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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

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

 

News Articles

Global Corporate Powerhouses Ramp Up to Privatize California's Roadways, Newsreview.com, 11/08/12

More States Privatizing Their Infrastructure.  Are they Making a Mistake?, Washington Post, 03/31/12

New Golden Gate Bridge Approach Hits Funding Snag, San Francisco Chronicle, 2/6/12

SBX is Still the Poster Child for Misguided Public-Private Ventures, UT San Diego, 1/12/12

Toll-Road Woes Show Risk of U.S. Loans Lawmakers Aim to Expand, Bloomberg, 1/11/12

SANDAG Officially Takes Over South Bay Toll Road, UT San Diego, 12/21/11

91 Express Lanes - How it Helped Change the US Toll Road Landscape, InfraAmericas, 10/28/11

Toll Project Bankruptcies Demonstrate Risk Transfer, Bacon’s Rebellion, 05/27/11

Lessons From Bankruptcy of South Bay Expressway, San Diego Union Tribune, 05/27/11

 

Reports & Documents

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

California Public Private Partnership Transportation Projects
Information Sheet, August 2011

P3 Hospitals:  The Wrong Direction
Report by Canadian Union of Public Employees, 04/2011 

Public-Private Partnerships:  Understanding the Challenge
Report by Centre for Civic Governance, 06/2009

Private Roads, Public Costs:  The Facts About Toll Road Privatization and How to Protect the Public
Report by US PIRG Education Fund, 03/31/2009

Evaluations of Public-Private Partnerships
Report by Ron Parks and Rosanne Terhart of Blair Mackay Mynett Valuations Inc, 01/05/09

100 Flawed, Failed and Abandoned P3s
Report by Canadian Union of Public Employees, 03/2005

PECG Contacts

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

 

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