See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/260178291

The Risk-Averting Game of Transport Public-Private

Partnership: Lessons from the Adventure of California's
State Route 91 Express Lanes

Article  in  Public Performance & Management Review · December 2012

DOI: 10.2307/23484720

CITATIONS READS

5 348

1 author:

Anna Ni
California State University, San Bernardino
31 PUBLICATIONS   874 CITATIONS   

SEE PROFILE

All content following this page was uploaded by Anna Ni on 03 June 2015.

The user has requested enhancement of the downloaded file.

 The Risk-Averting
Game of Transport
Public-Private Partnership
Lessons from the Adventure of
California’s State Route 91 Express Lanes
Anna Ya Ni
California State University, San Bernardino

ABSTRACT: With both the demand for mobility and nationwide fiscal stress
increasing, governments at all levels are interested in public-private partnerships
as a way to introduce private investment to the public transport infrastructure.
Although transport PPPs offer great promise, their complexity entails unusual
risks for the investment environment, the project, and the partnership itself.
Adopting the lens of game theory, this article traces the evolution of the State
Route 91 Express Lanes (91EL) PPP over the past two decades and analyzes the
risk-averting behavior of the players in the transport PPP game. The odyssey of
91EL demonstrates that managing transport PPPs requires understanding of the
nature of the game, recognition of sectoral differences, the skill to concert divergent
interests, willingness to change and learn, and the courage to take risks and explore
practical solutions in an erratic political and economic environment.

Keywords: game theory, public-private partnership, risk aversion,

transportation

G overnment historically has relied on public monies to finance infrastructure. In

recent decades, compelled by widespread fiscal stress, government has increasingly
explored public-private partnership (PPP) as a way to introduce private investment
into public infrastructure and services.
In the United States, the private sector historically has played an important role
in the financing, construction, and operation of transport infrastructure. Although
the role of the private sector in transport projects declined from the 1930s to the
1970s, it began to revive in the 1980s. In recent years, as the need for highly
efficient surface transport systems has continued to grow despite stagnant state
fiscal capabilities, governments and legislatures, both state and federal level, have
exhibited a growing interest in PPPs and are moving forward to open the door

Public Performance & Management Review, Vol. 36, No. 2, December 2012, pp. 253–274.
© 2012 M.E. Sharpe, Inc. All rights reserved. Permissions: www.copyright.com
ISSN 1530-9576 (print), ISSN 1557-9271 (online)
DOI: 10.2753/PMR1530-9576360205 253
254  ppmr / December 2012

to many more such arrangements (Lockwood, 1998, 2000; National Academy of

Public Administration, 1995).
As a result, a vast literature has emerged to prescribe principles and guidelines, as
well as to report convincing successes and disappointing failures. However, theoreti-
cal and empirical knowledge about such arrangements is relatively limited. Despite
the widespread popularity the partnership concept enjoys, there is a lack of consensus
regarding the defining characteristics of the arrangement (Bloomfield, 2006; Linder,
2000; Wettenhall, 2003). This article attempts to define public-private partnership
as a game that is both cooperative and noncooperative. Adopting the lens of game
theory, the article analyzes various risks, risk-allocation rationales, and risk-averting
behaviors in such arrangements. Tracing the 20-year adventure of California’s State
Route 91 Express Lanes (91EL) PPP, the article illustrates the settings, rules, roles,
strategies, and moves of the players in the PPP game and concludes with lessons
for public practitioners who may at times be involved in PPPs.

The Transport PPP Game

Definition
Generally speaking, a public-private partnership is an institutionalized form of
relationship of public and private actors who, in pursuing their respective objec-
tives, work together toward a joint goal (Nijkamp, Van der Burch, & Vidigni,
2002; Schaeffer & Loveridge, 2002). The concept encompasses a broad spectrum
of intersectoral relationships for the provision of public goods and services char-
acterized by sharing of risks, responsibilities, and returns on investment between
the partners (see Figure 1). Given that there is no single PPP model and a diversity
of arrangements, a relationship qualifies as a PPP if (1) it involves “two or more
actors,” at least one of which is a public entity; (2) each of the participating actors
can bargain on its own behalf; (3) the relationship is long-term and “enduring”; (4)
each actor brings either material or symbolic goods to the relationship; and (5) all
the actors have a “shared responsibility” for the outcome (Peters, 1998).
PPPs are commonly used for providing public infrastructure, community fa-
cilities, and related services. In such an arrangement, the private sector partner
usually makes a substantial cash, at-risk, equity investment in a public project,
while the public sector partner gains access to a new revenue stream or service
delivery capacity without having to make a substantial capital investment. The

The author is grateful to the following institution and persons: the Leonard Transportation
Center, for sponsoring the early phase of the study; Weija Li, for his assistance in collecting the
data and literature for this report; Kirk Avila, CEO of SR91 at OCTA, and Jan Mittermeier Sr.,
vice president of operations, Cofiroute USA, for their insightful input and thoughtful review of
this report; and Paul Suino, Monty Van Wart, and Jonathan Anderson, for editing the previous
versions of the manuscript.
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  255 

Figure 1. The Spectrum of Public-Private Partnerships

Source: Revised and adapted from Gidman, Blore, Lorentzen, & Schuttenbelt (1995).

private partner obtains a steady return from the investment via tolls, user charges,
performance-based fees, related real estate development, or other revenues. It is
typical under such an arrangement for the government agency to retain ownership
of the public facility or system, while each party shares in the income resulting
from the newly formed partnership. In recent decades, PPPs have been increasingly
used to develop and manage various aspects of public transportation, including
highways, ports, railroads, airports, and other related facilities and services. As of
2009, statutes that enable the use of PPPs for the development of transportation
infrastructure have been enacted in 23 U.S. states and one territory.1
Traditionally, transport PPPs involved arrangements where the private sector
takes on the responsibility for constructing new projects. However, in recent years,
many other mechanisms have been explored to capture the values of efficiency,
financial capacity, and expertise that the private sector can provide. An increasing
number of public transportation agencies are now outsourcing maintenance and
operation, program management, and strategic planning responsibilities to private
firms, tasks normally done in house (Government Accountability Office, 2008). The
term PPP has acquired a broader meaning to describe any scenario under which
the private sector assumes a role in the planning, design, construction, operation,
and maintenance of a transportation facility, as compared to traditional procure-
ment methods.2 These types of collaboration, as elaborated in several sources (KCI
Technologies, 2005; Perez & March, 2006), include:
• Design-Build (DB). A private partner designs and builds a facility to specifica-
tions agreed to by a public agency, within an agreed-upon time frame and at a
256  ppmr / December 2012

