Some PPPs have been promoted because of short-run budgetary imperatives rather than efficiency gains. Forging an alliance with a private firm is seen as a way of building new infrastructure when governments are cash-constrained, or as a means of generating financial resources from already built infrastructure. For example, after Indiana received $3.8 billion from a private company to operate, maintain, and upgrade the Indiana Toll Road in exchange for receiving toll revenue for the next seventy-five years, Governor Mitch Daniels of Indiana stated, "One year ago, Indiana faced twin deficits: a fiscal deficit stemming from years of government outspending its means, and an infrastructure deficit, a $3 billion shortfall between the cost of needed transportation projects and the dollars due to come in . . . . Today, state government is operating on a balanced budget, and is on its way to paying back its debts to schools and local governments" (TOLLROADSnews 2006).
Similarly, a ninety-nine-year contract for the Chicago Skyway was exchanged for a large sum, of which government spent an important fraction. In these instances, PPPs can be used to anticipate spending.
PPPs with the private sector also have the advantage of allowing governments to build projects even when other forms of financing are restricted by legislative or other constraints (Engel, Fischer, and Galetovic 2009; see also House of Lords 2010, p. 16).
The Chicago Skyway and the Indiana Toll Road are cases where the short-term political benefits of these programs are important. In both cases, the contract was used to anticipate government spending and to lease existing infrastructure.5 And in both cases, unexpectedly high bids suggest that the city of Chicago and the state of Indiana are likely to benefit. In Chicago, the portion of the lease payment that was not set aside to retire Skyway bonds and city debt or to go into the long-term reserve had been almost spent by 2010, before the retirement of Mayor Daley (see Box 1).
The results for the Indiana Toll Road were similar. The Indiana Toll Road, part of the U.S. Interstate Highway System, runs for 157 miles, connecting the Chicago Skyway to the Ohio Turnpike. A consortium with the same firms that leased the Chicago Skyway paid $3.8 billion for a seventy-five-year lease of the road. This sum was much larger than the estimates of a state-commissioned analysis that valued future cash flows at $1.9 billion. Part of the difference is due to having the economies of both highways under a single administration, since they linked. Clearly, there was also an element of "winner's curse," and the consortium, Cintra-Macquarie, has written down the capital value of the concession.
In both these cases, politicians managed to convert future revenues into current spending, and were lucky that the winning bid was much higher than the value of the road. This allowed them to develop a reputation for prudence by using part of the resources to pay down debt and invest for the long-term, while using the windfall to increase current expenditures. Perhaps the most significant feature of the lease was that the city managed to enhance the value of its asset by committing to higher tolls.