© 2012 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

Walter Reed, Edwards Wildman PartnerPrivatization of Infrastructure

What is Privatization of Infrastructure?

♦ Privatization of infrastructure is when the government brings in a private organization to build, operate and maintain state infrastructure.

♦ Examples of state infrastructures include:♦ Roads♦ Bridges♦ Public buildings

♦ Advocates for privatization argue that the private sector can operate these infrastructures more efficiently.

♦ Privatization is appealing for governments because it solves short-term budget crunches.

Two Privatization Approaches

Ways to privatize infrastructure.

Sell assets that have already been built to private companies to

operate.

Have a private firm take charge of building the infrastructure from

the start.

Option 1: Selling Assets

♦ State governments can privatize infrastructure by selling assets that have already been built to private companies.

♦ This was done in 2006 when Indiana Governor Mitch Daniels leased the Indiana East-West Toll Road to an international consortium of investors.♦ The private companies agreed to operate and maintain the

roads for 75 years.♦ The private companies were also given the right to increase the

tolls each year.

Option 2: Building Infrastructure

♦ Private firms can be in charge of building the infrastructure from the start.

♦ European countries have been doing this for years.♦ Private companies bid for a project that the state has set-up.♦ The private company has to raise enough money from outside

investors to design, operate, build and maintain the highway for a decided on amount of time.

♦ The private company then has an incentive to keep costs low and finish the construction on time.

Why Privatize Infrastructure?

♦ Local governments can improve infrastructure while under a tight budget.

♦ Private firms take the heat for raising fees and tolls instead of politicians.

♦ Private companies often operate the infrastructure for less money and more efficiently.

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Arguments Against Privatization

♦ Privatization has the potential to conflict with other public-policy goals

♦ Monopolies might be created.

♦ Increased transportation costs for consumers and freight transportation companies.

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© 2012 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

For more information on Walter Reed, please visit:

www.WalterReedEdwardsWildman.com

© 2012 Edwards Wildman Palmer LLP & Edwards Wildman Palmer UK LLP

For more information on Edwards Wildman, please visit:

EdwardsWildman.com