Public-private partnership is being suggested as the panacea to complete rail at no cost to the taxpayer, but this is a myth. P3 is not going to help and would probably make things worse. We will most likely pay even more in the long run than if we built it with direct government control.

The Honolulu Authority for Rapid Transportation’s inflated ridership projections of 121,000 daily trips will lead them to make promises of vast revenue for the private operator which will most likely not materialize, leaving the private partner short-changed, and coming back at the city for added compensation, as has happened elsewhere, described below.

Local bus ridership has gone down 20% in the past four years, and national transit ridership has also been decreasing, yet HART projected rail ridership numbers have not been adjusted accordingly.

HART is throwing in the towel, conceding they do not have the ability to manage this project, nor do they have any backup plan without P3 (“Plan To Award Rail’s Final Contract Reaches Point Of No Return”).

It is tragic that the situation has gotten so bad HART is desperately trying to turn rail over to some private company who they hope will do all the work for them in this most difficult final phase. However, many bad examples and problems with P3 have happened elsewhere with this approach, which amounts to a conservative attempt to privatize government as much as possible, and turn huge profits over to the private sector at taxpayer expense.

HART Rail Guideway columns at the Aolele Street and Nimitz intersection near the Daniel K Inouye International Airport.

Rail guideway columns at the Aolele Street and Nimitz Highway intersection near the Daniel K .Inouye International Airport. HART says a public-private partnership can best complete the project. Can it?

Cory Lum/Civil Beat

This P3 scheme is a natural extension of the well-known history of the project itself, more concerned with transit oriented development rather than providing efficient transportation, conceived by our bankers and corporate landowners to push people as far as the limits of our island allows, develop valuable agricultural land and make room for overseas, absentee buyers to dump their excess cash into our desirable neighborhoods in downtown Honolulu.

At this point the best solution would be to end the mistake at Middle Street with an integrated bus and ride-share station that could bring riders more directly to their final destination, with no further construction cost or damage to the urban environment.

P3 Disasters Abound

Overestimation of ridership is a chronic problem with new transit systems, upsetting many P3 contracts, such as Sydney’s rail line from the airport to downtown built by the private Airport Link Co. Ridership was less than projected, forcing the company into receivership and exposing the government to costs of around $600 million, despite a surcharge by that company on top of normal fare. The government made a revised contract costing them another $100 million.

Sydney had a similar problem with a toll tunnel under the city, which has 30,000 daily vehicles instead of the 95,000 estimated, which caused the private operator to raise the tolls, receive an additional $400 million from the government, then go bankrupt. According to Wikipedia, these Australian calamities “served to dampen government and business enthusiasm for further public private partnerships in transport.”

In the end, taxpayers are going to pay whether it is for private or public infrastructure.

London had similar problems expanding their metro system utilizing P3, with the private firm going bankrupt and the government stepping in to provide an additional $2.5 billion to complete the works.

The private Las Vegas Monorail Co. went bankrupt in 2010, unable to pay $650 million in loans, then it recovered, but now the company wants an added $150 million to extend the line 1 mile.

Indiana was paid $3.8 billion for a 75-year lease on a toll road by a private firm that was supposed to improve the road then collect all the tolls, but in a few years the firm went bust. Indiana already spent the money on other projects, so the road tolls were doubled.

Orange County, California, leased out a toll road, but due to poor performance spent a decade in court to buy it back for $207 million.

Chicago leased all parking meters to Morgan Stanley for 75 years for $1 billion which was quickly spent. Now, no more revenue from skyrocketing meter fees, parking lanes cannot be removed, or suspended at rush hour, bike lanes cannot be created, bus routes are constricted. Existing meters are grandfathered, so if one meter is removed the city pays Morgan $351,000.

Northern Virginia has to reimburse their private HOV lane operator if too many people carpool.

Other Problems With P3

  • There is a conflict between the private operator’s focus on profit versus the public interest in providing service.
  • We don’t even have a clear plan for the terminus at Ala Moana — how can we make a deal?
  • Politicians often lack the financial knowledge to effectively negotiate with sophisticated corporations in long-term contracts … the devil is in the details.
  • Private discussions sometimes include corruption and kickbacks.
  • In the end, taxpayers are going to pay whether it is for private or public infrastructure.
  • Unintended consequences and disagreements can lead to major litigation.
  • Ansaldo already has the contract to operate rail for ten years and would not hesitate to add termination of that deal to their existing lawsuit.
  • 35 states have not attempted any P3 projects.
  • There is little evidence P3 performs better than direct government funding over the long term.

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About the Author

  • Dennis Callan
    Dennis Callan has been involved for many years with transportation issues including past terms as co-founder and co-chairman of Stop Rail Now, chairman of the Manoa Neighborhood Board, former chairman of the Oahu Metropolitan Planning Organization Citizen Advisory Committee on Transportation and former president of Life of the Land.