CALPIRG Education Fund Analysis Cautions
against Proposals that Fail to Protect the Public Interest
As Governor Schwarzenegger indicates he will push for new “public
private partnerships” in his State of the State address next month, today CALPIRG
Education Fund released an analysis about the potential flaws of privatization,
and the safeguards that need to be in place first with any privatization deal.
The report, Road
Privatization: Explaining the Trend, Assessing the Facts, and Protecting the
Public, specifically assesses recent toll road privatization proposals in
other states. The cautionary tales and resulting conclusions are applicable not
just to road privatization, but any proposal that privatizes public assets.
“In tough budget years, it can be tempting to look for a short-term
influx of private cash. But Governor Schwarzenegger should not propose any
privatization deal that fails to protect the public interest in the long run,”
said Emily Rusch, CALPIRG Advocate.
The analysis concludes that seven basic safeguards are
needed to protect the public in privatization deals:
1. Public control retained over
decisions about transportation planning and management;
2. Fair value guaranteed so future
toll revenues won’t be sold off at a discount;
3. No deal longer than 30 years
because of uncertainty over future conditions and because the risks of a
bad deal grow exponentially over time;
4. State-of-the-art
maintenance and safety standards
instead of statewide minimums;
5. Complete transparency to ensure
proper process;
6. Full accountability in which the
Legislature must approve the terms of a final deal, not just approve that
a deal be negotiated; and
7. No budget gimmicks because a deal
must make long-term budgetary sense, not just help in the short term.
The report from CALPIRG Education Fund describes how New Jersey, Pennsylvania,
and Texas
recently backed off from private road deals. New Jersey’s Governor Jon Corzine had
previously headed Goldman Sachs, a company that earned millions in road
privatization consulting fees in Chicago and Indiana. After a lengthy
consideration of whether to privatize New
Jersey’s own toll roads, Gov. Corzine concluded that
it made more financial sense for the public toll authority to itself borrow
money against future toll hikes. Texas
placed a two-year moratorium on private deals after the public toll authority
showed it could deliver billions more in value with the same toll hikes. Massachusetts passed a
law in 1993 that ensures any private deal must demonstrate that it saves the public
value in the long term.
Here in California, Orange County
experienced its own problems with the private ownership of Route 91. Public opposition
to the rising tolls on Route 91 and costly legal challenges to the noncompete
clause in the contract led the private operator to sell the franchise back to
the public sector in 2003. Despite Orange
County’s experience, down in San Diego the brand-new
privately owned South Bay Expressway opened on November 16th of this
year, and started collecting tolls for the first time this past Sunday.
“Public control over planning decisions, transparency, and full
accountability are just a few of the safeguards that elected officials must demand
before giving the green light to privatization deals,” concluded Rusch. “Otherwise,
no matter how much money the private sector is waving at California’s general fund, the long-term costs
could outweigh the benefits of any proposal.”