predetermined price. This is often viewed as the traditional form of PPP.3

• Design-Build-Operate (DBO), Design-Build-Maintain (DBM), and Design-
Build-Operate-Maintain (DBOM). Like the DB, but the private partner also
operates and/or maintains the facility.
• Design-Build-Operate-Turnover (DBOT), Build-Operate-Transfer (BOT), and
Design-Build-Warranty (DBW). The private partner transfers the facility to the
public agency upon completion of the project. In DBW, the private partner also
provides a warranty to guarantee the condition of the facility.
• Build-Own-Operate (BOO), Buy-Build-Operate (BBO), and Buy/Lease-Develop-
Operate (BDO). The private partner builds or, in some cases, renovates, modern-
izes, and expands a facility, and then operates it under a contract with the public
agency. The transaction involves a franchise, an asset sale, or a lease with the
private sector (i.e., the private partner obtains ownership or right-of-use of the
facility).
• Maintenance and Operation. The public agency outsources the maintenance and
operation of the facility to private companies.
• Program Management and Strategic Planning. This type of collaboration often
involves large, complex projects that benefit from integrated strategic planning,
coordination of design and construction activities, and consolidation of multiyear
capital programs into shorter implementation periods.
Under different scenarios, the return on investment, in theory, should be com-
mensurate with the risks and the responsibilities undertaken by the parties.

The Game
Given that transport PPPs are governed by rules, roles, and strategies, and, more
pertinently, entail risks and pay-offs, the game perspective is a useful framework
with which to understand the behavior of the parties in such arrangements (Medda,
2007; Scharle, 2002).
In essence, a PPP is a cooperative game (Davis & Maschler, 1965). Since the
parties have a shared desire for a higher payoff, they engage in a mutually sup-
porting relationship, and each has a stake in the success of the other. Cooperation
maximizes the benefits for both. Some researchers conceive such partnerships
as a middle path between public monopoly and full privatization that seeks to
integrate the best features of the two sectors (Faulkner, 1997; Leitch & Motion,
2003). The public sector contributes social responsibility, public accountability,
political responsiveness, environmental awareness, local knowledge, and job
creation and equity concerns (Pongsiri, 2003; Rainey 1997); while the private
sector encompasses efficiency, access to finance and resources, knowledge of
technologies, innovativeness and nimbleness, and entrepreneurism (Prabhu,
Robson, & Mitchell, 2002; Rainey, 1997; Savas, 1987, 2000; Spann, 1977). The
payoff for the public sector from the cooperation between the two parties includes
cost-saving (Donahue, 1989; Ferris & Graddy, 1986; Hirsch, 1995; Savas, 1987,
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  257 

2000), enhanced production resources (Bloomfield, Westerling, & Carey, 1998;

Collin, 1998; Mackintosh, 1992; Perez & March, 2006), shared risk (Fayard, 1999;
Linder, 2000; Stainback, 2000), and reduced project uncertainty (Brown & Brud-
ney, 1998). Similarly, with the support from the public sector, the private sector
party gains various tax incentives, stable cash flow, and profit generation over the
course of a concession (Datta, Rajagopalan, & Rasheed, 1991; Kouwenhoven,
1993). The intersectoral cooperation helps each party recoup benefits it could not
possibly gain otherwise. The respective roles of the private and the public partners
are expected to be neither antagonistic nor identical, but complementary.
Despite the common goal of project success, the public and private participants
in a transport PPP have significantly different objectives in the arrangement. There
is an inherent conflict between the public sector’s need to demonstrate “value-
for-money” and the private sector’s need for robust revenue streams to support
financing arrangements (Grimsey & Graham, 1997). In addition, each party has
the intrinsic interest to bargain on its own behalf for more benefits and fewer re-
sponsibilities. In this respect, a transport PPP also resembles a finite two-person
zero-sum or noncooperative game, where one player wins exactly what the other
loses (Von Neumann, 1944). This aspect of games is especially prominent in the
risk allocation of a transport PPP.

The Risk-Averting Game

Despite the promises of transport PPPs, the complexity of the arrangement in-
volves unusual risks (Fayard, 1999). The partners often find it difficult to contain
the risks and feel compelled to push them to the other party based on their own
self-interest.
Investment Environment Risks
Foremost, there is force majeure, such as natural disasters, social unrest, acts of
war, and the like. In addition, transport PPPs are subject to risks from the eco-
nomic, commercial, legal, and political environment. Economic risk can result
from uncertainty over ebbs and flows in the economy. Commercial risk is related
to the number of future users and income levels and the competition from other
projects. As for legal risk, despite the fact that the federal government generally
has been receptive, many states are hostile to PPPs, and their procurement laws
are often impediments to the PPP venture (Concrete Products, 2003).
Political risks are inherent in high-cost transport PPPs. The first and foremost
political risk comes from public opposition. Transportation facilities are generally
perceived as public goods in the United States. Tolls are often viewed as an addi-
tional charge for a product that the public believes it has already paid for through
federal and state gas taxes and other fees. Even some government officials, com-
mitted to “free” roads, lack enthusiasm for toll facilities, especially in the face of
258  ppmr / December 2012

public resistance. The involvement of a private sector partner often draws a con-
tradictory response from the public. While some applaud the potential efficiency
and innovation, others suspect that the real cost of the project may be inflated and
the public interest will be compromised for private sector profit. Political risks can
be further aggravated by the transitory nature of political champions and public
policies. Political champions of a PPP may enter and leave office throughout
the course of a project. Public policies, especially those that involve adopting
new practices or piloting new mechanisms, may be repealed or changed if they
encounter public resistance. These discontinuities create uncertainty for private
partners and can discourage private entities from pursuing PPPs. Additionally, a
transport PPP project may encounter objections from state employee unions, local
trade unions, local contractors and engineering firms, and environmental groups
because of its potential threats to public jobs, local businesses, and the environ-
ment (KCI Technologies 2005).

Project Risks
Given the complexity of transportation facilities, there are always technical risks
associated with construction, operation, and overall project quality. In addition,
risks for financing the final design and construction phases of transport projects
are intrinsic in PPPs. A primary motive for the states to use PPPs is the desire to
issue bonds that will not be secured by the state’s general fund (KCI Technologies,
2005). In such cases, the bond rating of the issuing entity and the tax status of the
bonds will determine the interest rate, and thus the financing cost. In most states,
the interest paid on state and local government bonds is exempt from federal and
state income taxes. In contrast, private entity debt usually is fully taxable. There-
fore, the private entity typically must pay a higher interest rate than a public entity.
Despite the argument by PPP advocates that private enterprises are more efficient
than governmental entities, it takes substantial increased efficiency to make up
for the interest advantage of tax-free government-issued bonds. Very often, the
government entities end up reimbursing the private partner for the higher cost of
debt through higher toll charges or user fees. Much of the risk associated with the
project also comes from the complexity of the arrangement in terms of documenta-
tion, technical details, and subagreements (Grimsey & Lewis 2002).

