Public-private partnership burns the public

There are many reasons why Nevada's state government should avoid public-private partnerships, unless government is privatizing or outsourcing an essential service.

Two philosophical reasons stand out. One, the government has a unique and important, but limited, role. Government's job is to provide a few core services, including (for state government) public safety, K-12 education and a basic safety net. Government's job isn't to create jobs or build things like sports stadiums. Two, the government shouldn't be picking the winners and losers in the economy. Its role is to referee, not participate in the business world.

If the philosophical arguments don't convince you, consider what happens when government oversteps its bounds - the government (read: the public) gets burned.


The Legislative Interim Finance Committee agreed Thursday to shift $176,000 out of a reserve account to pay a national law firm to protect the state in the bankruptcy proceedings of the Las Vegas Monorail.

Bonds for $650 million were issued through the state Department of Business and Industry to build the 3.9 mile system that runs between casinos on the Strip and the Las Vegas Convention Authority.

Lon DeWeese, chief financial officer for the state housing division, told the committee that the state was only the conduit for the issuance of the bonds. But hundreds of millions of dollars are owed the bond holders who invested in the project. ...

Horsey said Guinn also insisted that a highly rated insurance company be hired to make sure the bonds were covered. He said Ambac Financial Group, a triple "A" company, was employed. But now Ambac is also in bankruptcy.

Read the whole thing to get a complete sense of how taxpayers are getting soaked (and could be on the hook for hundreds of millions). All this happened despite the best-laid plans of those in charge at the time.

And this happens because all business ventures contain an element of risk. There is no sure thing in the business world, which is why no one should be forced (through the government using your tax dollars) to invest in something.

This is why principles are so important. No one knows the future, but sticking to the time-tested principles of limited government protects taxpayers from paying for the mistakes of yesterday.

Update 2/8/2011: My collegue, Geoffrey Lawrence, made an excellent point to by email. Public-private partnerships have a valuable role in a different context. If the government decides to outsource the provision of a core service to a private company, that's a worthwhile public-private partnership.

What's objectionable is when a public-private partnership is used to do something outside the core functions of government or when the government picks the winners and losers in the economy.

I've made a small change in the above text to reflect this point.


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