Thousands Of Californians Sign Up For VMT Trial

In response to a request from the California Department of Transportation, 5,000 California drivers signed up for the state’s nine month pilot program to replace the state’s gas tax with a charge based on vehicle miles traveled.  Starting July 1 of this year, the volunteers will make simulated payments based on how many miles they travel.  Participants include drivers from every part of the state and from every socioeconomic background, according to Malcolm Dougherty, Caltrans executive director.  “The opportunity to provide valuable input and evaluate the viability of a mileage-based user fee system demonstrates the commitment that Californians have to our roads and keeping them well maintained,” said Dougherty.  Findings from the program will be reported to the State Legislature and the California Transportation Commission at the end of the program in March 2017.  Ultimately it will be up to the State Legislature to decide whether to switch from the current state gas tax to a full-scale, road charge program.

California’s gas and diesel taxes bring in $2.3 billion per year to fund operation and maintenance and capital costs on California’s 50,000 lane miles and 13,000 bridges, leaving nearly $5.7 billion in unfunded repairs each year.  The VMT program starts just after the California Transportation Commission voted in May to cut planned road and transit projects totaling $754 million and delayed another $755 million of planned work from the state’s five-year transportation plan because of a decrease in gasoline tax revenues due to improved gas mileage and a drop in fuel prices.

Participants in the study, including 50 members of the California Trucking Association, pick from six simulated payment options, including a time permit that allows unlimited travel for a specific period, a mileage permit, and an odometer-based charge.  Options to record the vehicle mileage include a device that plugs into the vehicle’s electronics, a smartphone app, and one that records mileage through the onboard technology found on most new vehicles.

At the federal level, FHWA is considering applications from other states for a $1.5 million grant to fund a mileage fee pilot program, including along the I-95 Corridor that runs from Florida to Maine.  According to a survey last March of motorists across the country, a large majority support a shift to some form of road user fee from the gas tax, realizing that new ways are needed to fund construction and maintenance of surface transportation infrastructure in the US.

National Council for Public Private Partnerships asks “What’s Next?” at its Annual P3 Connect Conference

The National Council for Public Private Partnerships, reengineered its 2016 “P3 Connect” annual conference June 27 to 29, 2016, posing the question “What’s Next” for public-private partnerships in the United States.  NCPPP (as it is widely known in the P3 space) launched four Institutes to offer answers.  NCPPP created four separate Transportation, Energy, Real Estate and Social Infrastructure and Water institutes, each of which met in Chicago over the three day conference starting discussions with “where are we now” and ending with “where do we go from here.”

In parallel, NCPPP reprised its P3 “Bootcamp,” drawing participants from across P3 industry to present their thoughts and experiences in “What’s Next” discussions to those who sought a primer in terminology, history, challenges and advantages.  This year’s P3 Connect offered both a “101” and “201” course of study that offered both introductory and deeper looks into P3s structures, implementation, financings and challenges.

Several prominent projects and peoples were recognized with the 2016 National Public-Private Partnership Awards.  The Excellence in Individual Leadership Award was given to John Picerne, founder and CEO of the Corvias Group, which itself is comprised of three companies fostering long-term relationships in the military and university housing spaces, as well as the Corvias Solutions arm, fostering creative P3 opportunities, most recently with renewable energy platforms on military facilities as well as the first-of-its-kind Prince George’s County stormwater P3.  Infrastructure Project Awards went to Presidio Parkway and the Grand Parkway Project, two landmark transportation projects that are in service.  Other awards recognized creative municipal redevelopments and the merits of service-based P3s with the “NYC SAFE Disposal Program,” which granted a concession to manage household hazardous materials disposal in New York City.

NCPPP anticipates continued work through its Institutes, including plans to stand up a federal P3 Institute as the P3 market continues to explore new spaces.

NCPPP is a non-profit, non-partisan organization founded in 1985 and reimagined in the early 2010’s and presents itself as a forum for the brightest ideas and innovators in the partnership arena.  NCPPP, and each of its institutes, advocates for the advantages of P3 solutions to infrastructure and other challenges and facilitates the formation of P3s to deliver solutions to those challenges.

Maryland Purple Line Concessionaire Achieves Financial Close – Time to Build!