Partnership Risks
Essentially a transport PPP involves a public authority delegating the duty of
producing a public good (i.e., a public transport facility) to a private party. The
partnership has the nature of a principal-agent relationship (Eisenhardt, 1989) and
therefore bears the risk of a principal-agent problem, presenting challenges to the
public sector to manage it for the public interest.
Evidence of goal diversion is identified in the privatization literature (Gorm-
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  259 

ley & Bella, 2004; Mitnick, 1975). In addition, there is the risk of information
asymmetry. Public agencies that seek PPPs for transport projects commonly lack
productive, financial, or managerial expertise and capacity and, very likely, have
no previous experience in managing a PPP. In contrast, private entities that bid
for, and win, public contracts generally have long engaged in the business and
have accumulated expertise in assessing risks, negotiating benefits, and crafting
contracts. They may also demonstrate considerable experience in various aspects
of developing the facility. This apparent information asymmetry may find the
public sector susceptible to unanticipated risk.
The complexity of a PPP and the cost of negotiating it usually lead to reduced
competition. PPPs with two or three private sector candidates are not uncommon.
In many cases, public agencies have to rely on a single partner to carry out the
various aspects of the project and may well lose the bargaining position in the
relationship (Allen et al., 1989; Bailey, 1987).
PPPs also raise considerable accountability risk (Coats, 2002; Kettl, 1989;
Posner, 2002). Many observers see PPPs as a way to evade public involvement
and the scrutiny of labor, environmental, and community protections that might
apply if the same initiative were to be publicly financed and developed. Public
focus on these issues could lead to failed expectations, popular outcry, and a loss
of appreciation for the potential benefits that transportation PPPs can bring to
society in general. As transport projects are public goods, government agencies
will ultimately be held responsible for any incident or result of the project, despite
the partnership. The private entity in a PPP project almost always is a special-
purpose entity that exists only for the one project.4 If the project goes badly, the
entity can go bankrupt. In that case, the government entity must step in and cover
the remaining costs in order to keep the project in operation.
Theoretically, risks in a PPP should be allocated to the parties that have the most
influence or control over risky outcomes and that can bear the risks at the lowest
cost and thereby achieve the highest value-for-money (Medda, 2007; Pongsiri,
2003). In addition, risks should be commensurate with the rewards for taking them.
However, certain risks are outside the control of the partners. If neither party is
in a position of full control, the players of the game can be noncooperative; they
are likely to bargain back or to engage in risk-averting behavior. Such opportu-
nistic behavior is encouraged by the benefits of such behavior and discouraged by
safeguards, such as regulations and controls, agreements, and monitoring (Gulati,
1993; Williamson, 1975, 1985). In the absence of proactive safeguard mechanisms,
opportunistic risk-averting behavior may give one party the temporary advantage
of reaping benefits or shifting costs to the other party. However, the unequal re-
sponsibilities and rewards may push the partnership into peril. In order to sustain
the “enduring” relationship, partners will have to reassess and reallocate the risks
and rewards; otherwise the partnership may simply collapse.
260  ppmr / December 2012

Using the case of California’s 91EL PPP, this article illustrates and discusses
many of the risks and risk-averting behaviors associated with transport PPPs. The
91EL is one of the pioneering, most technically advanced, and most politically
controversial PPP toll road projects in the United States. Through a review of
documents, media reports, and personal interviews with both public and private
sector stakeholders of 91EL, the article traces the evolution of the 91EL PPP over
the past two decades (see Appendix). The case description was verified by the
public and private managers of the project. The story is developed in three phases
based on the ownership transition of the transport facility. Each phase involves a
different form of PPP along the spectrum, be it (1) designed, built, financed, and
operated by the private sector, (2) fully funded by government bonds, or (3) fully
contracted out to the private sector.

The 91EL PPP Adventure

Legal Background
California has historically restricted private sector involvement in the construc-
tion of public infrastructures. The general mode prescribed for public contracts
was traditionally the DBB method. The California Supreme Court, viewing DB
as a venue for the exercise of favoritism, long ago rejected it for public projects.5
The Supreme Court’s antagonism toward DB has found its way into the statutes
governing contracting by California counties.6 However, the ongoing increase in
the state’s population has dramatically increased the demand on the transporta-
tion infrastructure, while the availability of public revenues to fund infrastructure
improvement projects has not kept pace with the demand.
In 1989, with the goal of attracting alternative funding sources to meet the
state’s growing transportation needs, the California legislature passed Assembly
Bill (AB) 680, which paved the way for the California Department of Transporta-
tion (Caltrans) to enter into contractual agreements with private entities for the
construction and operation of toll roads.7
In March 1990, Caltrans issued an RFQ (request for quotation) for a private
Build-Operate-Transfer (BOT) for any project proposed in the state transportation
program. The state received responses from 13 firms. In June of the same year, the
state issued an RFP (request for proposal) and elicited 12 proposed projects (with
two for the same facility). Caltrans selected four proposals for implementation: one
in Northern California and three in Southern California. Only two of the four projects
have moved forward: 91EL and State Route (SR) 125 in San Diego County.8

Phase 1: Design-Build-Finance-Operate
SR 91 is a major east-west freeway that extends from Riverside County to northern
Orange County and ultimately joins Interstate 405 in Los Angeles. With more
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  261 

