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Public-Private Partnerships: a Bad Deal for Taxpayers

 

Design-build procurement, lack of public oversight and unfavorable lease agreements have typified California's public-private partnership (P3) projects.  State Route 91 in Orange County required a $207 million taxpayer bailout and is now a public toll road.  San Diego County’s State Route 125 was in bankruptcy, defaulted on hundreds of millions of dollars in taxpayer loans, and was ultimately purchased by SANDAG.

The 2009 budget package included expanded P3 authority for state highways.  The legislation required safeguards to ensure public agency involvement and inspection to prevent future P3 taxpayer rip-offs.  The Presidio Parkway replacement project violated those basic public safeguards.  A no-bid contract was awarded that will waste one billion taxpayer dollars. 

Public-Private Partnerships in California

Presidio Parkway (Doyle Drive).  The cost of San Francisco’s Doyle Drive replacement more than doubled when it was converted to a P3.  Fully funded and scheduled to be delivered using the traditional design-bid-build method, the project was to cost $473 million and likely would have been delivered for far less thanks to a favorable bid environment.  As a P3, the project will now cost $1.1 to 1.4 billion and will be funded not with “new money” but with availability payments of $28 million to $43 million a year for 30 years out of the State Highway Account.  Learn more about the Presidio Parkway Taxpayer rip-off here.  

SR 125 (San Diego Toll Road).  The private owners of San Diego’s P3 toll road filed for bankruptcy protection in 2010.  Among those who lost hundreds of millions of dollars – the Federal Governments’ TIFIA loan program.  This P3 toll road was supposed to cost $360 million and be complete in 2006.  Instead, costs ballooned to $843 million and the toll road did not open until November 2007.  Legislation in 2006 extended the tolls for an additional ten years to pay for cost overruns, requiring the public to pay the private owners “hundreds of millions of dollars in additional tolls,” according to the Department of Finance.

SR 91 (Express Lanes – Riverside Freeway).  In 2002, the Orange County Transportation Authority had to buy this public-private partnership tollway because of a non-compete clause that prohibited congestion-relieving improvements in the traffic corridors.  Taxpayers were forced to “assume the turnpike’s debt of $135 million and pay the company $72.5 million in cash,” in large part because design-build increased the cost from $57 million to $130 million.

Public-Private Partnerships:  Failures Around the World


To learn more about other P3 disasters from around the world, please visit http://www.ppp-disasters.com

PECG Press Releases

PECG Supports LAO Recommendations for Public-Private Partnership Projects - 11/8/12 Press Release

Budget Deficit Requires End to Wasteful No-Bid Contracts - 05/14/12 Press Release 

News Articles 

For more of the very latest news articles about public-private partnerships, please go to www.infrastructure-info.com 

 

Reports & Documents

Public Private Partnerships - Findings & Recommendations of the Special Panel on Public-Private Partnerships, House Committee on Transportation and Infrastructure, September 2014

Study: Economic Analyses Should Drive Transportation Infrastructure Projects
The Container, December 9, 2014

Report:  The High Cost of Poor Roads
New Studies Highlight Importance of Investing in State Infrastructure,
Coos Bay World News, November 29, 2014

Maximizing State Benefits from Public-Private Partnerships, Legislative Analyst's Office Report, November 8, 2012

PECG's 10/9/12 Letter to the Little Hoover Commission
RE September 25 Hearing

PECG Contacts

Ryan Endean
916/446-0400
rendean@pecg.org
  

 

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