Financing for the Maryland Purple Line closed on Friday, June 17 – marking an important milestone for the Maryland Transit Administration’s (and Maryland Department of Transportation’s) plan to deliver a transit solution to ease travel between the Maryland suburbs and Washington, D.C.

Once the project reached commercial close in early April, the winning concessionaire, Purple Line Transit Partners LLC (PLTP), worked closely with the MTA/MDOT team to finalize the financing structure and various other issues. This culminated in a week of financial closings which allowed the precedent-setting approximately 36-year public-private partnership (P3) to proceed.

PLTP’s financing plan included:

  • Negotiating an $874.6 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, which closed June 14;
  • Securing approximately $313 million in Private Activity Bonds (PABs), issued through the Maryland Economic Development Corporation and underwritten by JP Morgan and RBC Capital Markets, on June 17;
  • Harnessing $138 million in private equity from PLTP’s members; and
  • Utilizing approximately $900 million in anticipated federal “New Starts” grant funding.

The Purple Line’s financing structure helped Maryland taxpayers realize substantial savings. Since the proposal deadline in late 2015, due to rate and credit spread risk sharing under the project’s P3 agreement, the State of Maryland will save more than $550 million over the term. The PABs utilized in the project, in fact, were sold at the lowest interest rates ever achieved in the United States P3 market.

As the project reached financial close, the parties also executed an amendment to the P3 contract. The amendment reduced the base availability payments owed during the operations period to amounts determined by factoring the savings on future interest payments into PLTP’s financial model.  Maryland anticipates that the “New Starts” full funding grant agreement with the Federal Transit Administration will be signed later this summer.

The Purple Line achieved several industry milestones. It is the largest full DBFOM P3 in the history of the U.S. and Maryland’s third – and by far largest – P3, with total value over the term at approximately $5.6 billion, including a capital cost of about $2 billion. The project also secured the fifth largest TIFIA loan (and second largest TIFIA loan for a P3 project) in the TIFIA program’s history.

Jumpstarting the development process, the parties negotiated a notice to proceed that allowed limited work to proceed before the financial close. Construction activities are on schedule to begin in late 2016, and the project is slated to open for service in spring 2022.

The project faced several challenges, including a change in state executive administration and ongoing litigations generally involving environmental impacts diligence and property valuation. It also grappled with stakeholder demands and a need to find cost efficiencies during a formal procurement lasting more than 30 months.

For more on the history of the Purple Line, please see our previous blogs here and here .  More information on the project can be found at purplelinemd.com.

Successful Proposer Selected for UC Merced 2020 Project

The Regents of the University of California announced on June 15, 2016 that it has selected Plenary Properties Merced as the successful proposer for the UC Merced 2020 Project.

“We are impressed by the creativity, efficiency and aesthetic qualities evident throughout the winning proposal,” said UC Merced Chancellor Dorothy Leland.  “Plenary Properties Merced has produced a compact, environmentally sensitive design that blends beautifully with our existing campus, facilitates our multi-disciplinary teaching and research methods, and provides flexibility for future changes in building usage.  Most important, it’s a cost-effective way of building out our campus.”

The Plenary Properties Merced team includes Plenary Group, as sole equity member, Webcor Builders, as lead contractor, Skidmore, Owings & Merrill Inc., as lead campus planner, and Johnson Controls Inc., as lead operations and maintenance firm.  UC Merced

The project is the first higher education availability payment P3 project to be awarded in the United States, and may well serve as a template for future higher education capital projects, both within the UC system and nationally, if successfully completed.  “UC Merced, the youngest campus in our system, is poised to become a model for our other campuses as we look for the most efficient ways to construct, operate and maintain facilities that enable us to pursue our teaching, research and public service missions,” said UC President Janet Napolitano.

The project involves the design, construction, financing, operation and maintenance of a broad mix of academic, residential, student life, and recreational facilities at the University of California’s youngest Merced campus for a 39-year contract term.  The project will nearly double the physical capacity of the campus and is intended to support projected enrollment growth from 6,700 current students to 10,000 students within five to seven years.

