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Reason Foundation

Orange County Register

Let the Private Sector Pave the Way

Private money building roads in other states

William E. Simon
February 22, 2005

Thanks to decades of poor management and chronic underfunding of California highways, drivers across the state spend more time stuck in traffic than ever before. In 1982, the average Santa Ana, Long Beach and Los Angeles driver lost 47 hours in traffic congestion, according to the Texas Transportation Institute, which conducts exhaustive research on urban traffic.

By 2002, that number had skyrocketed, nearly doubling to 93 hours — by far the worst in the country. And the story is the same in other regions around the state.

That's one of the reasons that Californians ranked traffic congestion as the most important regional issue in a recent survey by the Public Policy Institute. Unfortunately, many transportation leaders have simply thrown up their hands, believing that we cannot build our way out of congestion at this point and that building new capacity won't help - and that even if it did, the money to build new roads doesn't exist anyway. This defeatist attitude is dangerous. California certainly has severe transportation problems now, but traffic is only going to get worse as our state continues to grow. Vehicle-miles traveled will increase 30 to 50 percent by 2030, with truck traffic, vital to the state's economy, growing even faster. Continuing to neglect highways is a recipe for economic disaster.

A new Reason Foundation study makes a compelling case that California can get moving again. Despite the state's ongoing fiscal crisis, the Reason report demonstrates that funding for multibillion-dollar transportation projects does exist. The private global capital market is investing in transportation projects around the world, from Paris to Sydney to Virginia to Texas.

In fact, Texas officials just announced a $7.2 billion plan, funded with private investments and paid back by user tolls, to build the first Trans Texas Corridor. The project is being financed, designed and built by a European firm, Cintra, which in addition to paying the $6 billion construction price has agreed to pay the state $1.2 billion in franchise fees for the opportunity to operate the toll project for 50 years.

In other words, not only does the state receive a massive, needed transportation investment, the private sector is financing it and paying the state for the privilege to operate it. This is but one example of a global shift.

Sadly, California is missing out on this extraordinary opportunity - even though it actually pioneered the concept of private investment in highways. In 1989, the state passed the first-ever public-private partnership law that brought about express lanes on the 91 Freeway in Orange County and the soon-to-be opened SR-125 in eastern San Diego County. But because of a political controversy that erupted in Orange County over provisions in the contract limiting the state's ability to expand or improve free, competing roads, the state Legislature repealed the law altogether. Now 20 other states have adopted laws allowing public-private partnerships to build roads.

Those states learned from the Orange County mistakes and corrected them. But not California, which threw out the baby with the bath water. As a result, transportation dollars are flowing to Texas and Virginia instead of here.

Fortunately, we can correct that mistake. Gov. Schwarzenegger has made it clear that he wants to renew California's investment in its highways through an important new effort called GoCalifornia. This ambitious program will include public-private partnerships, toll- based projects, and new methods to ensure that we build roads as quickly and affordably as possible. And in a departure from transportation politics of the past, both Republicans and Democrats in the Legislature are expressing interest in these ideas.

It is time for lawmakers to ensure that California has the tools to build a 21st-century transportation system and to recapture the state's legacy of innovation. A critical component will be legislation that enables state and local governments to partner with the private sector to build new highway capacity.

In these cash-strapped times, doing otherwise is the equivalent of knowingly burning cash in a fireplace. And that is behavior no taxpayer should stand for.

William E. Simon, Jr. is Co-Chairman of William E. Simon and Sons and Honorary Chairman of the Reason Foundation's Building for the Future project.



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