Funding Options for Common Public-Infrastructure Problems Essay
Summary of the problem and PPP type feasibility
Financing public infrastructure is a complex task due to the numerous factors and stakeholders involved. The source of funding has to match the interests of the public. In our case, the state is in urgent need of new prison facilities to accommodate the large numbers of convicts and to comply with public health and architectural standards. The public is notably averse to the state directing scarce funds to improving the welfare of criminals, never mind the facilities are inadequate to hold them (Wojewnik-Filipkowska & Węgrzyn, 2019). The practical funding option available to the state is public-private partnership (PPP) wherein funding is supplied by private entities. Grant funding and borrowing are unfeasible as they contravene public interests. Funding Options for Common Public-Infrastructure Problems Essay
The problem set involves the construction of new prison facilities. As such, PPP types relevant to our case are build-operate-transfer (BOT), build-own-operate (BOO), and build-own-operate-transfer (BOOT) (Sarmento & Renneboog, 2016). In BOT contracts, private enterprises build infrastructure, operate it to recoup their investments, and transfer it to the relevant government body after a given period of time. The government retains ownership of the project for the entire period. With BOO contracts, private entities build the infrastructure, own it and operate it for an indefinite period. In BOOT contracts, the private entity develops the infrastructure, owns and operates it, and transfers ownership to the state after as per contract terms.
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Another form of PPP is that based on project ownership where the PPP types involved are joint ventures and full divestures. Joint ventures are where there’s co-ownership of the project between the government and private enterprises (Sarmento & Renneboog, 2016). Full divestures are where the project is fully privately owned. Given that correctional services are under public authorities and transferring prisons to private entities would amount to handing ownership of human beings to private interests, it is necessary for the government to have ownership of the infrastructure (Harding, 2018). As such a joint venture where the state owns the prisons even though they are built and operated by a private enterprise is the feasible PPP type. Funding Options for Common Public-Infrastructure Problems Essay
Pros and cons of three funding solutions to the prison-infrastructure problem.
The three funding solutions to the prison-infrastructure problem are: state funded by debt or grant, total private funding, partial private funding. The pros to state funding include: total project ownership by the public, lower overall project costs, greater oversight and enforcement on rehabilitation standards. Cons to state funding include limited funding, risk of conflict with stakeholder interests, bureaucratic lag, and diversion of funds that could be used elsewhere. Pros to private funding include: easy availability of funds, transfer of risk to private entities, and quick project implementation. Cons to private funding include: higher total project costs, poor enforcement of standards, and subjecting public services to the profit motive (Harding, 2018). Partial private funding provides the benefits of better project risk management, easier access to finances, and government oversight over correctional services (Engel et al, 2013). However, disadvantages such as subjecting essential public service to private profit, high overall project costs, and conflict of interest with public wishes are retained.
Proposed financing structure
Given the difficulties with substantial expenditure of state resources in developing correctional infrastructure, the bulk of funds shall come from private sources. The public-private-partnership type is a joint venture. It is only logical that the state bears part of the project costs. In this case, contributing 10% of project funds ought to suffice. The state can source the funds from its revenues or from borrowing. In either setting, the burden of payment rests with state taxpayers. The private enterprise provides 90% of project funds which goes to constructing new facilities (Sarmento & Renneboog, 2016). To recoup their investments, the private partner runs the correctional facilities for 20 years and gets paid on a per-inmate per-day basis. The benefit of this setup is that the state does not bear the significant upfront costs of building the facilities. However, the project costs are averaged out over the life of the contract and an essential public service is placed under private profit motive (Enns & Ramirez, 2018). Funding Options for Common Public-Infrastructure Problems Essay
References
Engel, E., Fischer, R., & Galetovic, A. (2013). The basic public finance of public–private
partnerships. Journal of the European economic association, 11(1), 83-111.
Enns, P. K., & Ramirez, M. D. (2018). Privatizing punishment: Testing theories of public
support for private prison and immigration detention facilities. Criminology, 56(3), 546-573.
Harding, R. W. (2018). Private prisons and public accountability. Routledge.
Sarmento, J. M., & Renneboog, L. (2016). Anatomy of public-private partnerships: their
creation, financing and renegotiations. International Journal of Managing Projects in Business.
Wojewnik-Filipkowska, A., & Węgrzyn, J. (2019). Understanding of public–private partnership
stakeholders as a condition of sustainable development. Sustainability, 11(4), 1194. Funding Options for Common Public-Infrastructure Problems Essay
State X has a growing prison-infrastructure crisis. State prisons are at double capacity, while crime continues to rise. Meanwhile, county and municipal jails are maxed out, and the state cannot afford to keep transferring prisoners to out-of-state corrections facilities. Barring the option of releasing prisoners and relaxing the standards for criminal conviction, the state desperately needs new prisons. Moreover, existing facilities are falling apart – increasingly below acceptable architectural and public-health standards – but the state is facing a major budget deficit, and the public is opposed to spending much needed dollars on improving living standards for convicted criminals.
This part of your paper should:
Include a summary of the problem and the PPP type that is feasible for this issue.
Discuss the pros and cons of three funding solutions to the prison-infrastructure problem.
Identify a proposed financing structure to meet the need in the scenario.
Cite sources used to research topics and support positions. Funding Options for Common Public-Infrastructure Problems Essay