Purpose

To consolidate, disseminate, and gather information concerning the 710 expansion into our San Rafael neighborhood and into our surrounding neighborhoods. If you have an item that you would like posted on this blog, please e-mail the item to Peggy Drouet at pdrouet@earthlink.net

Sunday, February 23, 2014

Opinion: U.S. 36 partnership good for Colorado

http://www.dailycamera.com/guest-opinions/ci_25202249/u-s-36-partnership-good-colorado

By Dan Gibbs, Jack Hilbert, and Will Tour, February 23, 2014


We have been distressed to see the misinformation circulated about the U.S. 36 managed lanes project and the public private partnership (PPP) that helps finance it. You may have gotten the same "robocalls" or emails that some of us have — lurid claims that the state is selling U.S. 36 to a foreign corporation, all lanes will be tolled, you will have to pay $28 every time you drive on 36, and the contract prohibits transportation improvements on parallel roads. Scary stuff — if it were true! As current and former elected officials who have been involved in transportation for years, we would like to set the record straight.

The U.S. 36 project will rebuild the existing lanes, add a bikeway, and add one additional managed lane in each direction, which will be free to bus rapid transit (BRT) vehicles and 3-plus person carpools, and can be used by toll paying single occupant vehicles. The existing lanes will not be tolled.

The managed lane will move more people more quickly than a traditional lane because each bus and carpool will have more passengers than a single occupant vehicle and the bus, carpool, or toll paying vehicle will be 20-25 minutes faster than driving in the existing lanes during rush hour. Planners expect nearly 20,000 bus riders every day in these lanes! The old way of business, letting all vehicles use the lane at no cost, would just fill them with congestion; there would be no travel time savings for carpoolers, bus riders or drivers who choose to pay the toll.

The combination of carpool, toll, and transit offer several congestion-free choices, and mean that residents of all incomes will benefit. And, the existing lanes will remain free but will be rebuilt to be in much better shape, partially funded by those who pay the toll to use the new lanes.

Tolling has been part of the plans for years, as approved by a federal environmental impact analysis that had multiple public hearings, hundreds of public comments, and support from all the local governments along the corridor. The tolls will be there with or without a PPP. And the toll levels will be pretty much the same — high enough to assure free flow for the buses and carpools, and low enough to remain attractive to toll paying vehicles.

Coloradans have little appetite to increase taxes for transportation. Recent polling showed that only about 40 percent of voters would support raising sales taxes for transportation, (and support was even lower for a gas tax increase.) If we want to make improvements to our transportation system, these partnerships are a key way to leverage the funds we do have.

CDOT does not have enough money to complete this project all the way to Boulder. This partnership fills the gap, allowing the project to be completed in 2016. Without this, it could be years before the managed lanes make it to Boulder. We get the project benefits years earlier — and save money compared to finishing the project at some time in the future, when everything will cost more.
PPPs need to be well designed, but there is nothing nefarious about them.

It is misleading to describe a project like U.S. 36 as privatization — the state owns the road, the state sets the tolls, and RTD provides the transit service. The contractor builds the infrastructure and maintains the road, and will be paid back by those who use the new lanes. They have multiple contractual obligations — ensuring free flow for buses, adequate maintenance of the road, and much more. They are required to pay decent wages and benefits. The contract gives no right to block improvements to other roads or transit services. Once the private sector partner makes certain revenue targets the state starts sharing in the toll revenue — and the state share must be spent on transportation in the corridor, including public transit. This is a good deal for our citizens.

This is not the first PPP in Colorado. This is how RTD is building the rail lines along I-225, to the airport, to Arvada, to Westminster, and north up I-25. If we want to see improvements to other corridors in the state, more PPPs are going to be necessary.

Certainly, there are ways to improve the process. The fact that contract details were not publically released fueled suspicion of the process. And, while this contract is a good one, there are deals in other states that have been poorly constructed, and we do need appropriate safeguards to make sure these are done right. Going forward, we encourage CDOT and the legislature to ensure greater transparency and opportunities for public input in the PPP process, while still allowing well-crafted partnerships that meet the needs of Colorado.

