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Prospectus Blog Puget Sound Mobility Requires Public-Private Partnerships

The Tacoma News Tribune reports this morning that the crumbling, 94-year-old Murray Morgan Bridge has been ordered closed by State Transportation Secretary Paula Hammond, raising strong city council concerns about access to Tacoma’s tidelands areas for medical or industrial emergency response. A 2004 estimate pegs rehab costs at $77 million, but only $25 million has been secured to date, the TNT reports.
Current road and transit needs for the Puget Sound Region total $66 billion over the next two decades, according to a transportation governance commission created by the Washington State Legislature and Governor Christine Gregoire. Those needs are likely to grow. The population of four-county metro Seattle will rise from the 2000 U.S. Census level of 3.276 million by 52 percent, or 1.712 million – about as much as metro Portland today – to just shy of 5 million by 2040. This according to the Puget Sound Regional Council’s new draft Vision 2040 regional update on growth, transportation and economic development. Additionally, roads and transit construction costs are rising ever higher.
The upshot: A solid long-term transportation finance strategy is crucial. Our Cascadia Center’s Director Bruce Agnew and Senior Fellow Steve Marshall argued in a News Tribune “Insight” section op-ed Sunday, October 21 that we’re at a crossroads, and must move well beyond reliance on traditional funding sources to address current system maintenance and future system expansion needs.

….new construction should be financed from tolls and private equity while federal Highway Trust Fund and state resources handle the maintenance of the existing system. Until now, large international construction firms and foreign banks have dominated the private sector partnership world. But today, local labor unions like the Northwest Building Trades and state public employee pension funds like the giant California Public Employee Retirement System want a piece of the action. The potential for funding alliances between public entities and labor unions or public employee pension funds is an important consideration in a state that has banned most public-private partnerships.
We are not talking about foreign investors making huge profits and setting ever-higher tolls. Instead, the men and women who build the infrastructure would share in returns on the investment while the public retains control over toll rates. As former U.S. House of Representatives Majority Leader Dick Gephardt noted earlier this year at our Cascadia Forum, “pension funds are patient funds, a 50-year return on investment” for union members and the public.


A special state transportation performance audit prepared for the office of State Auditor Brian Sonntag recommends, among other things, that the legislature “review whether new legislation is required for public-private partnerships for transportation infrastructure and implement any necerssary changes.”
In California, interest in PPPs is also running high. Former Governors Gray Davis, Pete Wilson and George Dukemejian yesterday highlighted the need for private-public partnerships, in a Southern California newspaper op-ed, “California Infrastructure Needs ‘Plan B.'” They wrote:

It’s clear we need a new solution, a Plan B, to ensure our state’s future success. We can do so by creating “Public Private Partnerships” or “P3.” Through P3, most of the highway, bridge, rail, water conveyance, public health and other facilities projects are paid for out of a combination of taxpayer supported bonds, private equity and debt, and fees charged to those who actually use or benefit from the infrastructure and services. One successful model in British Columbia created a “state enterprise agency” to identify P3 opportunities and then impartially evaluate private- or public-sector involvement while focusing on ensuring the long-term protection and benefit of the community.
…Sacramento needs to pass legislation enabling P3 to function in this state. Senate Bill 61 (Runner), supported by the governor, is a first step but is stuck in the Assembly because of opposition by public employee unions who believe their jobs may be threatened. What they don’t understand is that without this Plan B, a lagging economy and dwindling state revenue stream will indeed threaten their jobs and retirements…..We need a fair, open process that clears the way to plan for major new infrastructure projects that attract private sector planning, management and financial skills, while protecting the long-term interests of the broader community.

Thomas J. Donahue, president of The U.S. Chamber of Commerce, put it this way, in a recent Washington Post op-ed titled “Bridges To Somewhere”:

What must our nation do to meet the urgent infrastructure funding challenges? Where is the money going to come from? We can start by unlocking potentially hundreds of billions of dollars in private investment just waiting to be spent on power plants; pipelines; shipping and hauling routes to railroads and airports; privately constructed and operated roadways; and more. The money is there if government regulators would get out of the way. Countries around the world use an array of innovative financing approaches and public-private partnerships to bring key projects on line quickly. It’s about time America did the same.

Transportation construction companies are taking the lead right now in public-private partnerships to build new infrastructure. One example is the new South Bay Expressway in San Diego. On a highway route initially proposed in 1959, the $635 million north-south artery built on the eastern edge of San Diego was financed by Macquarie Infrastructure Group funds based in New York and Australia, which will recoup their outlays via a 35-year tolling concession. Regular users can bypass tollboths, using windshield-installed tolling account cards which are automatically read by overhead transponders in the roadway. Depending on distance travelled, tolls for two-axle vehicles range from 75 cents to $3.50 for account-holders, nominally more for tollbooth customers. The toll is doubled for vehicles with three or four axles. The South Bay Expressway opens November 19.
Cascadia Center is planning a luncheon forum on public private partnerships in transportation, during the week of Dec. 17, in Seattle. Stay tuned for more details.
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