The Impact of Private Funding on Economic Sustainability: SR-91 Lanes

This report analyzes the economic sustainability of the SR-91 lanes in California, focusing on the impact of private funding in addressing transportation infrastructure challenges. The study examines the context of funding problems faced by the Orange County Transportation Authority (OCTA) and the subsequent involvement of private investment in the construction of high-occupancy vehicle lanes. The report delves into the success of the SR-91 lanes, highlighting the peak pricing schemes and the controversies surrounding the non-compete clause. It further discusses sustainable issues in transportation, emphasizing the importance of public-private highway financing partnerships, balancing public and private interests, and the need for a strong public sector. The report concludes that sustainability in private sector funding can be attained from the partnership of public-private highway projects and balancing the interests of the private and public sector will be fundamental.

Running head: ECONOMIC SUSTAINABILITY
ECONOMIC SUSTAINABILITY
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Introduction
Excise tax on diesel and gasoline served as the main source of funding for highways and
roads in United States. The introduction of fuel efficient vehicles, electric vehicles and hybrids
has lowered the revenue generated by the government. The Orange County Transportation
Authority (OCTA) faced the problems of financing as they wanted to build high occupancy
vehicle lanes that connects jobs centers in Orange Country and Riverside Country. Investment
from private sector has helped to finance the project and led the success of SR-91 lanes in
California. The aim of the paper is to study the impact of private funding in the creation of SR-
91 lanes in California and application of such practices in areas of sustainability.
Success of SR-91 lanes in California
There were major funding problems due to the widening of the gap between gasoline tax
revenues and highway construction projects. During 1989, there were only a few privately
financed highways in US and getting private investment was difficult. It is highly favored to
expand the gasoline tax in the Democrat controlled state legislature (Lee, Thomas, & Alleman,
2018). A transportation summit was held that enabled two parties in executive branches and
legislative to increase the gas tax rate by nine cent and led to allowance of four private highway
demonstration projects. The legislation preferred private enterprises to be more innovative,
instead of designating para projects as potential private franchises. The California Private
Transportation Company (CPTC) proposed private toll lanes for the construction of SR-91 lanes
in California by forming subsidiaries of three corporations (CHUNG, 2013). A private company
was granted to construct toll lanes along the Route 91freeway in Orange country that is densely
populated with the heaviest tragic inflows globally.

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After the SR91 lanes were opened, they were viewed as a net public benefit. A large
number of drivers supported the peak pricing schemes. However, huge reductions happened
during peak period travel times (Du et al., 2013). The average peal period travel increased in the
eastbound free lanes due to a diversion in traffic in the toll lanes. A non-compete cause was
introduced that restricted public agencies to increase highway capacity within a one-and-a-half-
mile-wide corridor on either side of toll lanes. CPTC was given the assurance that there would
not be any competition from future highway projects that will affect their investment (Gordon et
al., 2015). Several controversies related to the topic went on for years until in 2003 when OCTA
purchased the toll roads from CPTC. The lanes charged peak off tolls, although the non-compete
clause was totally demolished (Göçmen, Phillips & Ryzin, 2015). The issue regarding the public
mobility in competition with the profit making interest of the private sectors significantly
reduced. Thus, the privately owned toll was then used and operated by a public agency.
Sustainable issues in transportation
The issue raised several sustainable issues which will be effectively discussed in the next
sections. The finding by private sector may work effectively only under public private highway
financing partnership. This method has effectively led to improvement of transportation sector
which is sufficient for the provision of newer roads (Jang, Chung, & Yeo, 2014). Therefore,
private financing should not be used as a substitute for public financing, rather it should be
foreseen as a supplement source of investment. On the other hand, private and public investment
is combined to lower the gap for projects that are very expensive for public sector to build them
with limited funds (Göçmen, Phillips & Ryzin, 2015). However, sharing reward and risk
between the two sectors can be complicated and balancing both the interests will be difficult than

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the purely private franchises. Therefore, it is important to study the interest of the private sectors
and then organizes refunds.
In doing so, it is important to balance the public and private interests. The provision of S(
91 franchise for 35 years is inefficient as it is difficult to anticipate the changing travel demand,
growth patterns, shifting political winds and the change in technological parameters (Lee, Kwok
& Williams, 2014). Although, it is desirable to estimate the future possibilities of a project, the
efficiency lies in describing anticipated circumstances that whether public or private sector
should be addressed with the continuation of the original agreement. It is evident from the
circumstances that non-compete clauses are inflexible to maintain the requirements of both
public and private sectors over such a long span of time (Newmark, 2014). Thus, it is effective to
articulate the public-private highway projects in correspondence in correspondence to evolving
interests of the two sectors. The performance of public sector needs to be strong whenever
funding is done through private firms.
The financing needs to be balanced with well-staffed, well-trained, institutionally string
public sector with suitable technological procedures that can led to an effective growth of the
transportation sectors. Skills in projecting finance is adequately needed and funding of private
firms is not adequate for operation of a smooth transportation system in the long run (Lee,
Thomas, & Alleman, 2018). Moreover, transportation agencies need to have knowledge over a
wider range of things relating to electricity and telecommunications. For sustainable operation, it
is important for the high occupancy vehicles to provide an early opportunity for the pubic private
highway partnerships. On the contrary, the cash strapped metropolitan transport agencies can
face several problems for highway funding (Lee, Kwok & Williams, 2014). Public cost sharing
can lower the profitability of the private firms, although the loss is bore by the public sector.

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Conclusion
Therefore, the paper effectively addressed the role of private sector in funding the
transportation projects. The concludes that sustainability in private sector funding can be attained
from the partnership of public private highway projects and balancing the interests of the private
and public sector will be fundamental. This is because anticipation relating to urban growth
patterns, political winds, change in travel demand and technology is complex. Under such
conditions, public sector needs to be institutionally strong to meet the rising effective needs in
the transportation sector which cannot be balanced by only private financing.

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Reference List
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Göçmen, C., Phillips, R., & van Ryzin, G. (2015). Revenue maximizing dynamic tolls for
managed lanes: A simulation study.
Gordon, P., Moore, J. E., Pan, Q., Richardson, H. W., Cho, S., & Williamson, C. (2015). The
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Lee, E. B., Thomas, D. K., & Alleman, D. (2018). Incorporating road user costs into integrated
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improvement project (Ca). Sustainability, 10(1), 179.

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