CASE STUDY

Taiwan High Speed Rail52

Completed in 2007, Taiwan's high-speed rail system (THSR)-a PPP project between the Taiwan High Speed Rail Corporation and the Taiwanese government-required additional government support when the financial crisis of the late 2000s resulted in a reduction in passenger use. When the PPP could not meet the government's debt service payments, the project failed. But the failure was not just a product of an untimely financial crash. The system itself was designed in such a way that failure was unavoidable.

Hoping to avoid the political difficulties that come with laying new high-speed rail tracks in heavily populated areas-a challenge made more complicated by the fact that high-speed rail tracks must be exceptionally straight-THSR chose to situate the stations outside of major urban centers. In so doing, the project managed to avoid the staunch political opposition that comes with relocating citizens. But it also meant that riders on the train would need to travel to remote stations outside their respective cities to board the trains at all. This increased distance resulted in diminished demand.

Even given the project's geographical compromises, the government could have taken steps to increase demand for the train. For example, the government could have raised the highway tolls along the parallel route to motivate drivers to take the new train. This was not done, and ultimately, the failure to create demand resulted in the sub-optimization of the project.

Had THSR managed the political interests at stake more appropriately, the rail system might have seen higher ridership and a higher rate of farebox recovery. Often, the politically expedient choice is not the right one.

CASE STUDY

Park Plaza53

In the late 1960s, Boston's Park Square, a confusing intersection of major streets and retail stores just south of Boston Common, was in desperate need of redevelopment. The Square featured a large number of vacant offices, a few large vacant lots used for parking, and the northern end of the Square (known locally as the "Combat Zone") was home to a thriving pornography industry, complete with adult bookstores, strip clubs, and a rotating cadre of for-hire sex workers. The Square's location, however, made the land highly attractive to development; it was nestled directly between Copley Square and the thriving downtown commercial district. Though private investment had renewed portions of the district throughout the 1960s, there were still major areas in need of improvement in 1970.

The Square was characterized by a bizarre street pattern and a large number of tiny, irregular-shaped lots, meaning that a private developer would have a difficult time acquiring a large enough parcel of land to successfully redevelop it. The solution to Park Square's state of disrepair would rely on cooperation with the public sector-through a significant use of public authority-to dramatically rethink the area from the ground up. But the plan to redevelop Park Plaza would need to navigate an elaborate approval process, not just within the city of Boston, but at the state level as well.

The Massachusetts Department of Community Affairs (DCA) was established in 1968 after the consolidation of several state-level agencies into a single department which reported directly to the governor. Though the department was nominally tasked with supervising local housing and development projects, in practice the department had shown little interest in this type of policing. By 1971, while the DCA had engaged in supervising projects in some of Massachusetts's smaller towns, it had never once come into conflict with the Boston Redevelopment Authority, despite the fact that enormous redevelopment had taken place in Boston.

But in 1971, the DCA's new commissioner, Miles Mahoney, was determined to change that. It was his view that the DCA should take a more active role in supervising development projects, and the plan to redevelop Park Plaza would be one of the first tests of that role.

In March 1971, the city awarded a relatively untested firm called Boston Urban Associates (BUA) with the redevelopment rights for Park Plaza. The plan, which did not feature a firm commitment to deal with the Combat Zone, faced significant opposition from community groups, who questioned BUA's track record, worried about the plan's adverse effects on the environment, and doubted the city's wisdom in selling off its land-in the form of streets that would be discontinued to make larger development lots-for a mere $3 million. But despite the concerns raised in the public hearing process, the Boston City Council passed the resolution. The mayor approved it, and on January 13, 1972, it landed on Miles Mahoney's desk at the DCA.

The plan would need DCA's approval to proceed. And Mahoney was unimpressed with what he saw. In his mind, BUA was a less-than-ideal partner. The firm had insufficient capital and a nonexistent track record. And without a plan to address the Combat Zone, the plan was not, in his estimation, a good one for Boston. Unimpressed with the private sector partners and the logistics of the plan, Mahoney rejected the plan.

Criticism was swift. Boston's mayor, Kevin White, alleged that DCA had been a part of a "conspiracy" from the governor's office. Governor Sargent denied the accusation, but stood by DCA. Until a second submission could be made to satisfy DCA's requirements, the plan was simply illegal.

But opposition continued to mount. Boston's three daily papers-seldom in agreement about anything-denounced the decision and called on the city to reverse Mahoney's decision. Organized labor-which stood to gain roughly 3,000 construction jobs-protested outside the State House. Governor Sargent tried to reassure the crowd; while he supported the idea of a Park Plaza plan, the details would need to be right. Boos and catcalls drowned out his words. A hardhat, tossed from the mob, narrowly missed his head.

This level of support caught both Mahoney and Governor Sargent by surprise. Clearly the governor was more vulnerable than he thought. The next day, Sargent asked Mahoney to reevaluate the proposal with BUA-negotiate and maybe come to some kind of agreement. Mahoney thought it was pointless, but agreed to sit down anyway.

Negotiations seemed doomed from the start. BUA rehashed their original arguments to the DCA, and DCA's opinion of the deal, understandably, did not change. Public sentiment was largely with DCA-residents, environmentalists, and community organizers were all wary of the plan-but that didn't matter when the Governor announced to newspapers (without telling Mahoney) that a new plan had been submitted, and that it largely addressed his concerns.

Without any political leverage of his own, Mahoney was out of options. With the governor fenced in by labor, the newspapers, and the city government, the project would move forward.