One reason to shift infrastructure financing to the private sector is that governments and their contractors often give taxpayers the shaft. They say a big project will cost a certain amount, but then the project gets underway and they reveal that---whoops!---the project actually costs much more. No one gets fired, the money has been spent, taxes and debt have been increased, and officials move onto the next boondoggle.
Here is a 2009 essay on the topic, and here are a few recent examples that have piled up on my desk:
- High-Speed Rail. California voters approved bond funding for what they were promised was a $43 billion rail project in 2008. But a new report by the plan’s sponsors shows that the project is now expected to cost $98 billion, although part of the higher cost estimate reflects inflation.
- Air Traffic Control. “The Federal Aviation Administration continues to struggle with budgets, deadlines, and management of its multi-billion dollar upgrades to the nation's air traffic control systems.” One project -- the En Route Automatic Modernization system -- “is about five years behind schedule and as much as $500 million over budget.”
- FBI Computer System. “The Sept. 11, 2001, attacks exposed the FBI's troubles with information sharing, and the bureau accelerated plans to replace its unwieldy case-management system with new software. That technology project was called Trilogy and was supposed to deliver software called Virtual Case File that was to help FBI agents share investigative documents electronically. The inspector general called the project a fiasco and said the FBI and its contractors wasted $170 million and three years.” The FBI then launched a new project, Sentinel, but by last Fall the new system was already two years behind schedule and $100 million over budget.
- Washington Bicycle Trail. “The cost to rebuild the Capital Crescent Trail along a future Purple Line has ballooned from an estimated $65 million to $103 million, almost half of which would be spent to squeeze the trail and light-rail trains through a tunnel in downtown Bethesda.” Wow! That’s got to be the world’s most expensive bicycle trail at $103 million.
- Washington, D.C. Subway. The final bill isn’t in yet on the Metro’s Silver line to Dulles Airport, and the cost of the proposed Purple Line has crept up only modestly, but the precedents aren’t good. Historian Zachary Schrag found that the cost of the original system in 1969 soared from a promised $2.5 billion to $3.8 billion. Schrag comes to a similar conclusion as I have: “It is kind of a vicious spiral where people low-ball the estimates to get their project approved,” he told the WaPo.