricing to deliver faster commutes, better transit, and cleaner air.

And there are states like Indiana, Florida, and Texas that are funding ambitious infrastructure programs today—without raising gas taxes or grabbing new federal earmarks. Instead, these forward-looking states are reaching out to the private sector, where they are finding eager partners.

Governor Mitch Daniels' bold move to lease the Indiana Toll Road brought in $3.85 billion to fund the capital projects in the state's Major Moves program. Moreover, the private concern, Cintra, now has responsibility for upkeep of the 157-mile road, which was in need of costly maintenance and repairs.

Others have partnered with the private sector to finance, build, and operate new projects. A good example is Virginia's agreement with Transurban and Flour Enterprises on a $1.8 billion project that will add new HOT lanes to the Capital Beltway—one of the most congested highways in the nation.

Interest is not limited to highways. On Tuesday, Mayor Daley announced a private firm is prepared to pay Chicago $2.25 billion to take over operation of Midway Airport. It is a deal we will need to review, but the concept is strong.

And it is the direction we need to head. America has been slow to grasp the unprecedented innovation taking place in transportation financing today, and frankly, it is hampering our ability to compete in a global economy that relies on efficient transportation infrastructure.

Around the world, countries as diverse as Canada, France, Spain, England, Italy, China, Mexico, and India routinely use private capital to finance transportation infrastructure improvements. Russia has a pipeline of Public Private Partnership projects lined up that will involve hundreds of billions in private-sector investment.

Yet when I arrived in Washington to head the Federal Highway Administration in 2001, there was little talk of market forces or Public Private Partnerships in transportation.

With the active encouragement of the Bush Administration, that is changing.

We have developed model Public Private Partnership legislation and encouraged states to modernize their laws, and a total of 25 states now have P3 authority.

We have made market incentives available to airports and carriers, and they are helping spread flights more evenly throughout the day.

We have reached out to innovative municipal leaders with Urban Partnerships and congestion reduction grants, and they have responded with potent combinations of technology, pricing, and transit to fight congestion.

We have made aggressive use of private activity bonds and TIFIA loans and programs like Interstate Tolling, Corridors of the Future, and the Federal Transit Administration's PPP Pilot Program to encourage states to engage the private sector in creative ways. And from the Chicago Skyway, to the Capital Beltway, to the Hiawatha Light Rail, private-sector partnerships are becoming the preferred model for adding significant new capacity.

In fact, we recently concluded a comprehensive review of innovative financing projects in the United States. What the study found was that more transportation Public Private Partnerships have been completed over the last three years than in any comparable period in U.S. history.

Another 20 major highway and transit projects involving partnerships with the private sector are at various stages of development in California, Kentucky, Louisiana, Nevada, Ohio, Texas, and many other states.

Just this week, Governor Patterson announced a special commission on Public Private Partnerships for New York, preparing to position the state to "more effectively make long-term capital investments, even in periods of economic distress."

I recognize that the financial market is in upheaval right now. One implication is that states and municipalities will have a more difficult time borrowing even as they must fill gaps in their budgets.

At the same time, infrastructure funds continue to grow. Transportation represents an attractive investment—a solid asset with real value that produces a steady revenue stream.

Long-term, the trends are quite clear. The private sector must play a major role in modernizing America's transportation infrastructure— from our roads and bridges, to our subways and seaports, to our air traffic control system.

Public Private Partnerships are an essential part of modern transportation financing. These partnerships reduce project costs, accelerate project delivery, and allow states and municipalities to greatly leverage available public resources.

Over the last eight years, the Bush Administration has supported record federal investments in America's highways and bridges. We have nearly doubled funding for transit. And we have invested almost $50 billion in airports, runways, and aviation technology.

But there is no question in my mind that our most important legacy will be the unprecedented innovation we have sparked in the very way transportation in America is financed, built, and operated.

The challenge we now face is translating these good examples into a national policy that will deliver fewer traffic tie-ups in the air and on the ground, better transit services, a stronger economy, and a cleaner environment.

The Bush Administration has proposed reform legislation for both aviation and surface transportation aimed at furthering the momentum. Sadly, it will be next year at the earliest before Congress acts on either.

There is a clear role for the federal government in helping spread effective solutions across the country and making them the norm. But it has got to get out of the business of micromanaging process and stop limiting the flexibility of cities and states and the private sector to innovate. Federal policy can help promote accountability and rational investment decisions, but Washington should not stand in the way of change.

As I travel the country, I find there is a real hunger out there for new ideas—and an eagerness to put them to work to solve problems.

Some of the most exciting ideas have been proposed here in New York, like Mayor Bloomberg's congestion pricing plan for mid-town Manhattan—a plan many in this room helped to advance.

And some of my most disappointing moments as Secretary have been seeing those plans scuttled by entrenched interests determined to thwart any attempt at meaningful change. But that has not and will not stop me from continuing to beat the drum for reform, and you must not let it discourage you either.

As Prime Minister Margaret Thatcher used to say, "You may have to fight a battle more than once to win it."

New York City represents a microcosm for what is happening in cities across America. Historic transportation systems are failing. Gridlock is growing. And the battle with the forces of stagnation is joined.

So join with me in continuing to fight for relief from honking horns and polluting tailpipes and endless flight delays.

Join me in working for reliable transportation choices, so New Yorkers can walk out of their doors and know how long it will take them to get across town, whether they travel by taxi or transit, or on foot.

Join me in raising New York's stock by giving the city a 21st Century transportation system marked by innovation, efficiency, and choice.

And as has happened so many times throughout our history, when New York blazes the trail, the country will follow.

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