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Texas should turn to private capital for critical infrastructure needs



Texas – The Texas economic miracle is magnetic, but it is not magic. A key component of Texas prosperity is infrastructure.

Vision, ambition and leadership have been key in developing our current infrastructure systems; transportation, telecommunications, energy and water all rely on underlying infrastructure that requires ongoing modernization to support Texas’ economic and population growth. Modern infrastructure, in turn, has delivered the competitive foundation of our Texas economy. Other states have watched and learned, and now use our own tools to compete with us.

The Texas economy cannot hold its competitive ground without its historically robust overall infrastructure networks. Yet in recent years, Texas leaders have adopted a split-screen view of financing for critical infrastructure upgrades — with private or public funding — depending on the type of infrastructure.

For example, telecommunications infrastructure is built with private capital. Certain economic incentives aside, telecom companies are responsible for the ongoing build-out and upgrade of their networks, from seeking appropriate regulatory approvals to developing technology. Telecom companies also employ thousands of workers to install new digital lines and equipment, as to make ongoing updates and repairs. The expansive rollout of 5G is just the latest iteration of this ongoing modernization.

Yet, telecom companies do not rely on state tax revenue to pay for the systems that connect us. There is simply no need. State funding of telecom development would limit available funding of other critical statewide needs — especially in the wake of COVID-19. The telecommunications system represents critical public infrastructure financed with private capital. Texans come out winners.

Roads, bridges, ports, airports and just about all other large-scale transportation facilities are key to Texas’ thriving economy and continued growth. But unlike telecom, Texas chooses not to tap the billions of dollars of available private capital to fund even its largest, often multibillion-dollar projects. An approach more valuable to all regions of the state would be to use private capital for our most expensive infrastructure projects (often located in major metro areas), reserving more tax dollars for less expensive but no less important infrastructure development.

A central purpose for this approach — often referred to as public-private partnerships or P3s — is a more equitable distribution of limited state funds for key projects throughout our state.

London’s Heathrow Airport has long been privately redeveloped, owned and operated, as are other airports in Europe. Many major road projects — including those in other states — are funded by companies that earn a return through optional toll or managed lanes that offload traffic from free lanes for the benefit of non-toll drivers. Private capital has also been used to fund small water treatment plants and massive flood infrastructure. When private capital is used to develop infrastructure projects, they are owned by Texas, operated by the sponsor at its cost and under state oversight, and revert to Texas operation under certain key conditions.

Ideally, a company that builds infrastructure for public use and benefit should have a significant state presence to help preserve and improve our communities. Back to the telecom example. AT&T is one of our local corporate citizens, employing Texas residents, sponsoring charitable events and giving back in myriad ways, all while earning income from a valuable network of critical infrastructure.

Texas should lead again by utilizing the P3 model for infrastructure development because it is the most efficient and equitable approach to financing critical infrastructure and protecting our historic competitive advantage.