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Private Companies Could Run Bay Area Toll Lanes

Critics say such deals "don't have the public interest at heart"

Private companies could build and run hundreds of miles of planned toll lanes on Bay Area freeways, California Department of Transportation officials said this week.

The toll lanes — which allow single motorists to use carpool lanes for a fee — are planned for 280 miles of freeways in the East Bay and South Bay. The cost of the lanes ranges from $1.6 to $6.8 billion, a sum that would be challenging for the state to raise on its own, making them good candidates for public-private partnerships, state transportation officials say. In such deals, private investors finance, design and build the roads and recoup their investment by collecting tolls.

The toll lane projects “will need innovative financing," explained Matt Rocco, a spokesman for Caltrans, who said that it is "logical" to have the public-private partnerships "in the pipeline."

“Private interests are already shaping project development as a result,” Rocco said.

Toll Lanes

Democratic lawmakers and Caltrans engineers have strongly opposed highway privatization deals. The state engineers' union sued to stop the Doyle Drive replacement project, a $488 million deal to rebuild the southern approach to the Golden Gate Bridge that is being financed, designed, built and maintained for 30 years by a group of European investors. The project is now moving forward, after the suit failed last year. But the union’s executive director, Bruce Blanning, said handing over more highway projects to private companies would be a mistake.

“They don't have the public interest at heart; they have the profit motive at heart,” Blanning said. 

Indeed, private toll lane deals have a short and sour history in California. In 2003, Orange County had to buy its toll lanes from the private companies that built and were supposed to manage them, owing to a dispute over the construction of additional lanes. Last year, San Diego County had to buy its lanes after a private consortium that built them filed for bankruptcy when the tolls were lower than expected.

But supporters say the deals will help the cash-strapped state pay for big highway projects and reduce the cost overruns and delays that often accompany state-run projects. It was Gov. Arnold Schwarzenegger who pushed hard to revive private investment in the state’s infrastructure, helping to pass legislation and forming a special commission to review projects.

The push is continuing under Gov. Jerry Brown, who has promoted private investment in high-speed rail. Caltrans officials said five more freeway deals in Southern California are under consideration.

John Goodwin, spokesman for the Metropolitan Transportation Commission, which oversees the Bay Area's toll roads and which is spearheading the regional toll lane project, said that the agency has not made any decisions on partnerships.

“Caltrans’ assessment is not wrong that a public-private partnership could be employed, but neither is it set in stone,” said Goodwin. “It’s an option that will be considered in a number of different corridors by different partners, including Caltrans.”

The MTC has paid legal and financial advisers to explore different ways to pay for the toll lanes, including public-private partnerships, he said. 

A toll lane has already been built on I-680, but it has been slow to generate revenue. Another is on the way for I-580 between Pleasanton and Livermore. Goodwin said that toll lanes on I-880 and 680 are next in line. A decision about whether to hand the projects over to private investors won’t be made for another year, he said.

Goodwin said that the Doyle Drive project could pave the way for future public-private partnerships in the region.

“That's a breakthrough for project development in the Bay Area,” Goodwin said. “It’s safe to say that the operational success of that project will a go a long way in determining the market for these types of deals.”

Critics say the deals are unnecessarily expensive financing schemes that toss off fat returns to private investors and that are pushed by politicians who don’t want to be seen borrowing money. Academics who have studied public-private parterships warn that the state shouldn’t view the deals as easy money. 

“What we are afraid of is that people view public partnerships as free money,” said Hiroyuke Iseki, an assistant professor at University of Maryland. “The numbers do not get on the government books, but someone has to pay it, whether it’s the drivers or the taxpayers.”

David Crane, a former senior advisor to Schwarzenegger, said taxpayers will ultimately benefit from the deals, because private companies will drive the price of the projects down. 

“The state needs high-quality infrastructure at the lowest cost and faster pace,” Crane said. Without public-private partnerships, he said, “California would get lower-quality infrastructure at the highest cost and slowest pace.”

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