Financing infrastructure projects without public funds

By Chrissy Mancini Nichols

Jan 18, 2011

This post first appeared at

Illinois lawmakers passed a state income tax increase last week, but funds for building new transportation projects remain extremely limited. State motor fuel taxes have not matched inflation and cannot be used for transit. Federal funding helps, but the last surface transportation investment package expired 474 days ago - and it remains uncertain if Congress will take up a new plan this year. Even if a new federal bill passes, it will not cover all of metropolitan Chicago’s transportation needs. 

At the same time, demand for new and better roads and improved transit continue to grow. That means investment in regionally significant projects – such as the Chicago Region Environmental and Transportation Efficiency plan (CREATE), Elgin-O'Hare Extension/O'Hare Bypass, or any of the other priority capital projects identified in GO TO 2040, Northeastern Illinois’ comprehensive plan, is going to take some innovative thinking.

While it may be a taboo concept in Chicagoland, Public-Private Partnerships (PPPs) can be a resourceful approach to investing in infrastructure projects, offering taxpayers considerable cost savings and shortened delivery time, while effectively allocating risk to the private sector.

The lease of the City of Chicago’s parking meters angered the public because the process lacked transparency, funds were used to plug budget holes instead of investing in transportation projects, and hourly rates jumped. But PPPs have been used all around the country and world to generate considerable new investment in transportation infrastructure and save taxpayer’s money. At least 23 states, including Indiana, have passed legislation enabling PPPs for designated projects.

Just last month, through PPP financing, the Texas Dept. of Transportation built a $2.5 billion expressway project in Fort Worth at just a $573 million cost to taxpayers – less than 25 percent of the total cost. TxDOT Executive Director Amadeo Saenz told the American Association of State Highway and Transportation Officials, "these partnerships between states and a private company are allowing TxDOT to build several major projects that otherwise would not be built. By moving these projects forward, we can eliminate traffic congestion, give our citizens shorter commutes, and create jobs."

Illinois does not have general enabling legislation for PPPs, but in 2010 a project-specific bill was passed in the Illinois General Assembly to allow public-private financing of the Illiana Expressway, a bi-state highway in the south suburbs. Right now, it’s the only state project allowed to use a PPP.

MPC supports the Public-Private Partnerships for Transportation Act, which would allow Illinois to consider PPPs as a strategy for investing in new public assets this regions needs, such as freight rail modernization, express trains to the airports, bus rapid transit, high speed rail, and other transit and road enhancements. The Chicago Metropolitan Agency for Planning agrees, stating in the GO TO 2040 plan, “the focus of PPPs should be on funding transportation system improvements, not on generating revenue for non-transportation purposes by leasing or privatizing transportation assets.”

What does the PPP for Transportation Act do?

   All proceeds from projects financed through public-private partnerships will be deposited into a specific, newly created Public-Private Partnerships for Transportation fund.

   The Illinois General Assembly must approve all potential PPP projects prior to issuing RFQs or RFPs.

   All projects considered for public-private partnerships must be consistent with the corresponding region’s plan, provided the region has a Metropolitan Planning Organization.

   The Commission on Government Forecasting and Accountability will conduct an independent review of all project proposals prior to final approval of a public-private partnership to ensure it serves the public’s interest.

   The public-private agreement will not include a non-compete clause.

   In cases where the project pertains to an existing transportation facility, the contractor will adhere to all existing employee contracts and obligations.

   Property belonging to the State of Illinois is not subject to taxation.

   PPPs would be allowed for high-speed rail. 

MPC analyzed how the parking meter lease would be different if this law were on the books at the time. Instead of 81 percent of the revenue from the deal being used within one year to fill budget gaps, revenues would have been reinvested in our transit and road systems. There also would have been a transparent process in place at the beginning to ensure the public’s benefit maximized. It’s possible to do PPPs right in Illinois, if we develop standards that include a transparent process and a promise to invest funds back into our transportation system. 

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