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The Public Interest and Private-Sector Involvement in High-Speed Rail

10:02 AM PDT on July 20, 2011

The issue of privatization of public infrastructure was polarizing enough before the recent House proposal to take the Northeast Corridor away from Amtrak and turn it over to private firms. The privatization plan has its champions, who say it’s the only way to save high-speed rail, and its detractors, who call it a death knell for even the rail service we currently have.

In the middle are those who acknowledge that high-speed rail can’t be built in this country without some private funds, but that the government should still carefully control the process. A new report from the U.S. Public Interest Research Group, released yesterday, walks that center line. Better yet, it gives examples from around the world of how privatization has worked — and how it hasn’t. And it maintains that the question is not so much whether or not to involve the private sector, but how to craft the terms of the agreement so that the partnership adds value — not increased risk — for the taxpayer.

“Private financing can be a supplement but not a substitute for public support of high-speed rail,” said Phineas Baxandall of U.S. PIRG.

Indeed, it is clear that public and private actors are going to have to cooperate in order for the U.S. to realize its high-speed rail ambitions in California and elsewhere. But the government agencies negotiating the terms of these agreements will have to be very diligent to avoid compromising the interests of public-sector investors (taxpayers) and the purpose of the project overall, says PIRG.

“It’s attractive to politicians who may want to be champs for high-speed rail but who at the same time want to be against spending any new money for it,” said Baxandall. “Public-private partnerships have been a way to wave a magic wand to say ‘we’re going to build it, we’re just not going to pay for it. Somebody else is.’”

What this report shows, he said, is that the public sector has to be the “anchor” in these projects. “Public-private partnership isn’t just an easy way to make something happen without effort,” he said. “It takes a lot of planning.”

And private capital comes with some inherent risks. For example, in Great Britain in the 1980s, a public-private partnership which granted private control over rail lines established contracts in a way that incentivized private companies to delay maintenance. Ultimately, this led to a train derailment that killed four people.

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