than 268,000 vehicles per day, the freeway connects rapidly growing residential
areas in Riverside and San Bernardino counties with major employment centers
in Orange and Los Angeles counties.
The 91EL project was proposed to help alleviate the traffic jam commonly
experienced along the length of SR 91. The proposed accommodation was a four-
lane tolled facility that would operate in the median of SR 91 for 30 miles. To date,
only the express lanes of the first 10 miles (from the Riverside/Orange County
boundary westward to SR 55) have been completed and become operational.
The project was developed in partnership with California Private Transportation
Company (CTPC), an LLC formed by subsidiaries of three major private partners:
(1) Level 3—a global communications and information services company; (2)
Granite—a Delaware corporation and one of the largest construction contractors in
the United States; and (3) Cofiroute—a French company involved in the develop-
ment of private toll roads in France and other European countries. An agreement
between Caltrans and CTPC granted a 35-year franchise along a 30-mile portion
of SR 91, commencing at the opening of the first phase. The distribution of roles
and efforts between the state and the CPTC is presented in Table 1.
The Orange County Transportation Authority (OCTA) completed the National
Environmental Protection Act (NEPA) procedure for a high-occupancy vehicle
(HOV) facility along SR 91, and CTPC purchased the environmental documents
from OCTA. The documents were then supplemented to address the design changes
and tolling proposals needed by CTPC to implement its proposal.
The comprehensive agreement established the maximum rate of return to
CTPC (23%), defined treatment of HOVs, provided that Caltrans would not build
competing road capacity within a 3-mile corridor for the entire 30 miles of the
franchise (noncompete clause) and stipulated that traffic enforcement and facility
maintenance would be provided by the state on a reimbursement basis.9
Construction of the 10-mile express lanes began in September 1993 and was
completed in December 1995 at a total cost of $135 million. CPTC brought $30
million in equity to the project and a $101 million nonrecourse bank debt package.
The project’s relatively modest price tag was agreeable to the financial community.
In addition, the well-documented traffic volumes and vexing congestion levels on
the parallel highway suggested promising demand. In 2001, CPTC successfully
refinanced its construction debt through a private placement offering of $135
million in AAA-rated taxable bonds insured by XL Capital.
When the express lanes opened in December 1995, they constituted the first
fully automated and variably priced toll road in the country (Felbinger & Price
2000). Tolls on the express lanes varied from $1.00 to $4.75 by time of day, day of
the week, and direction of travel, reflecting the level of congestion delay avoided
in the adjacent nontolled freeway lanes. Carpoolers with three or more people
(HOV 3+), zero-emission vehicles, motorcycles, cars with disabled plates, and
262  ppmr / December 2012

Table 1. Distribution of Efforts by 91EL PPP

Development Stage Private Public

Land investment Existing state ownership
Plan/environmental objectives State transportation plan
Engineering design/permits CPTC
Construction CPTC
Tollway operation CPTC
Roadway maintenance Caltrans provides this service for
a fee, but 91EL is not required to
use it
Roadway policing California Highway Patrol provides
policing for a fee

Source: Adapted from Price (2001).

disabled veterans could ride free at most hours. As such, 91EL was also the first
operating High Occupancy Toll (HOT) lane in the United States.
In the first few years, the 91EL was viewed by many as a net public benefit. Early
public satisfaction surveys showed that a majority of 91EL drivers supported the
pricing scheme. A designated impact study showed dramatic reductions in peak-
hour travel times, and average peak-hour travel speeds on the free lanes were also
significantly improved (Sullivan, 1998). In the first six years of operation, CPTC
provided $6.8 million in tax revenue to the county. The profitability of the toll
road to the private sector was also promising. The toll road broke even in the third
month of operation, and cash flow broke even in the third year of operation.

Phase 2: The Noncompete Controversy and the

Government Purchase
In spite of its long list of innovations, the 91EL PPP has encountered unexpected
problems. In a state that has traditionally enjoyed highways as public goods, some
citizens took the private ownership and the toll charge as an “incredible breach
of public trust” (Berkman & Bowles, 1999). Whereas the “free” lanes on SR 91
enjoyed reduced congestion because of the new toll lanes, safety issues arose as
many drivers made abrupt lane shifts when deciding whether or not to use the
tollway. Meanwhile, demands for greater capacity on the freeway were surfacing.
The nature of the franchise granted by the state became the subject of intense
public debate when the noncompete clause restricted improvements to congested
roads. This debate was widely covered in the local media, which portrayed the
PPP as a clash between competing interests: public versus private, safety versus
profit, transit versus highways, taxation versus private ownership, and nonprofit
versus for-profit organization (Sullivan, 1998). Limitations on improvements to
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  263 

“free” roads that competed with “toll” roads were characterized by the media as
“monopolies.” The state was accused of failing in its duty to protect the traveling
public (Bowles & Garrett, 2000).
When Caltrans publicly considered various traffic improvements to serve
the freeway, without seeking further dispute resolutions within the partnership,
CPTC anxiously exercised the noncompete clause and filed a lawsuit in March
1999 asking for damages as a result of Caltrans’s action to plan enhancements. A
settlement between the disputing partners that reaffirmed the noncompete clause
was reached in October 1999 without further litigation.
During this dispute, disagreements began to arise among the internal partners
of the CPTC consortium. Due to the unfriendly marketplace and weaker-than-
expected revenues, some of the partners in CTPC came to see the project as too
risky for their continued involvement. Two of CPTC’s three partners—Level 3,
which provided project management, construction, and financial services, and
Granite, the primary construction contractor—thought the franchise was no lon-
ger an appropriate investment. Unlike Cofiroute, which provided toll and traffic
operations management, the two companies lacked a strong interest and expertise
to operate the facility. The CPTC began to consider the idea of selling the facility
to a nonprofit corporation. It participated in the formation of NewTrac, a private,
nonprofit entity initiated by local politicians and business entrepreneurs, and in
September 1999 proposed selling the project to NewTrac. The proposed acquisi-
tion involved the sale of nearly $275 million in tax-exempt bonds issued by the
California Infrastructure and Economic Development Bank to assist NewTrac in
the purchase of the toll road (Samuel, 1999). The bond sale, however, was halted
by the state treasurer after concerns were expressed by local transportation of-
ficials and others about the relationship of CPTC and NewTrac. Amid a firestorm
of disputes, CPTC withdrew the proposed sale three months later.
In the face of these controversies and risks, OCTA, in January 2003, reached an
agreement with CPTC to acquire the franchise for $207.5 million (assuming $135
million in 7.63% taxable debt) under the authorizing legislation AB1010. Acting
under the agreement, OCTA assumed the existing debt of $135 million and made
a one-time payment of $72.5 million through internal borrowing.

Phase 3: New Operating Contract

Because OCTA had no toll road experience, it retained the toll road’s operator—
Cofiroute Global Mobility (CGM), a wholly owned subsidiary of one of the pre-
vious CPTC joint-venture members, Cofiroute. In January 2003, OCTA signed a
three-year management contract (with two one-year renewal options) with CGM
(also known as Cofiroute USA). The contract specified the company’s responsibili-
ties and compensation and assured a smooth operational transition while OCTA
was learning the toll road business and preparing to refinance its acquisition debt
264  ppmr / December 2012

