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California and the West

Taking Its Toll

Foray Into Privatizing Roads Is Discouraging Some, but Others See Eventual Success


SACRAMENTO — It was a grand experiment, the first push to begin privatizing California's public highway network: In 1989, state legislators gave big business permission to build four toll roads in traffic-snarled sections of the state.

The intentions were noble, but critics say the effort has largely been a flop.

Only one of the projects--a set of toll lanes to relieve traffic along the bottle-necked Riverside Freeway into Orange County--has been built. A second tollway in San Diego County is inching ahead with environmental clearance, years behind schedule.

Two others--an elevated expressway down the Santa Ana River in Orange County and a back-country route in fast-growing Alameda and Contra Costa counties--are on hold and may be dead, victims of lofty sticker prices and political opposition.

"It's simply not panning out," said John Stevens, a transportation expert who works for the Legislature. "None of these projects have performed to the expectation state lawmakers had and most certainly not to the expectation the business community had."

The state's stumbling step into highway privatization comes as planners around the state and nation continue to push for more toll projects. Proposals include having motorists in Los Angeles pay for using car-pool lanes and long-range efforts to build tollways around Southern California.

But given the troubles, even the most ardent advocates of privatization have begun to question whether a free market approach is the right one for roads.

"It's been much slower than any of us expected," said Robert W. Poole, president of the Reason Foundation, a free-market think tank in Los Angeles. "In much of the U.S., including California, it has been difficult to build these roads because of all the environmental impacts and general opposition to new roads as well as paying tolls."

With years of environmental reviews to overcome and no solid guarantees that a road would even be built, some private sector executives say the risk of tackling toll projects is too great.

"I know our parent companies would not get into another one again, not unless it already had environmental approval," said Kent A. Olsen, president of California Transportation Ventures, which hopes to have the San Diego tollway finished by 2001, five years late. "Had we known it would take this long, we never would have started."

Boosters of the highway privatization effort agree that tinkering is needed in state law to ease the risk of such ventures. But they insist that toll roads remain firmly in California's future.

"Pioneering efforts like this are equivalent to being the point man walking through a minefield," said Carl Williams, a state Business, Transportation and Housing Agency deputy secretary. "You are going to step on some mines. These projects have gone through all the hardships, the criticism, the politics, the environmental difficulties. But they will make it easier for those that come after."

Boosters say toll roads are inevitable for several reasons.

As traffic has increased on the state's highways, money for road construction has plummeted because gas tax funds have dwindled as automobile fuel economy improves. The state is simply strapped for cash to build freeways. Meanwhile, the state can't afford the bond debt needed to build tollways on its own.

"You have only so big a financial pie for roads," Williams said. "But once you bring private capital to the effort, you make the pie larger. That's what we're trying to do."

The real stumbling block for the private firms has been the environmental review process, which has proved too time consuming, costly and risky.

A preferable alternative, some say, would be to have state or local governments finance and conduct the environmental reviews. Once a project has been approved, a private firm could repay government the costs it has incurred and then finance and build the road.

With the possibility of failure reduced, a private firm could get better financing, the government could demand a heftier slice of profits, and lower tolls could be charged to motorists, the theory goes.

"That's where the risk comes in these projects," said Mark Watts, a lobbyist who helped push the 1989 law while he was a legislative staffer. "You've got several years of environmental clearance, and you're not making any money. If a project is waived off, you may have sunk millions into it with nothing to show."


Efforts to change the law have failed in the state Capitol. On at least four occasions, bills have been introduced to tweak the legislation. None has escaped the first committee.

Privatization backers blame it on state Sen. Bill Lockyer (D-Hayward), a former Senate leader and an ardent foe of the Bay Area's Mid-State Tollway, which even the most devout privateers consider dead.

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