A project for a 10-mile express toll road in the San Diego area in 2007 failed after it did not produce the rates of return the private developer expected.
"I still think there is room for public-private partnerships," said said Marney Cox, chief economist for the San Diego Association of Governments, which wound up taking over the road in a buyout. "But you need to be careful when you put them together that you don't get your assumptions out of whack and require that growth occur at extraordinary levels."
Ybarra said government representatives can try to negotiate limits on toll and fee increases. But the private investors have considerable leverage.
"Governments need this more than institutional investors need this, but I think there's a benefit to both," said Mark Huamani, an investment analyst at J.P. Morgan.
In Yonkers, a New York suburb with a mix of affluent and poor neighborhoods, officials are looking for $1.7 billion in private investment money to fix dozens of antiquated schools, including the 88-year-old Gorton High School, and say the benefits of private funding outweigh possible problems. Investors' returns would be paid with future tax revenue.
"We couldn't repair the buildings faster than they were deteriorating," said Joe Bracchitta, chief administrative officer for the school district. "We think that this is a way that urban school districts that are in a state of disrepair or decay can find another way to repair themselves and build 21st century environments for their students."
This story is the latest installment in a joint initiative by The Associated Press and Associated Press Media Editors on the fiscal crisis facing U.S. states and cities, how state and local governments are dealing with severe budget cuts, and how American lives will change because of it.
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