Report on Economic and Finance Sustainability in Transportation Sector

This report examines the economic and finance sustainability of transportation projects, with a specific focus on the SR-91 lanes in California. The paper begins by outlining the historical context of highway funding, highlighting the shift from public to private sector investment due to declining public revenues. It then delves into the SR-91 lanes case study, discussing the creation of the toll lanes by a private company, the issues encountered, and the eventual purchase by the Orange County Transportation Authority. The report analyzes the sustainability issues that arose from this project, particularly the role of public-private partnerships, and the need to balance private and public interests. It concludes that transportation projects are effective for public-private partnerships when public funds are inadequate, emphasizing the importance of contract terms and anticipating potential challenges. The report also stresses the need for strong public sector regulation and efficient management practices to ensure the success of these projects. Reference list included.

Running head: ECONOMIC AND FINANCE SUSTAINABILITY
ECONOMIC AND FINANCE SUSTAINABILITY
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1ECONOMIC AND FINANCE SUSTAINABILITY
Introduction
Before 1990s, highways were mainly constructed by the public sector and there were less
private sector funding to support the creation of highways. The most important source of funding
were served from the excise tax generated from gasoline and diesel. However, the introduction of
electric vehicles, hybrids and fuel efficient cars adequately lowered public revenues and funding
of highways became very difficult. Under such circumstances, private sector investment helped
to finance Sr-91 lanes in California that connects the Orange Country and Riverside Country.
Yet, there aroused several problems after the lanes were created. The goal of the paper is to study
the role of private sector investment in transportation sector and its sustainable issues that can be
used in other areas.
Success of SR 91 lanes in California
Express toll lanes in the State Route 91 freeway were created by a private company in
1995, which served as the first modernized highway in US that was regulated by California
Private Transportation Corporation (CPCT) which was a partnership of three private companies.
The lane had one of the busiest traffic inflow in the world as it was inhibited by millions of
people. In order to cope up with the expenditures and generate profits, a 35 year concession was
provided to CPCT fir operating the toll road (Lee, Thomas, & Alleman, 2018). The lanes was
used and supported by a large number of people which raised the traffic on the road as it
connected the job sectors in Riverside Country and Orange Country.
On the contrary, things did not effectively as planned as traffic congestion was very high
in the lanes and local officials along with the state planned on expanding the nearby highways in
order to improve the situation and enhance safety in roads. After the improvement plan was
announced by the officials, CPCT filed for a non-compete clause such that public highways

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cannot be created within a corridor of one and a half mile as it will significantly lower their
profits as congestion will decrease their profits. This is because if other alternatives are provided
by the public sector and dependence on toll roads will go down as people will prefer non-toll
roads that can hamper the profits of the forms (Göçmen, Phillips, & Ryzin, 2015).
Several conflicts aroused after the incident due to the 35 year concession which was
made with CPCT. However, in 2003 the Orange County Transportation Authority were
compelled to purchase the SR-91 lanes in California from CPCT with a sum amounting to 208
million in order to end up the debacle. As a result, the state legislature of California stopped the
provision of private funding for highways, although it motivated others for moving forward with
the privatization (Gordon et al., 2015). This has encouraged the private sectors to fund projects
by a partnership with the public sectors. Currently, most of the transportation projects are funded
by the conducted by a public-private partnership which has raised several sustainability issues.
Sustainability issues and areas for further scope and development
The creation of SR-91 lanes in California has enabled the public sector to understand the
significance of private funding and the way to conduct them (Olarte, 2016). The success of
private funding is based on the public private partnership projects. The public sector needs to be
focused on other areas as well in other the balance the private funding schemes (Huang, Burris,
M., & Shaw, 2017). Due to this, goods are sourced from one region to another that has
effectively led to the development of newer projects that is adequate to serve the regions and
smoothen the process of transportation sector as per revenue earning and funding newer projects
or other expenses.

3ECONOMIC AND FINANCE SUSTAINABILITY
The sustainability issue that aroused from the success of SR-91 lanes is that private sector
funding is only effective when it is guided as a part of public private highway funding
partnership (Tian et al., 2018). Private involvement in the transportation projects are effectively
viewed as a supplement source of investment and not a substitute for public funding. Merged
funds has helped in lowering the gap between private and public sector funding as cost of
building new roads is expensive for any sector if funded alone (Poole, 2017).
Although the process of risk and reward sharing may seem complicated at first, with
experience public sector will protect the private interests and follow a well-structured funding
model for future projects. The operation needs effective balancing of private and public interests
such that public sector needs to understand the motive of private franchises. The provision of 35
year concession to CPCT was inefficient because it is impossible to anticipate the growth
patterns, shifting political winds, technological advancement, change in travel demand and
creation of newer opportunities (Wang, 2016). Therefore, understanding the future prospectus is
necessary, yet it is mandatory for the private-public franchises to contain with the terms of the
contracts with them.
Conclusion
Therefore, it can be concluded that conduction of transportation projects are effective for
public private partnerships when the funds raised by public sector is inadequate to support the
projects. It is effective to keep the term of contracts among themselves and the two sectors must
study the unanticipated circumstances that can hamper the projects. The provision of 35 year
concession has been insignificant in denting the urban growth and concession periods must be
chosen by closely adhering the needs. These schemes are very complicated and public sector
should be institutionally strong to regulate the prospects of private enterprises.

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Moreover, efficiency of projects needs efficient management practices from both sectors
as financing is inadequate the provision of such roads as skills, technology, input price,
efficiency and time plays a significant role. Along with this, a clear trend in sectorial
development needs to be focused and accordingly the partnership is to be provisioned. Effective
functioning of transportation agencies is also important in handing the complexities of electricity
and telecommunication. Thus, in case of private funding, public sector has must handle the
regulations in an efficient manner and should be institutionally strong enough to handle the
complexities of pubic private funding.

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Reference List
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
Economic Impacts of SR-91 and I-5 Corridor Improvements. In Regional Economic
Impacts of Terrorist Attacks, Natural Disasters and Metropolitan Policies (pp. 175-194).
Springer, Cham.
Huang, C., Burris, M., & Shaw, W. D. (2017). Differences in probability weighting for
individual travelers: a managed lane choice application. Transportation, 44(2), 375-393.
Lee, E. B., Thomas, D. K., & Alleman, D. (2018). Incorporating road user costs into integrated
life-cycle cost analyses for infrastructure sustainability: A case study on Sr-91 corridor
improvement project (Ca). Sustainability, 10(1), 179.
Olarte, R. E. (2016). EXISTENCE OF UNUSED MANAGED CAPACITY ON DEDICATED
LANES AND AN ALTERNATIVE ON HOW TO SELL IT VIA AUCTIONS (Doctoral
dissertation).
Poole Jr, R. W. (2017). Express Transit Lanes for Toll Roads. Reason Foundation Policy Brief,
(146).
Tian, D., Wu, G., Hao, P., Boriboonsomsin, K., & Barth, M. J. (2018). Connected vehicle-based
lane selection assistance application. IEEE Transactions on Intelligent Transportation
Systems, 20(7), 2630-2643.

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Wang, X. (2016). Analysis of High-Occupancy-Toll Lane Operation (Doctoral dissertation, UC
Irvine).