News / Principles for Public Private Partnerships and California's High-Speed Rail Project

Principles for Public Private Partnerships and California's High-Speed Rail Project

🕔 July 24, 2011

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The research report released by CALPIRG Education Fund examines the experience with public-private partnerships for high-speed rail in other countries and the U.S. It aims to guide California's officials on structuring the future PPP/P3 contract of the California's high speed rail project.

According to its press release:
The report comes at a time when California is preparing to start laying the first tracks for high-speed rail in 2012, and Congress and state officials are debating future funding. Meanwhile, the U.S. House Transportation and Infrastructure chair has proposed privatizing Amtrak with the hope of garnering private financing for new bullet trains along the Northeast.
"The report shows that private financing can be a supplement but not a substitute for public commitments to support high-speed rail," said Emily Rusch, State Director for CALPIRG Education Fund. "In other nations the majority of support comes from the public sector. The rail companies overseas often have public ownership and the public on their board like a public utility or Amtrak.
The report examines high speed rail expierences in countries such as Portugal, Taiwan, Netherlands and Great Britain. All of them have had many problems in the implementation process.What we have learned clearly from all these experiences is that private finance should just support the public investment. See the following international examples, according to the report:
  • The Netherlands' HSL-Zuid line -which links Amsterdam and Rotterdam in the Netherlands to Belgium-relied on the public sector for 86 % of its budget.
  • The Perpignan-Figueres high-speed rail connection between France and Spain benefited from a public investment of 57 % of project costs.
  • The initial segment of Portugal's high-speed rail network is projected to be built with 55 % of its budget coming from public sources.
  • The new Tours-Bordeaux high-speed rail line in France will be built with 50 % public investment from France and the European Union
According to the report, the principles that should guide California's approach to PPPs are:1) Governments must only pursue PPPs for the "right" reasons, such as the ability to deliver a public project for lower price or with higher quality-rather than use PPPs to avoid budgetary discipline or compliance with labor standards or other regulations governing public projects.2) PPPs must deliver added value for the taxpayer, as measured by a comprehensive test that includes all the relevant costs of a high-speed rail project.3) PPPs must align private sector incentives with public sector goals, ensuring that private sector partners experience penalties and rewards that forward the public's interest in timely and cost-effective completion of the project and effective and safe operation.4) PPPs must only be pursued where ample competition exists for the service being put out for bid.5) PPPs must only be pursued by competent, well-prepared governments with the ability to defend the public interest in contract negotiations and to properly monitor and enforce contracts as they are carried out. In California, that means the California High-Speed Rail Authority will need more dedicated staffing as more contracts are signed.6) There must be clear public accountability in PPP projects, with one government agency responsible for overseeing the project and holding contractors accountable for their performance. In California, the California High-Speed Rail Authority is set up to be the responsible agency, and their public accountability should flow directly up to the governor's office.7) The public must retain control over key transportation-system decisions, ensuring that high-speed rail lines are built and operated in ways that are consistent with the public interest rather than the maximization of private profit.8) PPP projects must not impose unreasonable limitations on future government action, such as the "non-compete" clauses in some toll road leases that forbid government from improving other nearby transportation facilities.9) PPP contracts should be of reasonable length, with contracts for the operation and maintenance of long lasting infrastructure being longer than contracts for trains, communications equipment and other items with faster turnover.10) There must be complete transparency in the PPP contracting process and in the execution of PPP contracts. When there is a conflict between public right to be informed and private investors' confidentiality rights, the former should prevail. In California, key public private partnership contracts with the High-Speed Rail Authority should be posted on the state's website.Download the report here.
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