Puerto Rico: A Transportation Privatization Example for Missouri
With its reputation for tourism, rum, and sun, many might be surprised to find out that Puerto Rico actually is a leader of using the private sector to improve infrastructure under tight fiscal constraints.
Puerto Rico has entered a privatization boom in the last few years, due mostly to past financial mismanagement. Both the port authority (which owns Luis Munoz Marin International Airport) and the Puerto Rico Highways and Transportation Authority (which is responsible for highways and transit) spent heavily in past decades on projects like the Tren Urbano, a $2.25 billion rail line with low ridership and large operating deficits. After the financial crisis hit, Puerto Rico’s transportation authorities had large debt problems and a transportation system in need of investment.
To simultaneously reduce debt and raise capital for transportation improvements, the government privatized major transportation assets. In 2011, Puerto Rico leased two of its toll roads, PR-5 and PR-22, to Autopistas Metropolitanas de Puerto Rico, LLC. The company paid the government $1.1 billion upfront and agreed to make $350 million in capital improvements.
In 2013, Puerto Rico leased Luis Munoz Marin International Airport, the island’s largest, to Highstar Capital and Grupo Aeroportuario del Sureste SAB de CV, the first such lease of a large airport in the United States. The consortium agreed to pay more than $600 million upfront, along with additional yearly payments. The good news for travelers is that the consortium plans to invest over a billion dollars modernizing what can be a hectic airport.
Aside from major privatization deals, Puerto Rico (in contrast to other U.S. cities) continues to rely heavily on the private sector to operate public transportation. In fact, the most popular form of transit on the island are publicos, small vans and buses that cover much of the island’s metropolitan areas. Publicos are privately owned, and the system has the distinction of being the only primary bus system of a large U.S. city that uses almost no public subsidies. San Juan’s municipal bus system, which operates large city buses, also leverages the private sector by contracting out the operation of its buses to a private company, First Transit.
Missourians should take two major lessons from Puerto Rico’s experience. First, the private sector is capable of maintaining transportation infrastructure. The commonwealth’s largest airport, toll roads, and public transportation system are privately operated. Second, the private sector can provide significant capital for improvements. The lease of Puerto Rico’s toll roads and airport netted $1.7 billion in upfront payments and commitments for an additional $1.35 billion in infrastructure improvements. Missouri residents should learn from Puerto Rico’s example and explore areas where the private sector can help the state improve transportation. Missouri would be better off if these options were explored before the next funding or debt crisis.