Principles for High-Speed Rail Public-Private Partnerships
By Emily Rusch
CALPIRG Education Fund
As California prepares to start laying the first tracks for high-speed rail in 2012, a new report by CALPIRG Education Fund outlines the promise and pitfalls to avoid as California considers new public-private partnerships to complete our high-speed rail project.
While many in Congress are having trouble finding money to invest in high-speed rail, we must always remember the costs of not moving forward. Without high-speed rail, we will be more dependent on oil and will pay dearly to build more airport runways and ever-wider highways. For these reasons, among others, high-speed rail makes financial, economic, and environmental sense for California.
Our report, High-Speed Rail: Public, Private or Both? Assessing the Prospects, Promise and Pitfalls of Public-Private Partnerships, found that private financing can be a supplement but not a substitute for public commitments to support high-speed rail. 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. California already knows this, which is why we’ve committed public funds to the project already. However, we also know that we want to engage the private sector in our project in the future.
Partnerships must have the highest levels of transparency, clear rules of accountability, and strong public capacity for monitoring and enforcing agreements. Without these, public-private partnerships in other countries have often run into trouble. When private financing has been used as a short-cut around public funding, taxpayers often end up paying dearly
Therefore, CALPIRG Education Fund recommends that California policymakers follow the following ten principles as we look to new public-private partnerships:
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.
The report is available at http:www.calpirg.org/report.
Emily Rusch is the State Director of CALPIRG and CALPIRG Education Fund.