  Commissioner.
Dan Gibbs is a Summit County Commissioner, and former chair of the Senate Transportation Committee; Jack Hilbert is a Douglas County Commissioner and vice-chair of the Denver Regional Council of Governments; Will Toor is the transportation program director at the Southwest Energy Efficiency Project, and former Boulder Mayor and Boulder County Commissioner.

Comments to the Article


re: "PPPs need to be well designed, but there is nothing nefarious about them. "

They are nefarious in the sense that they are a bad deal for the public, the reason they are being pushed is to avoid asking the voters to approve debt and/or tax increases. Also as I keep repeating for those new to the topic: 


The major problem of course is that they are talking about a 50 year contract. A major benefit of using the private sector rather than the public sector for things comes from competition, which this eliminates for decades for this service. A 50 year contract for any sort of service like this absurd, there is no way to know that the best company to operate something now will be the best company to operate it in ten years. Even in the mundane world of roads it is likely that new materials and technology will change over the years. Aspects of the transportation system and needs may vary over time in ways hard to predict that a contract now may not take into account. This isn't being pushed by anyone who advocates for free markets and smaller government, this is "crony capitalism", handing favors to connected companies for no good reason. Those who take the contract now are unlikely to even still be working for the company by the time it is over.

Outsourcing contracts for short periods as is standard practice for most usage of private contractors makes sense since they are at least subject to some competition when they are re-bid and so there is incentive to do a good job. In this case a company could skimp on things for 50 years and profit, and since it is a monopoly likely get away with it unless they are enough worse that side streets are better than the highway. They may not get a contract renewal, but for a 50 year scam they may not care (they may realize how drastically the world may have changed by then in terms of transportation technology and needs and figure it is silly to worry about a renewal). Or perhaps after 40 years they could do a better job the last 10 and pretend it was because of a change in management and that the contract should be renewed despite what they did the first forty and probably get away with it if they have the right political connections, given the public tends to have a short memory.

This is an attempt to avoid the government doing what it normally would do to deal with roads: cutting back on its spending elsewhere to be able to be able to afford to perform basic functions like dealing with roads, and/or going to the voters to ask for increases in taxes and/or debt if they claim somehow they can't find enough waste to cut (the private sector overall improves productivity each year, it is able to do more with less, government needs to start following its example). There is no benefit to getting private financing in this case, except to the sleazy bureaucrats that wish to avoid either doing their jobs or asking the voters to bail them out if they are unable to do so without more money. Governments tend to be able to finance things at lower costs than private entities. 


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 "As the Globe and Mail reported last fall, in a study of 28 Ontario P3 projects, researchers found that “public-private partnerships cost an average of 16% more than conventional tendered contracts.” This is largely because private borrowers typically pay higher interests rates for their financing than do governments...
For example, in the construction of the Cobequid Pass in Nova Scotia, private financiers put up $66 million. The government of Nova Scotia is reimbursing them more that $300 million over 30 years, paying them an effective interest rate of 10%. This is more than twice what the government would have paid in borrowing costs if it had financed the project itself....

P3s entail complex arrangements between consortiums of partners that can be expensive to negotiate. The transaction costs for lawyers and consultants alone can add 3% to the final bill. The complex nature of these negotiations can add delays in construction and completion of the projects. Private shareholders also expect a good return on their investment. The contract they negotiate will seek to lock in profits to the consortium over the length of the contract. The final price charged to the governments will include these costs....

Governments nevertheless continue to farm out infrastructure projects to P3s for two main reasons. First, they will not have to shoulder the full cost up front. Instead they agree to reimburse the P3 consortium a fixed amount each year over the lifetime of the contract – usually between 25 and 40 years. Such an arrangement can be politically attractive. It looks better to show a more modest expenditure on the books each year over the lifetime of the project rather than to show a large debt on the ledger that is gradually being paid down. But often it means taxpayers are getting a bad deal over the long term.

Second, governments say they like P3s because it frees them from bearing the risks of construction delays, cost overruns, correction of design flaws and future fluctuating revenues. Under the terms of P3s these risks are all to be entirely borne by the private partner so they are priced into the contract. In the study of 28 Ontario P3 projects mentioned earlier, this risk premium averaged an astonishing 49%."

