California High-Speed Rail Authority Executive Director Mehdi Morshed, joined Governor Schwarzenegger Tuesday in participating in a roundtable discussion at the State Capitol regarding the importance of investing in California's infrastructure and maintaining the state's economic growth through public private partnerships.
Mr. Morshed noted the California proposed system of high-speed trains offers a unique opportunity to develop a new model for "P3" or public private partnership financing....
Mr. Morshed noted that high-speed trains are attractive to private investors because California's proposed system will bring a $1 billion annual profit or surplus, once built.
Now it's not as if this is totally new. The 2002 Implementation Plan always envisioned that private financing would play some sort of role in the HSR project, although at the time it was expected to be limited to the bonds.
But what exactly is meant by "private financing" - and how bad might this really be for HSR?
The Authority's finance team anticipates public-private partnership opportunities will include project debt financing, vendor financing, system operations and private ownership.
I can live with private involvement in debt and vendor financing, even though government can always borrow more cheaply. System operations is iffy at best - government runs the French, Spanish, German, and Japanese lines quite well, and when system operations were privatized in Britain, the results were deadly. Private ownership, however, is a line we must not cross - public ownership of infrastructure is key to an effective, safe, and affordable transportation system for Californians. High speed rail is an economic catalyst and an environmental and sustainablity necessity. It needs to be held in public hands for public uses, and not hollowed out for private profit.
Back in November Arnold Schwarzenegger announced that he was going to undertake a new initiative to privatize more of the building and management of public works projects here in California. Known as "public-private partnerships" or "P3," they've been employed around the world with poor results. At the time I denounced it as a dangerous giveaway, and Democratic candidate for AD-27 (should Prop 93 fail) Emily Reilly added her perspective on the failure of outsourcing design/build projects.
The Schwarzenegger administration is contemplating a plan, probably requiring state legislation, to create a California agency to oversee state and local public-private partnerships, aides said. Modeled after one in British Columbia, it would be staffed by professional financiers and other experts who could oversee the structuring of deals by both state and local governments.
But in reality, the BC model is NOT one we want to follow, as it instead proves that P3 is a costly waste that gives us nothing but higher costs and poorer quality services. So argues Bill Tieleman, one of the province's leading left-of-center voices. Tieleman claims BC Premier Gordon Campbell, a right-wing champion of P3, has "pulled the wool over the terminator's eyes" on these projects:
In the vast majority of examples here in B.C. and elsewhere, the costs are higher as the public gets hosed to provide private corporations with substantial profits.
The Abbotsford Hospital and Cancer Centre was to cost $211 million under the original P3 budget and open in 2005 - the current estimated cost is $355 million, a 68 per cent jump, and it will open this year instead.
The William Bennett Bridge in Kelowna - priced at $100 million, now estimated at $170 million, up 70 per cent.
The rapid transit Canada Line to the airport was budgeted at $1.55 billion but will now cost $2 billion, or 29 per cent more.
Or look to Brampton, Ont., which was promised a new P3 hospital with 608 beds for $350 million. It now has a hospital with just 479 beds for $550 million.
Read on for more details and examples of how this is already being implemented, without a vote of the Legislature...
Because apparently everybody loves an overpriced and overhyped idea, the Governator wants to do some more public-private partnerships for road maintenance and such:
Gov. Arnold Schwarzenegger on Wednesday proposed an expanded push for public-private partnerships and set a goal to add 20,000 new engineers to California's work force as part of his upcoming January budget plan.
The Schwarzenegger administration wants the state to expand the types of public projects that can be built with the financial might of private companies.Current law does not allow state government broad authority to use this type of contracting - known as a Performance Based Infrastructure - except in emergencies or through legislative approval. (SacBee 12.27.07)
The thing is, as both Robert and I have argued, they don't actually end up cheaper, or more efficient. Sure, they have success stories here and there, but overwhelmingly, what ends up happening is once the cameras disappear from the press conferences hyping these P3s, the bill gets higher as the owners of the corporation demand higher and higher profits. Oh, and they don't have the same labor standards as state agencies do.
So, yeah, let's line the pockets of investors with our state general fund. Sounds like a great plan.
Gov. Arnold Schwarzenegger signaled a major push today to engage private companies in the construction and management of state and local infrastructure, adopting a strategy employed in Canada, Britain and elsewhere...
The Schwarzenegger administration is contemplating a plan, probably requiring state legislation, to create a California agency to oversee state and local public-private partnerships, aides said. Modeled after one in British Columbia, it would be staffed by professional financiers and other experts who could oversee the structuring of deals by both state and local governments.
As Brian explained in his excellent Pat Brown is Rolling Over In His Grave post last month, this push is part of a broader assault on the public ownership and operation of our basic infrastructure. The LA Times does not quote a single opponent of privatization, instead casting opponents as merely greedy special interests wanting to protect their fief:
opposition from labor unions and from legislators reluctant to give up too much control over big spending projects.
One of Arnold's financial advisors, David Crane, is allowed to declare that this is about innovation and progress:
Whereas we're a very innovative state in many ways, when it comes to infrastructure we are less innovative, and the governor intends to bring public-private partnerships into our portfolio.