and cost. In January 2006, OCTA entered into a second operating agreement with
CGM. In spite of the ownership turnover, the 91EL PPP continued to mature.
OCTA represents the public ownership of the toll road. Operation of the toll road
is carried out by many partners, including Cofiroute USA, Sirit Corporation, and
Telvent, all private firms that contract with OCTA.
Learning from past experiences within the project, OCTA has paid close at-
tention to the need to build public confidence in the project (Avila, 2004). Before
purchasing 91EL in 2001, OCTA initiated a public policy debate about the benefits
of acquiring the lanes. In 2003, OTCA designated a research institute to conduct
market research and administer a customer satisfaction survey. During five years of
ownership, the agency has strived to achieve transparency through a variety of ven-
ues, including public education workshops, customer mailings and focus groups,
customer service centers, a project Web site, and meetings with the press.
On November 12, 2003, OCTA issued $195.265 million in Toll Road Rev-
enue Refunding Bonds (Aaa/AAA/AAA insured 27-year 4.43% tax-exempt
debt) to refund the $135 million taxable 7.63% Senior Secured Bonds and to
reimburse OCTA for a portion of its prior payment for the cost of acquiring the
toll road. The 91EL enterprise has continuously been a model of financial sta-
bility. Although the economic downturn reduced the number of vehicle trips in
fiscal year 2008, the project continued to receive a strong rating from Moody’s
Investors Service, Fitch Ratings, and Standard and Poor’s. Under AB 1010,
OCTA’s purchase allowed any revenues in excess of those needed to support
ongoing operations and bond payments to be used for improvements along the
91EL corridor. After five years of ownership, OCTA has accumulated a net asset
of $52 million from 91EL.
OCTA consequently removed the noncompete provisions and adopted a new
toll policy in July 2003.10 The new toll policy raised the maximum one-way toll
to $5.50 and removed the HOV 3+ tolls for most hours.11 Consequently, HOV3+
trips steadily increased from 15% in 2003 to 21.8% of total trips in 2008. The new
toll policy implemented a “trigger point” defined as 92% or more of maximum
optimal capacity, and constant monitoring of hourly, daily, and directional traffic
volumes to adjust tolls up or down. It also implemented an annual cost-of-living
adjustment (COLA), indexing non-superpeak hours to inflation. Because of these
innovative practices, the project was awarded the 2008 Toll Excellence Award
for tollway administration by the International Bridge, Tunnel and Turnpike As-
sociation (IBTTA).
In September 2008, the passage of Senate Bill 1316 authorized OCTA to
work in cooperation with the Riverside County Transportation Commission
(RCTC) to extend the 91EL an additional 10 miles into Riverside County.
The bill also extended the franchise agreement between Caltrans and OCTA
to 2065.
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  265 

Discussion
The adventure of the 91EL over the past two decades provides a rich context for
understanding the game aspect of public-private partnership, especially in terms
of risk allocation and risk aversion between the parties. Driven by increased
demands for public highways and constant fiscal stress, California loosened the
legal constraints on transport PPP despite the entrenched public hostility toward
such arrangements. Because this was their first experience with transport PPP, the
California public sector actors were unable to make an appropriate assessment
of the risks associated with the arrangement. In the expectation that the private
party would assume the entire project risk, the public sector completely signed
off the rights to the project as a “franchise” to the private party. However, in the
face of uncertainty about the commercial value of the project, the private partner
pushed the investment risk right back onto the public sector through the noncom-
pete clause. As a result, the public sector lost its ability to improve the competing
infrastructure and to implement plans that would accommodate changes over the
course of time. The consequent public outcry heightened the political hostility
toward the project. Despite the high profitability of the project, the private part-
ners perceived the political controversy as a threat to their investment. The public
sector had to contain the political risk and ended up purchasing back the 91EL
with government bonds. The partnership was restructured, with the partnership
reorganized, responsibilities reassigned, and risks reallocated. In the new phase
of the partnership, the public sector shares the major investment responsibilities
and risks, and consequently retains the most economic return-on-investment to
the public side for the subsequent upgrade of the project.

Lessons Learned
The experience of the 91EL PPP provides several lessons for public officials
entertaining the use of PPPs as a transportation solution.
The PPP Game Is Both Cooperative and Noncooperative in Nature
Game theory provides a useful framework to understand the complex arrangement
of a PPP. Public officials need to understand both the cooperative and the nonco-
operative aspects of the game. The game is governed by the economic, political,
and legal institutions—“rules of the game” (North, 1990)—associated with the
investment environment. The roles played by the actors in the game are expected
to be complementary but at times can also be contesting. The strategy to maxi-
mize their payoffs, in terms of either value-for-money or return-on-investment,
is through cooperation, which enables integration of the strengths of the parties
and allocation of responsibilities and risks based on their capabilities. However,
individual objectives and uncertainties reveal the noncooperative nature of the
266  ppmr / December 2012

game, whereby parties may engage in opportunistic risk-averting behavior in ex-

change for short-term gains. In this regard, parties will have to reassess the risks
and responsibilities and adjust their overall strategies to preserve their individual
interests. The noncooperative game aspect helps public officials to realistically
anticipate private parties’ possible opportunistic behaviors and to develop proac-
tive monitoring and controlling mechanisms to safeguard without compromising
the public interest or the partnership.
Not All Risks Can Be Shared Through a PPP; It Is Critical for the Public Sector
to Contain the Political Risk
Proponents of PPPs often justify the arrangement by its potential advantage of
allocating risk to the private entity that otherwise would be borne by the public
sector. PPP allows for the transfer of risks to the private partner involved, which
indeed may be better able to manage the risks (Linder, 2000; Stainback, 2000). How-
ever, the risk transfer can be illusory. On the one hand, in anticipating the potential
demand risk, private entities often push for noncompete provisions, toll rate settings,
a set-guaranteed minimum ridership, or payment for availability regardless of use.
On the other hand, not all risks can, or should, be shared. Risks associated with the
legal process can hardly be shared. This is because the private partner normally is
unwilling to accept the risks and project uncertainties associated with a publicly
controlled process. Such processes can add to project costs and can cause signifi-
cant delays. For example, the costs and risks associated with environmental issues
often cannot or should not be transferred to the private sector in a PPP. The risks of
delays or overruns due to the environmental-assessment process, or even whether
the project will be approved at all, normally reside with the public sector.
Moreover, given the fact that it is subject to more public scrutiny than its
private counterpart, the public sector is always expected to contain the political
risks associated with transport PPPs. The 91EL experience demonstrated the
significance of public acceptance and political support in defining the success
of a PPP project (Linder, 2000). A project that enjoys broad public support can
reduce not only the political risk for the public agency, but also the financial risk
for the private partners. In contrast, a project that has been constantly questioned
and disputed can easily drain a partner’s interest and confidence. Because of its
size and the costs involved, a transport PPP project can easily generate attention
from the public, media, local businesses, and local politicians. They are likely to
oppose the physical, environmental, economic, and social impacts of the facility,
and, especially in economically conservative states, the expanded role of private
corporations within the public sector.
Given California’s historical, political, and legislative background, it is not
surprising that the franchise agreement, especially the “monopoly” created by the
noncompete clause, raised significant policy, financial, and ethics attacks on the
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  267 

