By Lauren Dezenski
The Boston University Statehouse Program
What’s a cash-strapped state to do when faced with a laundry list of needed road and bridge improvements? Consider another route.
A commission created by Gov. Deval Patrick in 2009 is assessing a list of highway projects, including a plan to add road and bridge capacity to Cape Cod, that could be funded through a growing option being tried elsewhere: the public-private partnership.
“You’re leveraging the private dollars to go for the public good,” said Charlie McCabe, spokesman for the Rose Fitzgerald Kennedy Greenway Conservancy, private nonprofit that runs and maintains the state-owned Boston public
The model, which has had success in California and other states, encourages private investors and construction companies to finance and build toll projects in exchange for the right to charge tolls.
These kinds of partnerships are being studied as possible solutions to Route 3’s Hingham bottleneck, a second Sagamore Bridge, and as revenue-producing opportunities in some of the 133 state-owned rest areas, weigh stations and park-and-rides.
Route 3 could see the first “high occupancy toll” lane — HOT, for short — in the state, which would create a dedicated toll lane for nine miles from the Braintree split to Exit 14 in Rockland where the road drops from three lanes to two. The stretch of roadway would be built by a private developer who would use open-road tolling to recoup construction costs and make a profit.
With a public-private partnership, it’s possible these commuting headaches could be resolved rather than be stymied by a lack of public funds.
A public-private partnership is generally defined by “a heavy initial investment recovered in a long-term contract, with the private partner building, operating and maintaining a project, and internalizing the life-cycle costs of a project,” according to a 2011 study by the Brookings Institution’s Hamilton Project.
Under the system, the infrastructure project is eventually handed back to public control.
But the study cautioned public-private partnerships are not “a free lunch.”
“For example, when a state or local government sets up a PPP to build, maintain and operate a highway in exchange for toll revenue, drivers are still on the hook for tolls and the government relinquishes future toll revenues,” the study’s authors wrote. “Similarly, if the government leases an existing highway in exchange for a lump sum payment, it is exchanging future flows of toll revenue for present funds.”
California used a public-private partnership to combat one of its most infamous traffic nightmares, Route 91, the eight-lane freeway connecting Riverside and San Bernardino counties with Orange County and Los Angeles.
To end daily traffic delays, the state partnered with a consortium of construction firms that formed the California Private Transportation Company to build Route 91 Express Lanes, a $130 million, 10-mile, four-lane toll project built in the median of the existing highway. The lanes were opened to traffic on Dec. 27, 1995.
Under the plan, the California Department of Transportation took ownership of the lanes then leased them back to CTPC for 35 years. Under the terms of the lease, the private company pays for maintenance, operations along with police services from the California Highway Patrol — an estimated $120 million in savings for the state over the 35-year lease period.
In exchange, CTPC charged tolls to motorists willing to pay extra to use the freer-flowing “Lexus Lanes.”
The revenue stream from the tolls was so successful that the Orange County Transportation Authority purchased the toll road lease from CTPC in 2002 for $207.5 million.
In 2009, then-Gov. Arnold Schwarzenegger signed legislation allowing regional transportation authorities and the state to undertake an unlimited number of similar public-private partnerships. The legislation also removed restrictions on the number and type of projects the state could undertake.
Public-private partnerships have been used to create American infrastructure since the country’s infancy. In 1793, Pennsylvania worked with a private company to build the country’s first turnpike between Lancaster and Pennsylvania.
In 2005, a private company paid the state of Indiana $3.8 billion to operate, maintain and upgrade the 157-mile-long Indiana Toll Road in exchange for the road’s toll revenues for the next 75 years. The road, part of the U.S. Interstate Highway System, connects the Chicago Skyway to the Ohio Turnpike.
Gov. Mitch Daniels lauded the business deal, which plugged a $3 billion shortfall between the government’s fiscal and infrastructure deficits and refilled the state’s coffers. The deal garnered more than a state-commissioned analysis into the project anticipated.
Massachusetts already has some smaller-scale projects in this model. Boston’s 1.5 mile-long Rose F. Kennedy Greenway park, built over the city’s Big Dig highway, is maintained through a public-private partnership between the Massachusetts Turnpike Authority and the Rose Fitzgerald Kennedy Greenway Conservancy, Inc., a nonprofit group that manages the corridor of walking paths and parks parallel to the city’s waterfront.
After the park was completed in 2008, the conservancy began a five-year lease with the state to provide maintenance and operation for the park.
With 40 percent of the conservancy’s budget coming from the state, it’s up to the nonprofit to privately raise 60 percent to continue to run the park. That money comes anywhere from a yearly fundraising gala, farmers markets, food trucks and the Greenway Carousel ride.
“It’s a good example of something that creates a benefit because it adds something to the Greenway and helps us run,” McCabe, the conservancy’s spokesman, said of the iconic carousel.
The greenway could be just a start. The state’s Public-Private Partnership Oversight Commission is in the midst of drawing up a request for proposal, known bureaucratically as an RFP, that would go out to private groups interested in investing in and building public infrastructure projects.
Dana R. Levenson, MassDOT CEO, said there has been initial public support especially for a new span running parallel to the Sagamore Bridge over the Cape Cod Canal.
The average annual daily traffic on the bridge is 22,100 vehicles per day in each direction. During the peak season, that figure jumps to 40,000 vehicles.
Although another bridge would benefit the legions of travelers going on and off the Cape, the state has too many other more pressing projects in need of limited public infrastructure dollars.
“The only way to add the bridge was to have someone else go out and do the construction and the financing,” Levenson said.
Because the state has to target 80 percent of its limited highway funds to repair decaying structures or support economic development, the Public-Private Partnership Oversight Commission was established to determine whether a third Cape Cod bridge would be economically feasible.
While soliciting public comment on a potential twin Sagamore Bridge in December, the Cape Cod Chamber of Commerce voiced its support for the project.
“The existing highway roads are utilized and very little land taking is required,” the chamber wrote about the proposed bridge. “Public safety is increased during weather events while protected travel lanes minimize accidents. Users have an option of the Bourne Bridge if they prefer to not pay a toll for the new on-Cape feature.”
The commission contracted the financial advisory services firm KPMG that has recommended the state spend the summer conducting traffic and revenue studies, funding cost analysis, market sounding and legal assessment.
KPMG estimates these efforts could cost MassDOT $1 million, though in February, MassDOT spokeswoman Sara Lavoie said that number could change.
From those findings, MassDOT would issue a request for qualification, creating a shortlist of qualified bidders who could later submit building proposals. The commission hopes the request will be ready by late September leading to final proposals from bidders by spring of 2015.
The winning bidder would be able to recoup construction costs with revenue from tolls on the new bridge, coupled with new tolls for motorists using the Sagamore Bridge, Levenson said.