This newsletter provides an update on the status of public-private partnerships in the Commonwealth of Massachusetts.

This week, Massachusetts Governor Deval Patrick appointed four members to the Special Public-Private Partnership Infrastructure Oversight Commission (the Commission), thereby accelerating the prospect that Massachusetts may be willing to enter into agreements with private institutions to build, operate or manage some of the Commonwealth’s transportation assets.  Given this new opportunity, investors should pay close attention to the deliberations of the Commission and the Massachusetts Department of Transportation (DOT). 

The Commission, established as part of the omnibus transportation reform legislation of 2009, has the power to approve all requests for proposals issued by the state’s DOT for public-private partnerships, which bypasses the current anti-privatization law.  Moreover, due to the increasing demand for solutions to an aging transportation infrastructure and the questionable fiscal stability of the agencies in charge of the state’s roads, bridges and railways, the governor’s action could add a significant element to this discussion on Beacon Hill and provide an additional tool to help solve the transportation funding dilemma.  In prior years, a lack of political acceptance resulted in few opportunities to have a substantive debate on the merits of public-private partnerships.  But the recent upturn in the economy and the reform legislation of 2009 provide a bridge to a credible, realistic and cost-effective solution for future transportation financing. 

Massachusetts faces a current structural deficit for its fiscal year 2014 budget and carries significant debt obligations tied to transportation projects, including the Central Artery Project.  The financial needs of the Commonwealth today shed a more favorable light on the value of public-private partnerships, which in turn will help improve the economy and establish long-term stable financing by investors for transportation projects.  Experiences in other states, like Illinois, Virginia, California and Texas, and in other regions, such as Europe and Asia-Pacific, have shown significant potential to help balance budgets and improve the quality of roads and delivery of transportation services. 

With the Commission filled out, Massachusetts can seize the opportunity to fully examine and execute agreements with private institutions to operate whatever elements of the transportation systems deemed appropriate by the Commission.  Even if the Commission opts to incrementally venture into this territory with small pilot projects, like leasing the Massachusetts Turnpike’s service areas and other state-wide service and rest areas, the prospect for true systematic reform will be realized. 

The state, through the Massachusetts DOT and the Commission, should waste no time in exploring the opportunities that lie ahead so that Massachusetts truly can be on the road to fiscal stability for the state’s transportation agencies.  Investing in and improving the quality of the infrastructure and services offered by the DOT will have a long-lasting effect on the state and will be a win-win for taxpayers and private institutions alike.