Georgia Missed a Huge Opportunity to Leverage Private Funds

December 27th, 2011 by Leave a Comment

Georgia’s eleventh-hour cancellation of a toll concession project on managed lanes along I-75 and I-575 in Cobb and Cherokee counties is a decision with enormous ramifications. It impacts mobility for one of the region’s most congested corridors, the thousands of jobs that would have been created in the process, and future opportunities to attract private investor partners to fund and expedite much-needed infrastructure.

The state Department of Transportation calls public-private partnerships “a critical element of Georgia’s plans for sustainable investment in transportation.” Now fingers are being pointed in numerous directions over the cancellation of the promising west by northwest corridor, a move that astounded the three companies on the short list to build the billion-dollar project then manage the 60-year toll concession.

What’s next? The options are limited, unfortunately.

The I-75/575 project was just the beginning. A large part of the plan for improving regional mobility was premised on the private investment in an ambitious, seamless network of toll lanes that would have provided congestion “insurance” and expedited mass transit. The project’s promise is being reinforced by the increasing popularity of the I-85 high-occupancy toll lanes that opened in October. That federally funded demonstration project is already showing success, albeit limited because it is just one lane in each direction.

The blow to privatization is harsh: Private companies are expressing their uninterest in a fickle Georgia. The I-75/575 project involved international companies, so the damage to the state’s reputation is global. Innovative public-private partnerships are being explored for adding proposed reservoirs and other water infrastructure, but investors and consultants are increasingly dismissive of Georgia. That’s no surprise. PPP legislation has been worked and reworked in Georgia since 2003, and all the state has to show for it is a plan to privatize maintenance and advertising at rest areas.

The state has missed a huge opportunity to leverage private sector funding and innovation and expedite mobility. The state Transportation Board says it is “examining other available options for the delivery of this project.” Georgia has spent more than $50 million of taxpayer funds on the project already. The three interested teams spent millions of their own funds preparing. The bureaucratic process of starting over on the corridor will delay congestion relief for nearly 200,000 motorists a day. The state must find funding, which will slow a project that would have been expedited by qualified private investors.

One alternative could be to go to a design-build approach in which the state will contract out the project to a company to design and construct the project, then have the Georgia State Road and Tollway Authority manage it. That poses several problems. The private investors wanted Georgia to invest $300 million of the estimated $1.045 billion project. There is no state or federal money to fund the entire project, and voters would not stand for a gas-tax increase right before a vote on a regional transportation sales tax.

Not only would the state’s commitment reduce the funding available for other transportation projects, but Georgia also is constitutionally required to balance its budget. Adding this obligation could threaten the state’s existing stellar AAA bond rating and make it more expensive to borrow. If government commits its taxpayers to this project, watch the chances for the upcoming regional transportation sales tax referendum fade among already jaded voters.

(Published December 27 in the Atlanta Journal – Constitution.)

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