'In every single project approved so far as a P3 in Ontario, the costs would have been lower through traditional procurement if they had not been inflated by these calculations of the value of “risk.”' ..
And speaking of risk, is the government ever completely shielded from risk in working through a P3? The facts say otherwise.

'Evidence shows that governments, workers, and the public are left on the hook for cost overruns, bankruptcy, incompetence, and inefficiency. When 180 million litres of sewage backed up into homes and businesses in Hamilton, Ontario, the government and the public paid the cost of the clean-up, not the private partner.
Governments canno

t transfer the responsibility for the public interest. When a P3 fails, the government must step in to secure important outcomes such as patient care, clean water, sufficient electricity, and safe roads. Corporations can just walk away, and they do – leaving behind debt and dysfunctional services.' "
http://www.pidc-pa.org/news/376

 
"But reduced costs aren’t a certainty, according to the Congressional Budget Office (CBO). In a 2012 report, the CBO found that P3s have built highways “slightly less expensively and slightly more quickly” than the traditional approach, but the relative scarcity of data and uncertainty of existing studies on the topic “make it difficult to apply [those studies’] conclusions definitively to other such projects.”... " 


 http://townhall.com/columnists/rachelalexander/20...
"There are a myriad of problems with PPPs. Some or all of the risk is transferred from the private sector to taxpayers, diminishing the incentive for the private entity to perform well. Optimally, the risk should instead be on private financiers who have a direct stake in the outcome. With government guaranteeing payment, there is less motivation for the private entity to cut costs. The private partner has little risk of going under since government will bail it out. Of PPPs that reach the implementation stage, at least 50% end up in renegotiations of the contract due to unexpected circumstances such as less revenue than projected. 


The number of failed PPPs is piling up. A Norwegian study of 258 large PPP projects in 20 countries found that 90% had cost overruns of over 20-45%...

The General Accounting Office (GAO) issued a report critical of PPPs in 2008. "There is no 'free' money in public-private partnerships," GAO's report stated. "They are potentially more costly to the public and it is likely that tolls on a privately operated highway will increase to a greater extent than they would on a publicly operated toll road.” This is due to government’s failure to thoroughly review the costs and benefits in advance, rashly entering PPPs in order to receive large payments upfront to solve short-term problems without properly considering the long-term implications. 


Even the federal Department of Transportation (DOT), which GAO accused of rushing into PPPs, cannot hide the track record of PPPs. A recent DOT study acknowledged that PPPs in the area of transportation have a higher cost of capital than public financing.

Do not be fooled by the rhetoric of politicians and bureaucrats claiming PPPs increase privatization. PPPs are nothing more than a new name slapped on the same old concepts of government-enabled monopolization and government control over business. Directing a few large corporations to dominate the market is not the same as a free market." 


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http://www.pidc-pa.org/news/376
"Julie Roin, a University of Chicago law professor, also questions whether the “risk transfer” argument carries any weight. Ostensibly, for the private sector to turn a profit, a deal only makes sense if the government overestimates its risk and underestimates the project’s revenue potential. “It’s not as if any investor is going to accept risk without demanding compensation,” Roin says. “You’re just paying for the risk in a different way.”"...

Watchdogs note that in entering into the deals, governments actually may take on all kinds of new risk they didn’t face before—like the implications of entering into long-term deals that can constrain lawmakers’ policymaking options for decades. In a famous case, the California Department of Transportation used a P3 to build and operate express lanes that opened in the center of California State Route 91 in Orange County in 1995. When the government wanted to expand parts of the roadway to alleviate congestion, it was blocked by a “non-compete” clause in the 35-year contract. Following litigation, the government ultimately bought out the private partner. Just seven years after the express lanes opened, the county’s transportation authority paid $207.5 million for the $130 million project. That’s a worst-case scenario, of course. Those who study P3s say governments have learned their lesson about non-compete clauses. But “compensation” or “stabilization” clauses—in which governments owe the contractor money for taking actions that could reduce toll revenue—continue....

