The California Legislative Analyst has slammed a San Francisco-backed plan to essentially rent, rather than own, the Doyle Drive freeway onramp. The report comes six months after SF Weekly
characterized the project's "public-private-partnership" financing scheme as a taxpayer rip-off.
To recap from our June 9 story, Doyle Drive is a project now
under way in the Presidio to replace an earthquake-unsafe Golden Gate
Bridge freeway on- and offramp with a buried parkway.
Under normal infrastructure financing, engineers design a facility,
and then officials obtain legislative approval to spend taxpayer money
on it. They hold numerous contractor biddings to obtain the lowest
possible price for a project's components. And eventually they get the
[Here], a consortium of builder-investors is tapped to design,
construct, and pay for the project upfront. Over the next 30 years, the
state repays them at a guaranteed rate of return. This way, the project
is potentially paid for and built faster.
By hastening financing and construction, city officials argued, San
Franciscans get an earthquake-safe roadway sooner, possibly saving
lives. Swiftly spent money will create an economic stimulus. Investors
will take advantage of the current down market in construction costs.
Backers claimed such a scheme could save taxpayers $147 million.
That's because this form of financing only creates the illusion that it isn't
worsening California's fiscal crisis. Instead of borrowing money, the
state essentially rents, rather than owns, a freeway onramp. For a lot
of money. For a long, long time.
IThe deal was billed as a way to protect California taxpayers against certain risks usually associated with building a big infrastructure project, and, in exchange, give investors a healthy profit as reward for bearing those risks. The fine print, as examined by government accountants, however, shows that the state is stuck with the risks after all.
The guaranteed-profit model will probably cost more in the long run, and won't save California from fretting about cost overruns.
The guaranteed-profit scheme also fails to ensure the tight project schedule that was supposedly its raison d'être. It does not protect the state against the risk of unforeseen construction problems, even though that was supposed to be one of this financing scheme's main benefits. It doesn't provide cost certainty as promised. It also doesn't guarantee improved highway maintenance, as it was supposed to.
Other than that, however, it's a great deal.
Read the LAO report here: