Schwarzenegger making new push for PPPs & union critic hits two toll road concessions
Posted Wed, 2007-11-28 19:18
California governor Arnold Schwarzenegger is planning another push to get legislation passed to facilitate public private partnerships (PPPs). Previous efforts to get law more hospitable to private sector ownership of infrastructure including toll concessions have run into opposition from civil service unions and their supporters in the Democratic Party which has majorities in both houses of the legislature.
Law AB680 under which the 91 Express Lanes and South Bay Expressway toll concessions were initiated got repealed several years ago.
The governor and his staff have studied the use of PPPs in Canada, Australia and Europe, the Los Angeles Times reports Nov 28. They quote him as saying at a USC that "there's not enough money in the public sector, in the tax
base" to fund needed infrastructure.
Schwarzenegger acknowledged resistance in the legislature: "Right now, it's such a new concept for our legislators that they're not there yet 100%. They're concerned about it, they're suspicious about it, what it means, and so I think it will take a bit of time. But I think in the next round of infrastructure that we're going to do, there will be much more public-private partnerships."
The newspaper reports that the Governor will propose a special purpose agency to manage PPPs including toll concessions. He apparently has in mind as a model Partnerships British Columbia. He visited BC recently to discuss their management of private sector concessions and to see a project. The Golden Ears toll bridge in the eastern part of Vancouver is a major road project under construction.
US transportation secretary Mary Peters is quoted as supportive of Schwarzenegger: "The governor's plan to expand the private sector's role in financing and managing the state's transportation infrastructure is a very welcome sign. California has always been viewed by the private investment community as the most attractive destination, because the economy is so big."
Critic of concessions at government engineers labor union
The LAT quotes Bruce Blanning of a government labor union called Professional Engineers in California Government as bashing toll concessions: "They've generally been bad economics and
bad public policy decisions up to now. It's not that there's anything wrong with private money. The problem is there's been nobody around from the public interest to make sure that the project is done properly."
The South Bay Expressway, he said was "late and over budget" and 91 Express Lanes was problem-ridden.
COMMENT: 91 Express problems
91 Express Lanes has been an operational and a financial success and offers the option of a free flow ride past congestion that is taken advantage of by about 35k people each day. As an investor owned project it was a victim of a change in political mood in favor of building extra capacity and an over-rigid non-compete clause.
When the concession contract was signed in 1991 the prevailing mood was that "you can't build your way out of congestion" and there was no opposition to the state committing itself against adding any free capacity. That was totally non-controversial at the time.
Ten years later however a consensus had developed that 12 lanes was not enough on the CA91 especially eastbound. But the non-compete clause in the concession contract flatly prohibited the 13th lane.
Only by buying out the concession was Orange County able to do the 13th lane. AB680 was deficient in not providing a mechanism for negotiating a change in the terms of the concession.
Since then most concessions avoid any flat restriction on extra capacity, only providing for compensation if unplanned extra free capacity can be shown to hurt toll revenues. They also provide for negotiated changes in concession terms.
SBE "overbudget and late"
The South Bay Expressway is a major asset for the eastern part of San Diego but it certainly hasn't been a showpiece for private sector speed and efficiency. The union guy is right there.
An officer connected with the project on thebprivate sector side has said the biggest mistake they made was delegating to the state DOT Caltrans formal powers in the land acquisition and permitting process. He said that delayed and complicated the project by several years.
The hopes that Caltrans' "clout" would help the permitting process turned out to have been misplaced, he said. State officials were indifferent. It was local officials at the area association of governments and cities along the route who kept the project alive - despite Caltrans.
Still any road project in a democracy can be delayed by opponents regardless of financing and ownership. SBE faced initial NIMBY opposition and then after compromises had been reached to accommodate the locals, there was serious obstruction from the US Fish and Wildlife Service and the USEPA which delayed the project several more years.
The federal 'record of decision' or final permit was obtained June 9 2000, nine years after the concession was signed.
The majority ownership of the concession was at that point held by Parsons Brinckerhoff, the consulting engineers. They didn't want to raise equity or operate the project. Another 27 months was taken lining up investors - Macquarie. They did a financial close May 23 2003.
Construction didn't start or proceed quickly either. From financial close to opening of the road was 4.5 years. Too long.
Costs rose on the project too, though not abnormally. Construction cost inflation was rampant everywhere through this period.
To suggest as the union official does that there was "nobody around from the public interest to make sure that the project is done properly" is preposterous. Both projects were done under concession contracts written by the state of California. And local officials have been deeply involved in both of them throughout.
It is not clear as the union guy says that these projects, despite their shortcomings, are bad economics or bad public policy.
Whether SBE makes money for the investors remains to be seen. But without the private sector concession the road probably wouldn't have been built. And it is investors money, not taxpayer money that will pay the price for miscalculation. That surely is good public policy.
91 Express Lanes pioneered one of the most important innovations in transportation since the modern expressway was developed nearly a century ago - the use of variable toll rates to manage traffic flow and prevent the overload of lanes that is the cause of infuriating and inefficient stop-and-go congestion.
That should be recognized as very good public policy by professional engineers in California government, if not by a labor union of that name.
