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Public-Private Partnerships in Transportation

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Transcript of Public-Private Partnerships in Transportation

Current funding Creating PPP Information Resources International Practices PPPs at
Los Angeles Metro International Practices Adapting International Practice Problems:
Pricing per gallon
Fuel efficient vehicles
Decrease in automobile travel
Has not increased since 1993

Pricing based on vehicle miles
Other tax strategies
PPPs Gas Tax Gas Tax vs. Mileage Information:
Best practices
Key legislative elements
Where to find it:
State DOTs
Public Infrastructure Advisory Commission
Major Legal Issues for Highway Public-Private Partnerships (NCHRP Legal Research Digest 51, 2009)
Public Sector Decision Making for Public-Private Partnerships (NCHRP Synthesis 391, 2009)
The Effect of Public-Private Partnerships and Non-Traditional Procurement Processes on Highway Planning, Environmental Review, and Collaborative Decision Making (SHRP2, 2013) Contracts Modifications: Because PPP contracts are generally long-term, a robust modification protocol is needed to deal with potential changes.
Contracts range from 25 - 50 years
In the UK the Department's Representative (DR) has three main roles:
Performance monitoring
Financial monitoring
Contract administration Normalizing Procurement: Aids in maintaining a level playing field and foster accountability and transparency during implementation.

Selecting Projects: Adopt a policy for handling unsolicited proposals.

Managing Revenue: Question of whether the public sector should transfer the revenue risk fully to a private entity.

Managing Contracts: The robustness of a contract is critical, no contract can cover every contingency. Must be malleable. U.S. PPPs Early US PPPs:
Gained attention in the 1990s
E-470 Toll Road in Colorado
AB 680, California's 1989 legislation: concessions under Design-Build-Finance-Operate-Maintain Model.
Chicago Skyway and the Indiana Toll Road Project Selection: Procurement regulations must allow the public owner to use alternative delivery systems. Overview Current funding situation
What is a PPP?
U.S. PPP Programs
International practices in PPPs
PPPs at Metro
Creating PPP information resources
Conclusion Identification: Candidate projects are identified according to requirements.
Assessment: Public-Sector Comparator (VSC) and conducting a Value-for-Money (VFM).
Market Preparation:
Demonstrate feasibility through an "illustrative design"
Statutory requirements, such as environmental permits
Site surveys
Preparing rights-of-way acquisition
Starting on stake-holder agreements
Maintaining a risk register Design-Build Models Los Angeles Metro & Public-Private Partnerships What is a PPP? International Practices International Practices Revenue Transfer Mechanisms Real Tolls: User fees which can make revenue risk difficult to predict.

Demand Risk-Sharing: Bidders propose boundaries, the government sets a threshold.

Variable Length Concessions: Contract ends when certain financial targets are met.

Upside Sharing Provisions: If expected revenues are not met, private investors bear the consequences.

Direct Payments: Government pays the PPP contractor periodically as milestones are met. Image courtesy of DC Streetsblog The private partner may be a single company, but most often it is a team of organizations that have come together to execute the partnership. The public partner (government): The private partner: Source: http://finance-commerce.com/2011/02/the-nuts-and-bolts-of-a-design-build-partnership/ 18.4 cents per gallon Can PPPs offer
a solution? PPPs have enabled 10 - 20% of government infrastructure worldwide
Successful PPPs all over the world
FTA estimates funding shortfall of $14.8 billion annually
The U.S. has under-invested in transportation and infrastructure over the past 15 years Risk continuum: Design-build projects by state in 2003: Successful US PPPs:
Virginia Initiatives
Texas Projects
Florida Port of
Miami Tunnel Public Partner – Project development risk
Overall policies and control
Environmental process and clearance
Stakeholder support
Political commitment
Funding sources Roles and Responsibilities Used when revenue (tolls or other user-based fees) are projected to be sufficient to cover most or all project costs

Public subsidy may not be necessary

Concessionaire accepts actual toll revenue stream (risk) as sufficient to:
Build, operate and maintain the project
Provide reasonable return on investment for equity investors
Provide repayment of debt services on borrowed funds Revenue Risk/Concession Model May be used for all projects, including those with insufficient user-based revenue (i.e. tolls) to cover capital and O&M costs, but have sufficient public funding sources to cover project funding gaps

Allows long-term leveraging of public funds and user-based revenues to accelerate delivery

Consolidates benefits of integrated
project design, construction, operation and maintenance, realizing life-cycle cost savings Availability Payment Model Delivery decision: D/B, DBF, DBFO, DBFM, DBFOM

If concession includes maintenance, private partners have incentives to design and build sustainable construction and service model

