Governments often justify the use of PPPs because the private sector finances these projects, which they argue frees up scarce government resources that may be used in programs that are socially attractive but not privately profitable. Or, in what amounts to the same idea, PPPs are attractive because governments can get the infrastructure without raising taxes. Of course, this argument does not apply to projects whose capital costs are funded by future government payments, as in the case of the various projects that specify a schedule of capital charges payable in the future and that bind the budget to that time schedule. Examples include the I-595 Corridor Roadway Improvements Project in Florida, the Port of Miami Tunnel, and the Eagle Commuter Project in Denver, all of which are under construction (see Table 2). In these cases, PPPs help state and local governments perform a useful accounting trick, in which future obligations are kept of the balance sheet for no clear economic reason.
That PPPs relieve government budgets under strain is also a doubtful argument for projects whose capital costs are partially or totally covered by user fees. In this case, user fees also could have been used to pay the capital costs under public provision. The resources saved by the government by not paying the upfront investment under a PPP should be equal, in present value, to user-fee revenue reaped by the private firm with the concession. There is one exception to this argument, which occurs when a (local, state, or national) government temporarily faces borrowing constraints. A PPP might be the only option to finance a given project in the necessary time frame, after separating the revenue flows of the project from the rest of the public budget, something that may be hard to do if the government cannot borrow.
We conclude that in many cases governments choose PPPs because they allow them to make public investments while keeping future obligations of the balance sheet and beyond legislative control. This is not a valid economic justification for partnership with the private sector.