P3 PayGo Model for RhodeWorks

[button url=”http://rifreedom.org/wp-content/uploads/RICFP-P3-PayGo-101515.pdf” target=”http://rifreedom.org/wp-content/uploads/RICFP-P3-PayGo-101515.pdf” size=”medium” style=”royalblue” ]Click for full “P3 PayGo Model” report[/button]

Beginning this spring, Rhode Island Governor Gina Raimondo proposed a controversial RhodeWorks program to implement a toll system for commercial trucks as the foundation for a massive revenue bond that would not require voter approval. RhodeWorks is the governor’s strategy for repairing and maintaining a statewide road and bridge system that is undeniably in poor condition.

Despite a report from an insider government vendor, many are concerned that the governor’s plan would place yet another tax on Rhode Islanders — in the guise of highway tolls — putting unnecessary downward pressure on an already depressed state economy and placing taxpayers and drivers at further risk for inevitable cost overruns.

More recently, to address this concern, a Republican Policy Group (RPG) of state lawmakers has proposed a pay-as-you-go (PayGo) alternative that would find an annual sum of money derived from cuts and reform to existing state expenditures in order to fund the annual cost.

The mission of the Rhode Island Center for Freedom and Prosperity is to advance market-based solutions for the Ocean State through a rigorous exchange of ideas, as well as to provide alternative perspectives in the debate about important public policy issues. We agree with the priority on infrastructure established by the governor and the RPG’s directive to fund and build a sustainable repair and maintenance program within the state’s already high tax and fee regime. However, with Rhode Island’s infrastructure in such bad condition, a large up-front investment of money may be unavoidable.

The Center proposes an out-of-the-box concept for “delivery” of this massive public works project utilizing a proven model utilized in many other states for similar projects.  Lawmakers should conduct the detailed due diligence necessary to properly consider a public-private-partnership (P3) delivery model, with a pay-as-you-go (PayGo) funding foundation.

All combined this approach would fund much needed infrastructure upgrades largely from existing general revenue, yet would offload the debt, risk, and delivery of the project to a private sector partner.

The P3 PayGo model would preclude the need for tolling and would  provide substantial benefits for Rhode Island taxpayers and drivers by:

  • Removing the risk of taxpayers’ or ratepayers’ bearing the burden of likely cost overruns
  • Requiring no major new revenue streams, such as tolls, taxes, or fees
  • Removing project management from the RI Department of Transportation (RIDOT), which has recently come under intense public criticism for ongoing internal inefficiencies
  • Delivering bridge and road repairs in a more timely manner
  • Potentially saving hundreds of millions of dollars in overall project costs

Compiling this paper, the Center found the potential cost savings of a P3 PayGo project to be massive, reducing project costs by nearly half and potentially reducing annual costs to nearly one-third of the proposed spending. However, the primary goals of this proposal are to allow an upfront infusion of money without the need for tolls or other new revenue or long-term general obligation debt and to mitigate the risk associated with a project of this size. We therefore consider cost savings to be a secondary benefit, with the expectation that the numbers will become clearer as the public debate proceeds. At the very least, it is clear that, like the state’s bloated budget, P3 PayGo has plenty of slack to make the proposal feasible.

Important note: The term “public private partnership” is often used to describe government subsidies arbitrarily handed out to private ventures, such as 38 Studios. The P3 described in this paper is very different, with delivery of a vital public works project farmed out to a private sector partner in order to achieve market-based efficiencies and risk management not usually available to the government.

[button url=”http://rifreedom.org/wp-content/uploads/RICFP-P3-PayGo-101515.pdf” target=”http://rifreedom.org/wp-content/uploads/RICFP-P3-PayGo-101515.pdf” size=”medium” style=”royalblue” ]Click for full “P3 PayGo Model” report[/button]

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