When a publicly funded asset or piece of major infrastructure is privatized how is this offset to provide equity back to the public? Take a major public asset, let’s call it Sydney Harbor Bridge. This was designed, built and paid for with taxpayers money and then operated by the government for the people who funded it so they can use it. The government then wish to raise money do they privatize it by selling it to a private company for millions of dollars. The private company now charge a toll fee for everyone who now drives across it making millions of dollars and turning it into a good business. So now, how is the public reimbursed for the costs that their tax dollars were spent on? Given the public paid for it to be constructed and now pays to use it with a toll fee, do they get an equivalent tax cut or similar mechanism out of fairness? Seriously asking how this works, so serious answers only please.
In: Economics
There are many ways to achieve some degree of privatization, certain things work better with certain methods and it has to be fairly specific. Some broad methods:
1) “Operate only”. The government funds and builds the infrastructure. Then it basically outsources the operations to a private company. The agreement might be that the operator recovers the operational costs plus profits and the balance goes to the government. Government retains ownership of the infrastructure.
2) “Build and operate”. The government tenders a project. Example: build a new bridge with tollway. Private companies bid for the project and, if they win the bid, the private company funds the construction and then has the right to collect tolls/fees for some period of time and also to maintain the construction. After some time (might be decades), the bridge is handed back to the government. Government can give out many tenders – eg it can license many power generating firms at the same time to stimulate competition.
3) “Cost sharing”. This is a blend between (1) and (2) above. Things like universities etc. Government provides the land.
4) “Sell and operate”. Usually for pre-existing operations and infrastructure. Eg railways, airports. Government puts up the infrastructure for sale and operation. The buyer pays the government and agrees to operate it under certain requirements. The requirements may be to expand coverage, maintain service levels, maintain certain pricing levels or not to exceed profits.
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