In recent years, one approach to infrastructure building on which state and local governments have increasingly relied is the public-private partnership (P3). P3s place a broad range of project responsibilities and risks onto private entities, some of which were traditionally borne by public agencies alone. Typically, a P3 agreement calls on the private partner to not only design and build a facility, but also to finance, operate and maintain it. In exchange, the private party may be entitled to tolls or user fees that the facility generates, or may receive direct payments from the government. In this article, we discuss the status of California law as it applies to P3s and examine a debate in progress surrounding a P3 project in Long Beach.
California statutory law authorizes the use of P3s for certain state and local government projects. As described below, P3s are authorized for Caltrans, the Judicial Branch, the High-Speed Rail Authority (HSRA) and local government agencies.
In 1989, the Legislature authorized Caltrans to use P3 arrangements on up to four projects. Caltrans subsequently entered into two P3 agreements, one to build toll lanes on State Route (SR) 91 in Orange County, and the second to build SR 1251, which connects the Otay Mesa border-crossing area with the state highway system. Each contract required the private developer to design, build, finance, operate and maintain the facility.
Caltrans’ P3 authority was amended in 2009 in California Streets & Highways Code Section 143. That year, the Legislature authorized Caltrans to enter into an unlimited number of P3 agreements for various transport infrastructure projects through 2016. Such projects must achieve one or more objectives as determined by the California Transportation Commission. These objectives include improving travel times and reducing transportation delays; improving transportation operation or safety; providing quantifiable air quality benefits; and meeting a forecasted demand of transportation. All Caltrans P3 agreements must, also, undergo a 60-day review by the Legislature and the California Public Infrastructure Advisory Commission prior to being signed.
After passage of the 2009 statute, Caltrans entered into a P3 agreement for Phase II of the Presidio Parkway project in San Francisco. The agreement calls on the private partner to design, build and finance the second phase of a roadway replacing Doyle Drive, a 1.6-mile segment of Route 101 that provides southern access to the Golden Gate Bridge. The private entity is also responsible for operating and maintaining the structure for 30 years. In return, the state agreed to pay the private partner an estimated $1.1 billion over the duration of the contract.