Home » Media Center » The Communicator » eCOMMUNICATOR – PPPs, design-build can send taxpayers down long, rough road – March 2017
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Public-private partnerships, design-build can send taxpayers down long, rough road

Public-private partnerships (also called PPPs and P3s) is a term used to describe contracts where government entities turn over public services to private, for-profit businesses to build, own and operate.  President Trump strongly favors them and it is likely much of the massive infrastructure funding and effort that he has promised will be channeled toward PPPs.

PPPs are not a new concept, so they have a record of how they have worked out in the past and how some of them are working today.

Members of the PEF labor-management committee at the state Transportation Department (DOT) think the public should be aware often unforeseen problems can arise when public services are operated purely for profit.

photo“Fighting privatization is going to have to be at the top of our list of priorities from now on,” said Karen Patterson, a civil engineer 1 working in Hornell. She cites this example of taxpayers getting the short end of the stick with a PPP in Virginia.

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The problem arises from a 2011 agreement that state signed to turn the construction and operation of the Elizabeth River Tunnel project in the state’s Hampton Roads area over to a private, for-profit Swedish consortium, Elizabeth River Crossings Op Co LLC. The agreement is for 58 years and it contains a clause that requires the state to reimburse the consortium for any money it loses on the tolls it charges vehicles to use the Elizabeth Rivers Tunnel if those losses are caused by competition from any new bridges or tunnels that are built nearby.

The Hampton Roads region (at the southeast corner of the Chesapeake Bay) is honeycombed with rivers, inlets, and bays and an intricate web of tunnels and bridges for crossing  them. Virginia is now looking to ease some of the continuing traffic congestion in this very busy area by beginning a new Hampton Roads Bridge-Tunnel expansion. And there lies the rub.

The new project is aimed at easing congestion on I-64 and is expected to cost $3.3 billion. The project would construct a new tunnel parallel to the existing Hampton Roads Tunnel adding two more lanes to the existing four lanes. No one is sure how much those new lanes would reduce traffic and tolls on the Elizabeth River Tunnel, but the estimates are a few hundreds of millions of dollars racked up between the opening of the expansion and the end of the Elizabeth River Tunnel agreement in 2069.

That might not be the only hit to taxpayers, however, because Virginia is contemplating more projects in the area that could impinge on Elizabeth River Tunnel traffic and tolls. The consortium has reportedly told its investors the state might end up paying $774 million over the life of the agreement.

photo“This is a classic example of how states can tie their own hands and needlessly raise costs for taxpayers when public work is handed off to companies focused on profits,” said PEF Executive Board member Paul Gendron, who is PEF’s L-M chair at DOT. “In New York, proposals to expand design-build policies, that expand PPPs, are rife with needless risks of costly issues, both up front and down the road. We must help lawmakers understand design-build needs a big ‘Rough Road Ahead’ warning sign.”

THeCOMMUNICATOR – March 2017 Contents – PDF

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