PPP. In states less receptive to private ownership of public facilities, building up

public confidence through outreach and education is necessary but may not be suf-
ficient. Public agencies may need to consider alternative partnership mechanisms in
order to avoid the ownership dilemma. For example, instead of having the private
sector as sole financier, public agencies may consider co-financing the transport
project alongside the private entity. Such arrangements would create a joint venture
that could overcome public funding limitations, share the investment between the
two parties, and most likely retain the right-of-way in the public sector.
In addition, if the public is hostile to toll charges, public transportation agen-
cies may shift to the “shadow toll” approach, whereby the public sector pays
“tolls” to the private contractor based on the number and type of vehicles using
the facilities, while the motorists themselves pay no tolls. This approach may en-
able the government to gain access to new sources of capital and to capture the
efficiencies of the private sector without losing the perception of the highway as
a “free” facility.
These innovative practices provide more options for the public sector to win
public acceptance, but they still have their limitations. It is important for public
officials to make prudent judgments regarding the feasibility, specific needs, and
conditions of a project.
Aligning Partners’ Interests Is Fundamental to an “Enduring” Relationship
Conflicts between public and private sector interests have been extensively ob-
served in PPPs, and the precarious balancing of the interests of the two sectors
has also been extensively documented. However, a large transportation PPP is not
a simple collaboration between these two sectors; it often involves a vast array
of private and public institutions, each in pursuit of its own interest through the
vehicle of the project. As the 91EL case illustrates, the divergent interests of the
partners in the private consortium can increase the uncertainty and instability of
the partnership. Public officials should not thoughtlessly treat the private partners
as a whole, but try to understand their individual views and interests within the
bounds of the consortium. An effective communication network connecting all
the participants may reduce such risk.
In retrospect, some participants commented that there might have been numer-
ous ways to solve the noncompete controversy at the time. However, under the
constant pressure of accusations from the public and the press, the parties involved
were not able to “sit down and talk.”12 Instead, each chose tactically and anxiously
to pursue its own individual agenda. In doing so, optimal solutions to the contro-
versy were lost, and the sustainability of the partnership was compromised.
The nonalignment of interests could happen on the public sector side as well. For
example, when OCTA was negotiating the second term of the contract with CGM in
2005, a private entity, VESystems, designated by the county’s Transportation Cor-
268  ppmr / December 2012

ridor Agency (TCA), tried to compete for the contract. VESystems was a local busi-
ness engaged in communication-signal-enhancement network services. It had long
been a contractual partner with TCA, a public entity formed to plan, design, finance,
construct, and operate the tollways in Orange County. Given that VESystems had no
expertise in tollway operation, CGM eventually resumed the partnership. VESystems’
involvement was not a fair, competitive bid for a public contract, because it was not
a highway operating company. Rather, it reflected competing interests among public
agencies. This “reverse competition,” resulting from conflicting interests, overlap of
functions, and lack of coordination in public bureaucracies, was taken by the private
partner as a threat to the partnership. Therefore, it is equally critical for the public
sector to coordinate the interests of different authorities before engaging in a PPP,
in order to create a stable and sustainable policy environment.
Public Agencies Need to Build Up Organizational Capacity for Contractual
Relationships and for Contingencies
The use of a PPP is often justified on the grounds that it offers access to private
sector employees and expertise as compensation for the weaknesses of a lean public
agency. However, the complexity and significance of transport PPP projects often
require a strong and capable public partner that is well staffed, well trained, and
sound in institutional design (Poister & Van Slyke, 2002). Public officials need
bisectoral knowledge of project finance, construction, and operation. They also
need skills in negotiating, evaluating, and monitoring contracts. Most important,
they need to know how to communicate with their private partners, the press,
and the public. This challenge may exert a serious impact on the institutional and
organizational design. For example, public agencies may need to redesign their
hiring policies and training programs to reflect any PPP requirements.
As shown in the 91EL case, the private consortium for a transport PPP project
is difficult to create and sustain; very often there is only one private partner avail-
able or accessible for a given transport project. This often puts the public sector
in a risky situation, because it will be fully accountable if the private partner fails.
When Caltrans initiated the BOT scheme, the agency had no experience in such
arrangements; it could neither foresee the risks of the noncompete provision nor
plan for the contingencies of a divorce. In the end, it took the public sector several
years to finally resolve the issue.
When OTCA took over the facility, it, too, had no experience in operating
tollways. The contract with CGM was handy and efficient. Despite the fact that
a large toll-management market exists, few companies have either the interest or
the experience when compared to CGM. The deal with CGM enabled OTCA to
manage the contractual relationship with fewer than three employees (2.5 FTEs).13
This arrangement generates great administrative efficiencies. However, it also leads
to a lack of both interest and capacity to plan for contingencies.
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  269 

Public Officials Need to Embrace an Entrepreneurial Spirit That Takes Risk and
Seeks Return on Investment
When partnering with a private counterpart, public officials need to set aside the
traditional bureaucratic procurement mentality and embrace the spirit of entre-
preneurship. However, being largely constrained by excessive procurement rules
and regulations, public procurement officials generally exhibit less enthusiasm
than their private counterparts for pursuing an active economic agenda. With this
mentality, they can easily be “prey” to a shrewd business counterpart. The PPP,
in reality, is a joint venture in which both parties should reap returns, as they both
contribute equitably and share in the risks and expenses. Public officials should
view the public assets involved in any PPP as public investments that could gener-
ate economic gain. When a PPP lifts many of the typical restrictions, they may be
able to actively partner with the private sector in seeking returns.
Traditional public project managers are also reluctant to take risks. As shown
in the 91EL, the original intent of the public sector was to avoid risk—letting
the private venture take the risk and reap the reward as well. However, with risk
often comes payoff. When OCTA assumed the risk by repurchasing the facility,
the public sector also absorbed the returns on the investment. Within five years
of operation, the project accumulated a massive net surplus and became a rev-
enue source for improving the 91 corridor for the cash-strapped transportation
agency.14
Therefore, public entrepreneurs should view transport PPPs as investment op-
portunities. Through cooperation, collaboration, compensation, and competition
with each other, both sectors can well reap the social and economic benefits.

Conclusion

Public-private partnerships have much to offer governments in their scramble

to find new transportation financing and innovation. In a time when the nation
is facing increasing traffic congestion and gloomy economic conditions, private
sector involvement can be of particular interest. Barring changes to the current
tax structure, government agencies that embrace entrepreneurship will be better
equipped to leverage alternative resources in order to meet the increasing public
demand for greater infrastructure and service.
Joint ventures with the private sector, as demonstrated in the 91EL case, entail
both opportunities and pitfalls. As a model for the nation, the 91EL PPP pioneered
many of the challenges encountered in the formation of a PPP. The 20-year odyssey
has provided valuable lessons for the public and private sectors alike. While the
present analysis is limited to transport infrastructure development, the perception
of PPPs and their practical applications is kept as broad as possible.
The primary lesson learned here is that there is no guarantee of success (Sund­
270  ppmr / December 2012

quist, 1984). Managing a public-private partnerships for success requires recog-

nition of the nature of the game, the risks associated with the game, the skills to
concert divergent interests, a willingness to change and to learn, and the courage
to take risks and explore practical solutions in an erratic political and economic
environment.

