A CUSTOM PUBLICATION OF THE FRESNO BEE

SATURDAY, JUNE 18, 2011

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V A L L E Y ?

MONEY

enefits aside, high-speed rail is an expensive endeavor. The California High Speed Rail Authority puts the cost of its project at $43 billion, though others put the number higher. The question becomes: How does it get built? Some of the money has already been allotted both on the state and federal level. Close to $10 billion was approved by voters in 2008 via Prop 1A. The rest will come from public-private partnerships private companies investing money with the hope of future payoffs. Interested companies from China and Japan have already sent delegates to Fresno.

Public-private partnerships essential

P3s, as they are called, offer the potential to stretch government dollars with private capital as a way around lack of funding for large-scale public projects.
by Michael Colbelli, Skanska USA he United States has fallen behind much of the developed world in implementing a rail system that is fast, reliable and safe, which is why the demand for high-speed rail support in this country is so high. The residents of California are familiar with freeway congestion in our states northsouth corridors. We can all agree there would be immediate benefits from the California high-speed rail project spur economic growth and new business development in the region. Local politicians and community activists are fighting for high-speed rail stops in their cities and towns because they realize that having access to a 21st century transportation option means that businesses will be able to compete better in the global economy. There has been a lot of concern as to who will pay for this $43 billion project, and rightfully so. Government officials on both the local and federal levels are concerned By developing that taxpayers will bear public-private the burden of cost overruns. However, partnerships, there is another option government for the state to consider. Its called a Public provides Private Partnership. incentives for P3s, as they are known around the world, quality work and essentially allow the demands private sector to help accountability for fund, build, own and maintain large-scale operations and infrastructure projects such as high-speed rail, maintenance. tunnels or turnpikes. Michael Cobelli The concept, similar to how utilities do with the advancement business in the U.S., has of a San Francisco to been popular for at Anaheim corridor least 20 years in Europe. through Merced and The Swedes have used Fresno counties. P3s to fund wind Thousands of fullprojects. In the UK, they time jobs will be creat- have been employed to ed. California will build 800 projects since continue to progress as 1992, including power a leader in sustainabili- plants. In Poland, they ty as high-speed rail will are building a public reduce oil consumphospital. Now, other tion, greenhouse gas parts of the world are emissions, road conges- embracing P3 opportution and dependence nities. In Chile, which on cars. Californias has a strong economy, instead of spending new rail corridors will

A lot of confusion exists about how a project like Californias high-speed rail will be funded. The reality is public-private partnerships are essential to a healthy system.

money on roads, the government is investing in health care, with great success, and leaving transportation to the private sector, easing congestion, improving safety and modernizing travel. The U.S. has been late to embrace public-private partnerships because we have long been told that its the governments job to provide basic services, such as laying highways. But the railroads were built by private companies. Our electricity, gas, telephone and television are privatized and regulated. But what has been a foreign concept is now taking hold in Florida, where two highway projects are under way; Texas, with two massive roadway deals executed this year; and Virginia, where private companies are rebuilding the Capitol Beltway, as well as the Midtown Tunnel beneath the Elizabeth River, connecting Portsmouth to Norfolk. All are P3 projects. Fundamentally, a P3 involves the procurement of a public service (such as a high-speed rail project) by the private sector on a long-term contractual basis usually lasting

anywhere from 20 to 50 years. In these types of projects the private sector executes and manages the finance, design, construction, tolling, traffic management, operations, maintenance, safety, and sustainability efforts that deliver cost-efficient assets to government without raising taxes. At the end of the contract period, the facility and management of it, is handed back to the public sector at no cost. By developing publicprivate partnerships, government provides incentives for quality work and demands accountability for operations and maintenance. Despite the promise of economic growth, jobs and less government money, there is a misconception that somehow governments are giving away public assets. That is not the case. Through a performance-based contract, P3 projects remain mostly controlled by the government, which can fine or fire a developer throughout the contract if it fails to perform. Private firms have every incentive to build
SEE

ly subsidize the high-speed train system. MYTH: Any funding California receives for high-speed rail should instead be spent on Highway 99 improvements. TRUTH: CHSRAs economic model for its high-speed train system has, from the onset, always called for a public-private TRUTH: The Califor- partnership to finance system nia High-Speed Rail construction and Authority has reoperations. The goal ceived billions of is to attract local, dollars in funding state, federal and from the federal private funding, with government specifiprivate funders cally granted for taking on the lions Californias highshare of the investspeed rail project. ment. High-speed Because of the way train systems are these funds have built and operated been designated worldwide under this toward high-speed rail, the federal, state model. These financing experts and and local governinterests are out ments cannot take there, including this money and spend it on Highway high-speed train operators in France, 99. Germany, Spain, Likewise, ProposiChina, Japan, Korea tion 1A, the Safe, and more. Theyve Reliable High-Speed been visiting Fresno Passenger Train over the past several Bond Act, approved months to see how by voters in 2008, they can participate provides for $9.95 financially in this billion in bonds to be historical project. issued to establish With an 18.4% the high-speed train unemployment rate service. In this in Fresno County, the instance, too, it next six months will would be illegal to determine whether spend the money on this investment anything other than partnership will the high-speed rail come together. When system. it does, much needed jobs will come to our MYTH: Taxpayers will have to complete- county.

MONEY, PAGE 12