Public-private partnerships are an industry gimmick that don’t serve public well

Guest Commentary | Feb. 6, 2019

The start of a new legislative session inevitably brings calls from industry for lawmakers to authorize privatizing state highway projects through so-called “public-private partnerships.”

That would be a mistake.

Proponents claim multiple benefits such as cost savings and efficiency. But they fail to mention that previous highway projects in our state built with the same scheme they seek have not delivered as promised.

In fact, they are marked by taxpayer bailouts, cost overruns and bankruptcies.

Let’s take a look at the record.

In 2010, San Francisco’s Presidio Parkway, a 1.6-mile approach from the south to the Golden Gate Bridge, was on budget and on schedule before the Schwarzenegger Administration decided that it be converted from a traditionally financed, designed and constructed project to a privatized operation.

That decision doubled the project’s cost to $1.1 billion. The funding source was not the “new money” that privatizing proponents claim, but a rip-off of up to $40 million every year for 30 years from the State Highway Account.

In other words, some highway projects will be put off for a generation because every California taxpayer is financing—at enormous cost—a road in San Francisco.

People who want to hand public highway projects over to private interests claim that cost overruns are the responsibility of the developer, not taxpayers.

Tell that to the California Transportation Commission, which in 2017 spent $91 million to cover unexpected cost overruns to the Presidio Parkway developer.

San Diego’s Route 125 tollway was another project built with the privatizing authority that some partnership advocates now seek to renew. Because of excessive construction costs, the projected $360 million cost ballooned to $843 million, and toll revenue was lower than projected.

As a result, the private owners filed for bankruptcy protection in 2010. Taxpayers lost hundreds of millions of dollars when the private concessionaire defaulted on a federal loan. San Diego’s regional government authority bought the tollway in 2011, officially ending the privatization effort.

The first highway project built with privatizing authority was the State Route 91 tollway in Orange County. The business model there also failed.

In 2002, the Orange County Transportation Authority had to buy the lanes because the private owner refused requests by the authority and Caltrans to make congestion and safety improvements to the adjacent public freeway.

Why? The private contractor figured more congestion on the public freeway would force drivers to use their toll road.

Despite those documented failures, if the Legislature concludes that “public-private partnerships” are appropriate, public safety and the taxpayers’ dollars must be protected.

Here are some ways to do that:

  • State employees should inspect construction to ensure projects are safe and meet state standards. Without this provision, concessionaires would be inspecting and approving their own work.
  • Require public-interest protections, such as an expanded oversight and evaluation processes that emphasize transparency so that policymakers can make informed decisions.
  • Projects must have a private revenue source and must not rely on payments from the State Highway Account.

Last November, Californians rejected Proposition 6, and voted to continue spending billions of dollars each year to rebuild our transportation infrastructure. Not a penny of that money or any other broad-based transportation funding should be diverted to finance risky privatization schemes.

When it comes to “public-private partnerships,” let’s remember that those who forget the past are condemned to repeat it.

Cathrina Barros is president of Professional Engineers in California Government in Sacramento, She wrote this commentary for CALmatters.

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