Notes
1. The U.S. Federal Highway Administrations Public-Private Partnership Web page (www.
fhwa.dot.gov/ipd/p3/state_legislation) contains comprehensive analysis of current state PPP-
enabling legislation.
2. More information on PPPs is available at www.fhwa.dot.gov/ipd/p3/index.htm.
3. When the private partner in this or any of the other arrangements in this list provides
financing, an F is sometimes added to the acronym (e.g., DBFO).
4. Governments engaged in PPP applications often require the private entity to post sizable
bonds or letters of credit to protect the public.
5. See Ertle v. Leary, 114 Cal. 238 (1896).
6. See Public Contract Code §§ 20124, 20127, and 20128.
7. The law was repealed in 2005.
8. A description of the SR 125 case is available at www.fhwa.dot.gov/ipd/project_profiles/
ca_southbay.htm.
9. See AB 1010.
10. OTCA uses congestion pricing to set tolls as CPTC did, but it established an automatic
Consumer Pricing Index (CPI) adjustment. Previously, CPTC increased tolls by an amount
considered sufficient to decrease traffic for that hour to the desired level (there were no decreases
because traffic volume never declines). The amount was based on market conditions. The new
toll policy is available at www.octa.net/pdf/RevFinalTollPolicy7-30-03_v7.pdf.
11. Due to weaker than expected revenues, CPTC exercised its right to charge HOV vehicles
a half-price toll rather than allowing them to use the facility at no cost soon after its opening.
12. Comment made by Jan Mittermeier Sr., vice president of operations at Cofiroute
USA.
13. Other individuals in the agency are involved in SR91 as part of their other obligations.
The involvement of the agency’s contract, engineering, telephone, and accounting staff, and
others, is charged against the revenues of the facility.
14. The excess revenues of the 91EL are invested by OCTA in the 91 corridor in compliance
with the requirements of the enabling legislation. Improving the corridor was not an OCTA
obligation prior to the purchase of the lanes.

References
Allen, J.W., Chi, K.S., Devlin, A., Fall, M., Hatry, H.P., & Masterman, W. (1989). The
private sector in state service delivery: Examples of innovative practices. Washington,
DC: Urban Institute Press.
Avila, K. (2004, March). The 91 express lanes experience. Presentation at the IBTTA
Transportation Finance Summit, Washington, DC. Available at www.ibtta.org/files/
filedownloads/03042004_avilaestiot.ppt, accessed July 20, 2009.
Bailey, R.W. (1987). Uses and misuses of privatization. In S.H. Hanke (Ed.), Prospects for
privatization (pp. 138–152). New York: Academy of Political Science.
Berkman, L., & Bowles, J. (1999, December 15). Analyst assails tollway takeover: Plan
for 91 lanes called wasteful. [Riverside] Press-Enterprise, p. A1.
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  271 

Bloomfield, P. (2006). The challenging business of long-term public-private part-

nerships: Reflections on local experience. Public Administration Review, 66,
400–411.
Bloomfield, P., Westerling, D., & Carey, R. (1998). Innovation and risk in a public-private
partnership: Financing and construction of a capital project in Massachusetts. Public
Productivity & Management Review, 21, 460–471.
Bowles, J., & Garrett, R. (2000, January 2). How California sold the future of a highway:
Tax shortage led to private toll-lane deal. [Riverside] Press-Enterprise, p. A1.
Brown, M.M., & Brudney, J.L. (1998). A “smarter, better, faster, and cheaper” govern-
ment: Contracting and geographic information systems. Public Administration Review,
58, 335–346.
Coats, J. (2002). Applications of principal-agent models to government contracting and
accountability decision making. International Journal of Public Administration, 25,
441–461.
Collin, S. (1998). In the twilight zone: A survey of public-private partnerships in Sweden.
Public Productivity & Management Review, 21, 272–283.
Concrete Products. (2003). Study finds state procurement laws impede design/build use.
Available at http://concreteproducts.com/index.php/news/archive-news/3421.html,
accessed July 20, 2009.
Datta, D.K., Rajagopalan, N., & Rasheed, M.A. (1991). Diversification and performance:
Critical review and future directions. Journal of Management Studies, 28, 529–557.
Davis, M., & Maschler, M. (1965). The kernel of a cooperative game. Naval Research
Logistics Quarterly, 12, 223–259.
Donahue, J.D. (1989). The privatization decision: Public ends, private means. New York:
Basic Books.
Eisenhardt, K. (1989). Agency theory: An assessment and review. Academy of Manage-
ment Review, 14(1), 57–74.
Faulkner, J. (1997). Engaging the private sector through public-private partnerships. In
Luis Gomez-Echeverri (Ed.), Bridges to Sustainability (pp. 157–172). New Haven:
Yale University Press.
Fayard, A. (1999, January). Overview of the scope and limitations of public-private
partnerships. Paper presented at the European Conference of Ministers of Transport,
Paris. Available at http://rru.worldbank.org/Documents/Toolkits/Highways/pdf/46.pdf,
accessed on July 20, 2009.
Felbinger, C., & Price, W. (2000). Organization and management of public works in state
government. In J. Gargan (Ed.), Handbook of state government administration (pp.
613–640). New York: Marcel Dekker.
Ferris, J., & Graddy, E. (1986). Contracting out: For what? With whom? Public Adminis-
tration Review, 46, 332–344.
Gidman, P., Blore, I., Lorentzen, J., & Schuttenbelt, P. (1995). Public-private partnerships in
urban infrastructure services. United Nations Development Programme Working Paper
Series 4. Nairobi: United Nations Development Programme/Habitat/World Bank.
Gormley, W.T., & Bella, S.J. (2004). Bureaucracy and democracy: Accountability and
performance. Washington, DC: CQ Press.
Government Accountability Office (GAO). (2008). Highway public-private partnerships:
More rigorous up-front analysis could better secure potential benefits and protect the
public interest. GAO-08-44.
Grimsey, D., & Graham, R. (1997). PFI in the NHS. Engineering, Construction and Ar-
chitectural Management, 4, 215–231.
Grimsey, D., & Lewis, M.K. (2002). Evaluating the risks of public private partnerships for
infrastructure projects. International Journal of Project Management, 20, 107–118.
272  ppmr / December 2012

