The Role of Public-Private Partnerships in California's Transportation Future

Projects funded by tolls could add highway capacity that would not otherwise be built

Mr. Chairman and Members,

I thank you for the opportunity to be here today.

My name is George Passantino and I am Director of Government Reform for the Reason Foundation. I am here today to speak about public-private partnerships in transportation and the role that they may play in California’s transportation future.

Before I make a couple of brief points I wanted to put the challenge we face as a state into clearer context.

Everybody realizes the severity of the transportation crisis we face now though few realize how much worse it is likely to get.

Between now and 2030, the rough equivalent of the population of the state of Florida in the last Census—around 16 million people—will move to California. If you think things are bad now, imagine how bad things will be in 25 years when the state has 50 million people. Our only hope is to start working toward realistic solutions today.

Now, just last week, Governor Arnold Schwarzenegger announced his intentions to restore Proposition 42 funding to the state budget. While this is to be applauded, because these monies can fund desperately needed improvements to existing roads, reconfigure some intersections, and the like, restoring Prop. 42 should not be mistaken for a long-range transportation solution.

When you look around California, you can see critical “mega projects”—desperately needed capacity expansions beyond what traditional means can deliver—across the state.

This is important because whenever we talk about public-private partnerships, people get hung up on “toll roads” as though those are the only kinds of facilities we are talking about. Let me try to broaden your operating definition a bit.

A variety of projects become possible through public-private partnerships—projects that might otherwise never be built:

  • Dedicated goods movement facilities from the twin ports of Los Angeles and Long Beach, up through the Inland Empire and on to the Nevada Border—or across the Antelope Valley. These facilities would not only facilitate goods movement but make our roads safer by getting big rigs into dedicated lanes.
  • Networks of congestion-free lanes in major urban areas, following on the heels of what Gary Gallegos and SANDAG are doing down in San Diego. We have calculated that a public-private partnership could quadruple the size of their plan for the same amount of taxpayer money.
  • Desperately needed alternate routes from the Inland Empire into Orange County or from the Antelope Valley into the Los Angeles Basin. Given their multi-billion-dollar price tags, they will likely never be built using traditional financing mechanisms.

California is clearly beyond tinkering—we need major work! Though not a panacea, public-private partnerships are a critical component of that effort.

There is a global market awash in capital eager to invest in these large-scale transportation projects. Billions upon billions of dollars are going all around the world and into other states—high growth states that we are competing with for jobs and economic development—but not California because we have no authority to enter into these agreements.

I also want to address one likely area of concern. Some groups, particularly public employee unions, will attack public-private partnerships because they see them as taking their “piece of the pie.” This is shortsighted and wrong.

Public-private partnerships fund a GROWING PIE—and in the process can bring more money to the table for public sector transportation projects too.

The best illustration of this can be found in Texas where the Spanish firm Cintra has entered into an agreement to construct the first segment of the Trans-Texas Corridor for $6 billion in private funding. But on top of that, they are also paying the Texas Department of Transportation $1.2 billion in franchise fees, which will be used by TxDOT to do additional highway construction. In other words, the state department will have more money in house to build roads than they otherwise would have.

If California had the same kind of legislation, CalTrans could also see new monies for new projects that otherwise might never be available. These new monies would be available because of partnerships, not in spite of them.

With those brief remarks, I strongly encourage you to look closely at the role public-private partnerships can play in California’s transportation future and I am happy to answer any questions you may have.

Thank you.

George Passantino is Senior Fellow