If private partner also operates the facility/service, maximum efficiencies are introduced Procurement Approach Strategic analysis and business case development precede decision
Capital costs, O&M costs, lifecycle performance and public funding are integral elements in delivery assessment
Calculation of value-for-money between public (traditional) delivery and proposed PPP delivery is required
Which approach provides best value? Project Delivery Determination PPP potential evaluation is step by step process. Move on to next step if current effort shows positive results: PPP Project Evaluation Los Angeles Metro Board adopted PPP Framework and Work plan
Set the stage for identifying PPP candidates in 2009 LRTP and Measure R program
Authorized procurement of PPP consultant team, InfraConsult, LLC with subs:
KPMG, LLP, Nossaman LLP, HDR Inc., and Sharon Greene + Associates PROGRAM DEVELOPMENT Partner with private sector
Share risks and rewards
Utilize private financial sources for equity and debt to finance construction
Establish private investment and debt service for repayment as “availability payment”, based on availability of facility Financing Approach Most projects need public funding support in addition to user-based revenue to repay equity and debt

PPPs are a financing and procurement approach – not a substitute for funding
May increase finance capacity by accessing new private capital sources, and may reduce costs
Public sector still has to identify a source of revenue Free Money? Public Partner – Project development risk
Overall policies and control
Environmental process and clearance
Stakeholder support
Political commitment
Funding sources
Private Partner – Project implementation risk
Design and construction
Facility operation/maintenance/management Sector Roles/Responsibilities Projects with greatest likelihood of success for private participation:
Clearly defined, environmentally cleared, high-priority projects with demonstrated public sector commitment
Equitable and effective risk allocation
Transparent, well-defined procurement process, with early initiation where feasible
Programmatic/portfolio approach to P3s Program Approach High Speed Rail Regional Setting Accelerated Regional Transportation Improvements
(ARTI) 6 projects ($770M) Achieve cost savings
Operations - performance-related concessions and system availability-based contracting
Capital - design and construction efficiencies
Enhance cash flows
Private financing mechanisms
Leverage Measure R revenues and other public funding sources
Utilize new funding sources
Value creation and user revenue streams (e.g., transit-oriented development, road tolls) Achieve accelerated project delivery
Project activities in “parallel”
Ensure project quality throughout life cycle
Private financial participation (“skin in the game”)
Reduce risks
Eliminate/lessen risk of project cost overruns/change orders
Reduce public sector risks by strengthening project interfaces
Complement federal funding Focus on Project Life-Cycle Accelerating project delivery
Reducing costs through contracting and construction efficiencies
Allocating risk effectively: design, finance, construction and operation
Reducing lifecycle/O&M costs through productivity improvements
Leveraging local revenue
and federal funds
Creating regional jobs Metro P3 Program Objectives Possible rail and tollway
connection between the San
Fernando Valley and Westside
Consider LAX/Airport
Likely mega-concession with
full revenue risk transfer to
Estimated cost preliminarily
$5 billion to $15 billion
Estimated revenue could
leverage the development of
a project in the range of $10
billion in capital cost Sepulveda Pass Transit Corridor Project assumption for P3 analysis is twin 57’ diameter deep bore tunnels, approximately 21,000’ long
Four lanes each direction
Phased construction possible
Tolling and P3 delivery
appear to provide adequate funding for $5.5 billion project SR 710 North Gap Public-Private Partnership
delivery of freight corridor –
$2.5 billion
Additional strategic analysis
needed to understand tolling
implications of zero-emission
Coordination with California
Department of Transportation I-710 South Corridor NEW 63-mile east west corridor from SR-14 past I-15 to SR-18
50-mile Freeway/Toll facility
NEW High Speed Passenger Rail from:
Existing Metrolink Station in Palmdale to XpressWest Station in Victorville
One seat high speed ride from LAUS to Palmdale could make highway toll facility and rail facility self-financing and self-supporting as $6.5 billion Public-Private Partnership concession High Desert Multipurpose Corridor ARTI as Public-Private Partnership ARTI – Six Elements Accelerated Regional Transportation Improvements Metro’s Potential PPP Candidates Short list PPP Information Resources: PPP Information Resources: TRB, TRID NCHRP, SHRP2 Private Partner – Project implementation risk
Design and construction
Facility operation/maintenance/
management East Croydon Bridge, London, UK PPP procurement processes
PPP project delivery
Project management Source: Metro.net, Sepulveda Corridor Project Matthew Barrett June 9, 2013 Source: AECOM, Eastside Goldline Extension Source: Metro.net Initial project screening
Strategic assessments
Business plan development Source: Metro.net, Measure R Projects Source: Metro.net, Crenshaw/LAX Transit Corridor Source:
Metro.net Source: Orange County Transportation Authority Source: Metro.net, Public-Private Partnerships Source: Metro.net, Public-Private Partnerships Source: Metro.net, Public-Private Partnerships Source: Metro.net, Public-Private Partnerships General Transportation Innovation Research Committee Source: 91expresslanes.com Source: Metro.net Source: Metro.net, Expo Line opening
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