Two stories hit my desk last week that highlight the place of tolls and public-private partnerships in the debate on infrastructure funding.
The South Bay Expressway was touted as an example of how public-private partnerships could work. But only a few years after it opened, it filed for bankruptcy reorganization.
First, there was this Reason-Rupe opinion poll
finding that 77% of those polled oppose increasing the federal fuel tax, while 58% thought new roads and highways should be funded by tolls, and 55% favored using public-private partnerships to build critical infrastructure projects.
This followed a recent town hall meeting
where presidential hopeful Mitt Romney Romney said he doesn't like borrowing, but is willing to do it if there's a specific revenue stream to pay it back -- and specifically used tolls as an example.
It's not the first survey to put numbers to Americans' reluctance to pay higher fuel taxes, even though most agree that something needs to be done about our infrastructure. In a study done almost a year ago by the Rockefeller Foundation, only 27% said that raising the federal gasoline tax would be an "acceptable" way to provide more highway funding. Instead, most survey respondents supported more private investment as an acceptable option for raising more transportation money.
Yet as this story illustrates,
public-private partnerships aren't a slam-dunk.
In 2003, southern California officials got a $140 million loan through the Transportation Infrastructure Finance and Innovation Act, or TIFIA, for the South Bay Expressway
in San Diego County. It was the first tollroad to get a TIFIA loan, according to published reports. TIFIA is today being touted as a partial solution for the country's infrastructure funding crisis.
Then-Transportation Secretary Norman Mineta called the loan "a TIFIA success story, demonstrating how innovative federal financing tools can attract private investment to critical transportation projects."
Officially owned by the California Department of Transportation, the toll road would be leased to a group of private backers until 2042. Those private backers expected that with the rapid suburban growth near San Diego, they would get a handsome return on their investment.
But this public-private partnership didn't work out so well, thanks to the housing bust. As Tollroads News
pointed out in reporting on the bankruptcy filing, "The tollroad is located in the west coast's 'Subprime Central' zone or mortgage walkaway country on the eastern fringe of suburban development. A boom area for a couple of decades everything stopped just as the road opened."
The road also was hit by a drop-off in U.S.-Mexico trade when Mexico hit the U.S. with punitive tariffs for not opening the border to cross-border trucking as agreed to under NAFTA.
The South Bay Expressway company filed for Chapter 11 bankruptcy reorganization in March of 2010. After emerging from it in April, the 10-mile toll road was sold to the San Diego Association of Governments last month. Well, actually they didn't buy the road, since the government already owned it. What they bought was the operating lease to operate the road and collect tolls for the balance of the contract -- about 31 years.
Macquarie, a big Australian infrastructure investment company that was one of the backers, wrote the road off as a loss. Interestingly, however, the federal government says it will at least break even on its loan.
As the writer of this article points out, "The road's tortured history, and especially its journey through bankruptcy court, are enough to convince critics of PPPs that this is one bet the feds never should have made."