Chicago got $1.15 billion when it leased its parking meters for 75 years, but whenever it temporarily closes a street the city must compensate the private partner for the lost revenue. When Indiana faced flooding in 2008, tolls were waived to evacuate people quickly, but the state had to pay the Indiana Toll Road’s private concessionaire $447,000 for the lost revenue. Carpooling is generally viewed as a good thing—it reduces pollution and congestion—but Virginia could owe millions of dollars to a contractor if too many carpoolers use its tolled high-occupancy express lanes. “These reimbursements make governments the contractor’s insurer and guarantor,” says Ellen Dannin, a law professor at Penn State University. Moreover, provisions like those may give states a strong monetary incentive to avoid actions that would ordinarily be considered smart public policy. If governments face fines for doing what they think is best, there could be serious implications for the way they govern." 
 
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 Who pays if the road defaults on the debt? I have a sinking feeling I know the answer. 
 
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 All debt on this project is backed by the state. "Plenary Roads Denver" is an LLC specifically created to be able to bail on the road if any unforeseen issues arise. The moment it starts losing money, it will be dissolved, and all debt will fall on the taxpayers. 
 
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 "Planners expect nearly 20,000 bus riders every day in these lanes! "
- Planners also expect over 100,000 car trips per day, carrying over five times as many humans as the buses. Why should we spend 40% of our money (yes, the BRT lane and stations added 40% to the cost of this project) on less than 15% of the users?

"The combination of carpool, toll, and transit offer several congestion-free choices, and mean that residents of all incomes will benefit. And, the existing lanes will remain free but will be rebuilt to be in much better shape, partially funded by those who pay the toll to use the new lanes"
- The primary beneficiaries of this project are the very rich and those with expense accounts who don't mind paying $14 each way to drive to Denver. The average person is totally screwed by the fact that there has not been one iota of improvement to traffic capacity.
- There will not be a dime from tolls used to pay for the free lanes. Plenary gets all of the money up to a certain threshold, and public transit gets first shot at the rest. Every single toll project in Colorado has collected far less in tolls than projected. When that happens on this project, there will be $0.00 contributed toward the free lanes. The TAXPAYERS pay to maintain the free lanes, not tolls.

"The tolls will be there with or without a PPP. And the toll levels will be pretty much the same — high enough to assure free flow for the buses and carpools, and low enough to remain attractive to toll paying vehicles."

"Free flow of buses and carpools" is NOT a concept on 95% of toll roads. Only in the Californicated mind of Will Toor should tolls be used to manage a bus lane. Go to Illinois, New York, Texas or any other state with the wide use of tolls, other than the FAILURE that is California,. All of them have MUCH lower tolls per mile, and NONE of them penalize drivers in favor of buses. NONE.

"It is misleading to describe a project like U.S. 36 as privatization — the state owns the road, the state sets the tolls, and RTD provides the transit service. The contractor builds the infrastructure and maintains the road, and will be paid back by those who use the new lanes. They have multiple contractual obligations — ensuring free flow for buses, adequate maintenance of the road, and much more. They are required to pay decent wages and benefits. The contract gives no right to block improvements to other roads or transit services. Once the private sector partner makes certain revenue targets the state starts sharing in the toll revenue — and the state share must be spent on transportation in the corridor, including public transit. This is a good deal for our citizens."

- Lies, lies, lies. This section was purposely written to give the reader the impression that ALL of US-36 will be paid for by tolls. WRONG. The taxpayers are STILL required to pay ALL costs on 2/3 of the highway, including snow removal, repair and repaving. Plenary is GUARANTEED a profit on every single activity they do on the free lanes.

As a final comment, please go back and re-read this Op-Ed/Screed. Where is it mentioned that the contract is for FIFTY-YEARS? Oh wait, somehow that small fact isn't merited as something to be mentioned. Seriously? That is really all you need to know about these morons - they are desperately trying to spin the fact that they are richly profiting from this deal, especially Will Toor, whose "think tank" has been given money by several of the interests on this road, through "Anonymous Foundations". All three of the people who "wrote" this screed have vested interests in propping up this debacle.
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"We have been distressed to see the misinformation circulated about the U.S. 36 managed lanes project and the public private partnership (PPP) that helps finance it."
- Yes, so have we been distressed to see misinformation circulated, LIKE THIS OP-ED.
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"The old way of business, letting all vehicles use the lane at no cost, would just fill them with congestion; there would be no travel time savings for carpoolers, bus riders or drivers who choose to pay the toll."