Gulati, R. (1993). The dynamics of alliance formation. Ph.D. dissertation, Harvard Uni-
versity.
Hirsch, W.Z. (1995). Factors important in local governments’ privatization decisions. Urban
Affairs Quarterly, 31, 226–243.
KCI Technologies. (2005). Current practices in public-private partnerships for highways.
Available at www.mdta.maryland.gov/About/documents/currentpractise.pdf, accessed
July 20, 2009.
Kettl, D. (1989). Performance and accountability. Washington, DC: National Academy
of Public Administration.
Kouwenhoven, V. (1993). Public-private partnership: A model for the management of
public-private cooperation. In J. Kooiman (Ed.), Modern governance (pp. 119–130).
London: Sage.
Leitch, S., & Motion, J. (2003). Public-private partnerships: Consultation, cooperation and
collusion. Journal of Public Affairs, 3, 273–278.
Linder, S.H. (2000). Coming to terms with the public-private partnership. In P.V. Rosenau
(Ed.), Public-private partnerships (pp. 19–35). Cambridge: MIT Press.
Lockwood, S. (1998). The changing state DOT. Washington, DC: American Association
of State Highway and Transportation Officials.
Lockwood, S. (2000). Factors affecting the future of state DOTs as institutions. NCHRP
08-36/Task 12B. Washington, DC: Transportation Research Board.
Mackintosh, M. (1992). Partnership: Issues of policy and negotiation. Local Economy,
7, 210–224.
Medda, F. (2007). A game theory approach for the allocation of risks in transport public-
private partnerships. International Journal of Project Management, 25, 213–218.
Mitnick, B.M. (1975). The theory of agency. Public Choice, 24(1), 27–42.
National Academy of Public Administration. (1995). State Departments of Transporta-
tion: Strategies for change. NCHRP Report 371. Washington, DC: Transportation
Research Board.
Nijkamp, P., Van der Burch, M., & Vidigni, G. (2002). A comparative institutional evalua-
tion of public-private partnerships in Dutch urban land-use and revitalization projects.
Urban Studies, 39, 1865–1880.
North, D. (1990), Institutions, institutional change and economic performance. Cambridge:
Cambridge University Press.
Perez, B.G., & March, J.W. (2006). Public-private partnerships and the development of
transport infrastructure: Trends on both sides of the Atlantic. Edmonton: University
of Alberta, Institute of Public Economics.
Peters, B.G. (1998). With a little help from our friends: Public-private partnerships as
institutions and instruments. In J. Pierre (Ed.), Partnerships in urban governance (pp.
1–10). New York: St. Martin’s Press.
Poister, T.H., & Van Slyke, D.M. (2002). Strategic management innovations in state trans-
portation departments. Public Performance & Management Review, 26, 58–74.
Pongsiri, N. (2003). Public-private partnership in Thailand: A case study of the electric
utility industry. Public Policy and Administration, 16(3), 69–90.
Posner, P. (2002). Accountability challenges of third party government. In L.L. Salamon
(Ed.), The tools of government: A guide to new governance (pp. 523–551). Oxford:
Oxford University Press.
Prabhu, V.B., Robson, A., & Mitchell, E. (2002). Business excellence in the public sector—
A comparison of two sub-groups with the “private” service sector. TQM Journal, 14(1),
34–42.
Price, W.T. (2001). An odyssey of privatizing highways: The evolving case of 91 express
lanes. Public Works Management & Policy, 5, 259–269.
 Ni / The Risk-Averting Game of Transport Public-Private Partnership  273 

Rainey, H.G. (1997). Understanding and managing public organizations (2nd ed.). San
Francisco: Jossey-Bass.
Samuel, P. (1999, November 2). Farce & scandal: 91 Express “sale” to Newtrac unravels.
Tollroads News. Available at www.tollroadsnews.com/node/2458/, accessed July 20,
2009.
Savas, E.S. (1987). Privatization: The key to better government. Chatham, NJ: Chatham
House.
Savas, E.S. (2000). Privatization and public-private partnerships (2nd ed.). New York:
Chatham House.
Schaeffer, P.V., & Loveridge, S. (2002). Toward an understanding of types of public-private
cooperation. Public Performance & Management Review, 26, 169–189.
Scharle, P. (2002). Public-private partnership (PPP) as a social game. Innovation, 15,
227–252.
Spann, R.M. (1977). Public versus private provision of governmental services. In T.E.
Borcherding (Ed.), Budgets and bureaucrats: The sources of government growth (pp.
71–89). Durham: Duke University Press.
Stainback, J . (2000). Gain confidence in public-private partnerships. Public Management,
82(1), 23–24.
Sullivan, E. (1998). Evaluating the impacts of the SR 91 variable-toll express lane facility.
Final report to the Department of Transportation, State of California. San Luis Obispo:
Cal Poly State University, Department of Civil and Environmental Engineering.
Sundquist, J.L. (1984). Privatization: No panacea for what ails government. In H. Brooks,
L. Liebman, & C.S. Schelling (Eds.), Public-private partnership: New opportunities
for meeting social needs (pp. 303–318). Cambridge, MA: Ballinger.
Von Neumann, J. (1944). Theory of games and economic behavior. Princeton: Princeton
University Press.
Wettenhall, R. (2003). The rhetoric and reality of public-private partnerships. Public Or-
ganization Review, 3(1), 77–107.
Williamson, O.E. (1975). Markets and hierarchies: Analysis and antitrust implications.
New York: Free Press.
Williamson, O.E. (1985). The economic institutions of capitalism: Firms, markets, rela-
tional contracting. London: Collier-Macmillan.
274  ppmr / December 2012

Appendix. Chronology of 91EL

Event
1989 AB 680 passed on July 10
1990 RFQ issued in March
1990 RFQ issued in June
1991 Comprehensive Agreement executed in January
1993 Construction began in September
1995 Construction ended; road open to traffic in December
1996 Operation broke even in third month of operation
1998 Cash flow broke even in third year of operation
1999 CPTC filed a lawsuit against Caltrans in March
A settlement was reached in October
2001 CPTC refinanced its construction debt through a private placement offering of $135
million AAA-rated taxable bonds insured by XL Capital
2002 AB 1010 (Correa) passed
2003 OCTA acquired for $207.5 million on January 3
OCTA board of directors adopted new toll policy on July 14
First toll adjustment raised the maximum one-way toll to $5.50 on August 1
OCTA issued $195.265 million tax-exempt Toll Road Revenue Refunding Bonds in
November
2006 OCTA entered into a second operating agreement with CGM on January 3
2008 Senate Bill 1316 (Correa) passed in September
Honored with the International Bridge, Tunnel and Turnpike Association’s Toll
Excellence Award for tollway administration.

Anna Ya Ni is an assistant professor of public administration at California State

University, San Bernardino. Her research focuses on e-government, information
assurance, privatization, and organizational effectiveness.

View publication stats