In this issue:
- ANNUAL PRIVATIZATION REPORT 2022: Surface Transportation Trends
- INFRASTRUCTURE: Long-Term P3s Deliver Value and Effective Risk Management
- TRANSPORTATION: California High-Speed Rail Slows, Becomes Less Safe
- HOUSING: Local Governments Must Take Affordable Housing Lead
- NEWS & NOTES
- QUOTABLE QUOTES
Annual Privatization Report 2022: Surface Transportation
Reason Foundation has published the Annual Privatization Report, a thorough examination of contracting and public-private partnerships (P3s) at all levels of government, for more than 30 years. In the first section of the Annual Privatization Report 2022: Surface Transportation, Reason’s Baruch Feigenbaum details highway and passenger rail service public-private partnership projects throughout the world, including a thorough review of transportation policy trends across the United States.
Long-Term Infrastructure Partnerships Deliver Value, Shield Taxpayers from Risks
Private firms are often well-positioned to assume financial risks associated with potential cost overruns and delays that can occur on infrastructure projects. Public-private partnerships allow government agencies to work with companies to effectively deliver and maintain infrastructure, providing an essential risk management tool for agencies looking to limit risks to taxpayers while maintaining infrastructure assets. In this backgrounder, Reason’s Robert Poole explores some of the benefits and tradeoffs of revenue-risk and availability payment approaches to long-term transportation P3s.
California High-Speed Rail Meets Facts on the Ground
The original California high-speed rail ballot initiative promised voters a trip from San Francisco to Los Angeles in under three hours, with trains traveling 220 miles per hour. In a new article, Reason’s Marc Joffe details some of the project’s latest developments including the decision to share sections of track with commuter trains, which significantly slows speeds and presents a growing safety risk to drivers and pedestrians.
Local Governments Must Play Lead Role in Affordable Housing
As housing prices continue to rise and impact more Americans, many of the key solutions are more likely to be found at a local level. In a recent article, Baruch Feigenbaum outlines how changes to zoning laws, building-approval processes, and height limits could help increase the supply of housing.
NEWS & NOTES
WATER
California Coastal Commission Votes Down Los Angeles Area Desalination Plant: The California Coastal Commission voted unanimously to deny the construction of a $1.4 billion desalination plant in Huntington Beach. The plant would have been similar in size to the existing desalination plant in Carlsbad, which can generate up to 50 million gallons of potable water per day and provides around 10% of drinking water to San Diego area residents.
Maryland and Baltimore Spar Over Wastewater Treatment Plant Takeover: Maryland’s secretary of environment directed the Maryland Environmental Service to take over operations at the city of Baltimore’s Back River Wastewater Treatment Plant. Inadequate maintenance and staffing have long contributed to the treatment plant’s excessive pollution problems, which include a backup of underground sewage that extends 10 miles. After a recent inspection, Maryland’s Department of the Environment (MDE) notified the city that it had two days to comply with established pollution discharge permits and then issued the directive after the city could not comply in the short window. The directive requires MDE to charge the city for the work it completes until the city addresses pollution and operational issues. In response, Baltimore filed a complaint aiming to end the takeover through an expedited court decision that would occur between late May and late July.
Pennsylvania City Gets Agency Approval for Sewer Sale: In April, the Pennsylvania Public Utility Commission approved the sale of York’s sewer system to Pennsylvania American Water. The $235 million deal affects over 40,000 customers in the city and surrounding townships. Local government leaders cited a budget shortfall and the need to avoid service cuts as motivations for the sale. Local ratepayers will endure an initial heavy rate increase of about 48%—the city was planning a 41% increase prior to the sale—in the first year of the agreement, preceding a three-year rate freeze.
TRANSPORTATION
Renewed Purple Line Agreement Reaches Financial Close: The Maryland Department of Transportation, the Maryland Transit Administration, and private consortium Maryland Transit Solutions reached financial close on the $3.7 billion restructured Purple Line P3 project. The light rail project stretches 16 miles through DC-area Montgomery and Prince George’s counties. The route includes 21 stations with four providing easy access to the DC Metrorail system. Delays have pushed the project’s expected completion date to 2026.
Retired CalTrans Contract Manager Guilty of Corruption: Former California Department of Transportation (Caltrans) Contract Manager Choon Foo “Keith” Yong pled guilty to rigging competitive bidding processes and receiving bribes for contracts he oversaw. From 2014 until his 2019 retirement, Yong worked with companies bidding on around $8 million in Caltrans contracts so preferred firms would win. Co-conspirator firms would receive a kickback from the winning firm and Yong would receive bribes, which totaled around $800,000 in cash, wine, furniture, and remodeling services. Yong faces up to a total of 20 years in prison and $1.25 million in fines.
LA Seeks Parking Management Partner: The Los Angeles Department of Transportation issued a request for proposals (RFP) for the management of parking violations and permits. The estimated $70 million annual contract would also have the private contractor develop and operate software and hardware systems for managing parking, assisting in parking enforcement, and supplying customer service. After a July deadline on proposals, the city hopes to announce a winner in late September.
Michigan K-12 District Considers Transportation Contracting: Bay City Public Schools (BCPS) issued an RFP to find a partner to handle student transportation for the Michigan school district. BCPS looks to enter an initial two-year contract, with the school district retaining the right the negotiate an extension. After a late May deadline on proposals, BCPS hopes to announce the contract winner in June, which would begin the contract in July. BCPS will supply facilities, fleet, and maintenance for providing the service, making the contract focused on driving operations.
LOCAL GOVERNMENT
Indianapolis Suburb Gets Strong Response for Sports Complex Sale: As of early May, the city of Westfield, Indiana had received 16 responses from firms interested in purchasing or operating the Grand Park Sports Complex, which spans 400 acres and includes the training facilities for the Indianapolis Colts. The city announced the sale in March, with supporters noting the park covered its operating expenses but has started to lose money overall due to depreciation nearly equal to operating expenses. If the facility is sold, Westfield hopes to pay off $80 million in debt secured for the complex. The city will continue to accept proposals, which must include the retention of all city employees involved for at least two years, until late June.
La Crosse Explores Outsourcing Entertainment Complex Management: The city of La Crosse, Wisconsin, issued a request for expressions of interest to find a potential partner to operate and manage the city’s La Crosse Center. The entertainment and convention complex opened in 1980 and has grown over the years to include 120,000 square feet of space, including a recently completed $40 million renovation and expansion. If the city is satisfied with the responses, it will issue an RFP to shortlisted firms later this year.
QUOTABLE QUOTES
“The [Maryland Department of the Environment] has determined that the decline in the proper maintenance and operation of the plant risks catastrophic failures at the Plant that may result in environmental harm as well as adverse public health and comfort effects.”
– From a directive issued by the Maryland Department of the Environment calling for the state takeover of the Baltimore-area Back River Wastewater Treatment Facility.
“The City of York is facing an unsustainable financial situation, which will require significant tax and fee increases and painful cuts to essential services – including the police department – to balance the budget and pay the City’s bills. Such a plan would be catastrophic to City residents and businesses and would likely reverse the recent economic gains that have been made in the City of York.”
– From York’s FAQ page on why the city’s sewer was put up for sale.
“The City has been fortunate to have excellent leaders and staff to guide Grand Park since its inception, as well as great partners for its operations. But even their monumental efforts have a ceiling because of red tape inherent in operating Grand Park as a municipality. So, we are at a point at which we need the private sector’s input on how Grand Park can reach new heights for the benefit of the City and its residents.”
– Andy Cook, mayor of Westfield, on the proposed sale of a 400-acre sports complex.