Enabling Public-Private Partnerships for Transportation in California

Introduction

California does not currently have the policy tools necessary to finance and develop large-scale improvements to its highway system, on which we will continue to rely for more than 90 percent of passenger transportation and the large majority of all goods movement over the next 30 years. A growing number of other fast-growing states (as well as urban areas in Australia, Britain, Canada, France, and others) have developed effective means of tapping the private capital markets and drawing on the project-delivery skills of the private sector to make major improvements to their transportation systems. California needs to do likewise.

Most recent legislative efforts to authorize public-private partnerships in California (including AB 1467) focus on modifying California Streets & Highways Code Section 143, the statute established by Assembly Bill 680 in 1989. While it is reasonable to create statutory authorization in this code section, as written, the statute fails to draw upon the best practices developed over the past 17 years in other states. If California is to authorize a true 21st Century authorizing statute in this code section, a complete rewrite will be required. Yet, while the authority created in AB 1467 may be severely limited, it seems reasonable to at least offer the opportunity for this statute to be used before it is completely overwritten.

Fortunately, another statute was approved in 1996 through Assembly Bill 2660, Government Code 5956, which may provide an easier avenue to improve access to public-private partnerships without overwriting AB 1467 and without requiring a complete rewrite of law.

AB 2660 authorized the broad use of public-private partnerships in varying local infrastructure, with two notable limitations. First, it did not allow state entities such as CalTrans to utilize this approach to infrastructure. Second, it excluded toll-based transportation projects within the State highway system from consideration. If a road is not within the state highway system, it is unlikely to have sufficient traffic levels to be financially feasible as a public-private partnership. In other words, while AB 2660 opened the door to public-private partnerships in other areas of infrastructure such as the development of water and waste-water facilities, it has provided no benefit in tackling the transportation crisis.

Despite its limitations, the law is generally well constructed and could become a potentially valuable tool in addressing California’s transportation infrastructure crisis if two minor changes are made to the law:

  • Government Code 5956 should be amended to remove the exclusion for toll-funded projects within the state highway system.
  • The authority to enter into public-private partnerships through this statute should be extended to state entities as well (most notably CalTrans).

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