- Well, at least we are getting right out in the open about why we just spent $500 Million! Let's say the project does carry its inflated projection of 20,000 trips in the BRT lane each work day. And lets say the project lasts 20 years without being rebuilt, which is almost inconceivable. That works out to be an incredible $4.80 worth of subsidy just in the cost of the BRT lane for EACH bus trip! Add to that the normal rate of subsidy for buses in RTD's system, and we are looking at a subsidy of about $7.00 FOR EACH BUS RIDE. Add to that the $5.00 fare,and we are looking at a total cost of at least $12.00 each way for RTD to bus someone to Denver. This is ridiculous.. 
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  "The U.S. 36 project will rebuild the existing lanes, add a bikeway, and add one additional managed lane in each direction, which will be free to bus rapid transit (BRT) vehicles and 3-plus person carpools, and can be used by toll paying single occupant vehicles. The existing lanes will not be tolled. "

- There is nothing in the contract limiting the HOV lane to being HOV-3, in fact, there is language ensuring that if the average speed of the buses goes below 50MPH between Denver and Boulder, the lane will become HOV-4, HOV-5 or HOV-infinite.
- There is nothing in the contract preventing the two "free" lanes from being tolled, and in fact, since CDOT is responsible for paying for maintenance for those lanes, when the road needs to be repaved, the two free lanes will almost certainly become toll lanes. 
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The Northwest Parkway is still owned by 3 government entities. However it is leased out to a Portuguese company to avoid the bankruptcy it was facing. For 99 years. The usage forecast in the prospectus for the bond issue was wrong by 50%. Included is a yearly toll hike and a non-compete clause, giving the lessee the right to veto any competition along the road.

In other words, a monopoly for 99 years. BTW. Will Toors is clueless about this type of deal. Must have to sign it to find out what was in it? 
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 re: "Will Toors is clueless about this type of deal."

Perhaps, many politicians seem to be gullible enough to fall for simplistic sound bite views of the world. However it could be he thinks it is likely to make things worse for cars, and he hates cars enough to push the scam anyway. Or he knows there will be problems, but he hates TABOR enough to wish to push ways for politicians to get around the fact that the public dares to wish to have input on increasing debt and taxes. They may figure it isn't an optimal approach, but this way they can get their pet projects done directly by government and farm out the lower priorities they still wish to see done to private companies even if the deal is flawed they may consider it the lesser evil even if the public disagrees. Or worst case there is some behind the scenes corruption going on that he is a party to (hopefully not, I know of no evidence of it and merely offer speculation about alternative interpretations). In any interpretation other than him being clueless, of course it is sleazy not to admit to the problems with the deal to let the public assess whether they agree with doing it. 
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 Mr. Toor and Cronies. Your scam isn't working. People do not believe you. Say and print what you want, as many times as you want, and it still will be seen through. The General Public aren't the fools you believed them to be. This Pushback isn't going away. May I refer you to the definition of Insanity? 
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Some history. US Hwy. 36 became a toll road from 1952 until 1967. For 15 years only, it was the Boulder/Denver Turnpike. The moral and integrity of goverment back then was build it, toll it until it is paid off and then open it back up as a non toll highway. Now we enter the Era of Corporations........... 50 years of profit to a private Aussie investment group. 50 years!!!!!!! True, that they are building it faster than T Rex project was built in Denver on I-25. That project took over a decade. But folks..... 50 years of toll fees? Old saying...money talks and BS walks.
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> "The fact that contract details were not publically released fueled suspicion of the process. And, while this contract is a good one ..."

The details have still not been released, so the fuel is still there. We have nothing on which to base determining whether the contract is a good one, or not, except for you telling us it is. If it's good, why keep it a secret?
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All you need to know is this is a 50 year deal. Goldman Sacks is taking care of the investors. These three Democrats want us to believe this is a good deal for the people of CO. Who is protecting us from the financial dealers at Goldman Sacks? If you believe these three political hacks, I have a bridge I would like to sell you. I am sure everyone of them have something coming to them for their support of this disaster.