TOLLROADSnews 2007-11-28
California governor Arnold Schwarzenegger is planning another push to get legislation passed to facilitate public private partnerships (PPPs). Previous efforts to get law more hospitable to private sector ownership of infrastructure including toll concessions have run into opposition from civil service unions and their supporters in the Democratic Party which has majorities in both houses of the legislature.Law AB680 under which the 91 Express Lanes and South Bay Expressway toll concessions were initiated got repealed several years ago.
The governor and his staff have studied the use of PPPs in Canada, Australia and Europe, the Los Angeles Times reports Nov 28. They quote him as saying at a USC that "there's not enough money in the public sector, in the tax
base" to fund needed infrastructure. Schwarzenegger acknowledged resistance in the legislature: "Right now, it's such a new concept for our legislators that they're not there yet 100%. They're concerned about it, they're suspicious about it, what it means, and so I think it will take a bit of time. But I think in the next round of infrastructure that we're going to do, there will be much more public-private partnerships."
The newspaper reports that the Governor will propose a special purpose agency to manage PPPs including toll concessions. He apparently has in mind as a model Partnerships British Columbia. He visited BC recently to discuss their management of private sector concessions and to see a project. The Golden Ears toll bridge in the eastern part of Vancouver is a major road project under construction.
US transportation secretary Mary Peters is quoted as supportive of Schwarzenegger: "The governor's plan to expand the private sector's role in financing and managing the state's transportation infrastructure is a very welcome sign. California has always been viewed by the private investment community as the most attractive destination, because the economy is so big."
Critic of concessions at government engineers labor union
The LAT quotes Bruce Blanning of a government labor union called Professional Engineers in California Government as bashing toll concessions: "They've generally been bad economics and
bad public policy decisions up to now. It's not that there's anything wrong with private money. The problem is there's been nobody around from the public interest to make sure that the project is done properly."The South Bay Expressway, he said was "late and over budget" and 91 Express Lanes was problem-ridden.
COMMENT: 91 Express problems
91 Express Lanes has been an operational and a financial success and offers the option of a free flow ride past congestion that is taken advantage of by about 35k people each day. As an investor owned project it was a victim of a change in political mood in favor of building extra capacity and an over-rigid non-compete clause.
When the concession contract was signed in 1991 the prevailing mood was that "you can't build your way out of congestion" and there was no opposition to the state committing itself against adding any free capacity. That was totally non-controversial at the time.
Ten years later however a consensus had developed that 12 lanes was not enough on the CA91 especially eastbound. But the non-compete clause in the concession contract flatly prohibited the 13th lane.
Only by buying out the concession was Orange County able to do the 13th lane. AB680 was deficient in not providing a mechanism for negotiating a change in the terms of the concession.
Since then most concessions avoid any flat restriction on extra capacity, only providing for compensation if unplanned extra free capacity can be shown to hurt toll revenues. They also provide for negotiated changes in concession terms.
SBE "overbudget and late"
The South Bay Expressway is a major asset for the eastern part of San Diego but it certainly hasn't been a showpiece for private sector speed and efficiency. The union guy is right there.
An officer connected with the project on thebprivate sector side has said the biggest mistake they made was delegating to the state DOT Caltrans formal powers in the land acquisition and permitting process. He said that delayed and complicated the project by several years.
The hopes that Caltrans' "clout" would help the permitting process turned out to have been misplaced, he said. State officials were indifferent. It was local officials at the area association of governments and cities along the route who kept the project alive - despite Caltrans.
Still any road project in a democracy can be delayed by opponents regardless of financing and ownership. SBE faced initial NIMBY opposition and then after compromises had been reached to accommodate the locals, there was serious obstruction from the US Fish and Wildlife Service and the USEPA which delayed the project several more years.The federal 'record of decision' or final permit was obtained June 9 2000, nine years after the concession was signed.
The majority ownership of the concession was at that point held by Parsons Brinckerhoff, the consulting engineers. They didn't want to raise equity or operate the project. Another 27 months was taken lining up investors - Macquarie. They did a financial close May 23 2003.
Construction didn't start or proceed quickly either. From financial close to opening of the road was 4.5 years. Too long.
Costs rose on the project too, though not abnormally. Construction cost inflation was rampant everywhere through this period.
To suggest as the union official does that there was "nobody around from the public interest to make sure that the project is done properly" is preposterous. Both projects were done under concession contracts written by the state of California. And local officials have been deeply involved in both of them throughout.
It is not clear as the union guy says that these projects, despite their shortcomings, are bad economics or bad public policy.
Whether SBE makes money for the investors remains to be seen. But without the private sector concession the road probably wouldn't have been built. And it is investors money, not taxpayer money that will pay the price for miscalculation. That surely is good public policy.
91 Express Lanes pioneered one of the most important innovations in transportation since the modern expressway was developed nearly a century ago - the use of variable toll rates to manage traffic flow and prevent the overload of lanes that is the cause of infuriating and inefficient stop-and-go congestion.
That should be recognized as very good public policy by professional engineers in California government, if not by a labor union of that name.
TOLLROADSnews 2007-11-28