Article: California Legislative Analyst Blasts Public Private Partnership
The California legislature's Legislative Analyst's Office (LAO) blasted a public-private partnership deal between the California Department of Transportation (Caltrans) and investors for the development of Doyle Drive. The plan was to give a private company, Golden Link, a 30-year lease on this vital southern route to the Golden Gate Bridge to perform needed renovation to the route. The state would pay the consortium $173 million for finishing the road, followed by $28.5 million in "availability payments" each year the road is open.
"Overall, our analysis finds that the Golden Link agreement does not meet all the goals Caltrans intended and is not likely to be a good fiscal deal for the state," Legislative Analyst Mac Taylor wrote. "In light of these findings, we think that the state should consider not signing the contract with Golden Link, and instead build the project with a more traditional approach."
The total cost of the project is estimated at $594 million on the partnership model, while traditional methods would cost around $490 million -- not counting a number of potential cost overruns on the riskier partnership model. In terms of bearing risks, the deal put state taxpayers on the hook if any discoveries of endangered species threatens roadside construction. It offered no guarantee that the companies undertaking the project would finish on time. Because the interest rates that will apply are not yet known, the analyst was unable to estimate the final cost with more certainty.
"Based upon our own analysis, we disagree with Caltrans' conclusion that the agreement results in a lower lifecycle cost," Taylor wrote. "As described in detail in another section below, we have concluded that a traditional design-bid-build procurement would be less expensive in this particular case than under the Golden Link agreement."
The analyst recommended dropping the public-private partnership contract. A copy of the letter is available as a 450k PDF at the source link below. Source