The UC Board of Regents will be asked to approve the project’s conceptual design and related external financing in July, and the project is anticipated to reach commercial and financial close in August.  Delivery of the first set of facilities is scheduled for 2018, and the full project is scheduled to be delivered by 2020.

Click here for more information about the UC Merced 2020 Project.

Court of Appeals Holds CityCenterDC P3 Not Subject to Davis Bacon Requirements

Public agencies and private entities are increasing collaboration to develop, operate and maintain a variety of transportation and building projects.  The involvement of a public agency in these “public-private partnerships” or “P3s” may necessitate compliance with statutes or regulations not otherwise applicable to privately developed projects, including a requirement to pay prevailing wages to construction workers.  In a recent decision, the U.S. Court of Appeals held that a private project developed on land leased from the District of Columbia (D.C.) is not subject to the Davis Bacon prevailing wage requirements.

Enacted in 1931, the Davis Bacon Act (Act) originally covered contracts for construction of “public buildings” entered into by the federal government and D.C.  The statute requires that construction workers on covered projects be paid not less than the prevailing rate of wages for work of a similar nature in the local labor market.  The statute was amended a few years later to also include federal and D.C. contracts for construction of “public works.”  Many states and municipalities have similar statutes governing construction of various public works.  Increasing innovation in real estate and development transactions between public agencies and private entities have blurred the lines between public works subject to prevailing wage requirements and private projects exempt from statutory wage regulation.

The CityCenterDC project involved a combination of leases and development agreements between the DC and a group of private developers.  D.C. entered into 99-year ground lease agreements with the private developers and received lease payments in return for the developers’ right to use D.C.’s convention center site.  In addition, D.C. and the developers entered into development agreements requiring the developers to develop and build CityCenterDC, an upscale mixed use project composed of office, retail, residential and hotel space.  While D.C. maintained the right to approve the developers’ general contractors, neither the leases nor the development agreements contemplated that D.C. would be a party to any contracts for the actual construction of the CityCenterDC project.

The Mid-Atlantic Regional Council of Carpenters’ request for a determination as to whether the Act applied to construction of CityCenterDC resulted in litigation and, ultimately, review by the U.S. Court of Appeals for the District of Columbia.  That court ruled that the CityCenterDC project failed to meet either of two independent prerequisites to application of the Act.  First, the court found that the Act applies only to construction contracts entered into by the federal government and D.C. and here D.C. was not a party to any of the actual construction contracts.  The court rejected the U.S. Department of Labor’s assertion that the development agreements constituted “contracts for construction” as referenced in the Act.  As a second independent basis for concluding that the Act did not apply, the court found that the project was not a “public work” within the meaning of the Act.  The court reasoned that in order to be classified as a public work, a project must possess public funding, public ownership, or government operations of the completed facility.  In rejecting CityCenterDC as a public work, the court noted:

“D.C. provided no public funding for construction of CityCenterDC.  D.C. does not occupy any space at CityCenterDC.  D.C. does not own or operate any of the businesses located there.  And D.C. does not offer any government services there.”

While helpful clarification as to application of the Act given the structure of the particular lease and development transactions at issue, the impact of the CityCenterDC decision may be limited.  The structures of projects, including financing, ownership, operation and use vary widely and the application of the Act will need to be assessed on a case by case basis.  Similarly, owners and developers should also familiarize themselves and ensure compliance with any applicable state or municipal equivalents to the Act.

Oklahoma DOT Seeks to Sell off State Owned Freight Rail Lines

Commonly when we think about state government owned railways, the image of commuter or light rail operations come to mind.  But many states own freight railroads as well.  In a few instances a state may have started its own line, while in other situations a state may have stepped in to preserve a rail line from abandonment.

Oklahoma is one of these states that have purchased rail corridors facing abandonment.  One such example is the Cowboy Sub, a 22-mile rail line originally purchased from the BNSF Railway Company in 1998 to save the rail line from abandonment.  Now, the Oklahoma DOT seeks to sell the Cowboy Sub and another state-owned rail line known as the Blackwell Sub.railway-station-1363771_1280

The Oklahoma DOT has issued a request for proposals to sell its Cowboy Sub between Pawnee Junction, Oklahoma and Stillwater Oklahoma.  The Cowboy Sub currently serves three customers and ships 640 cars per year ranging from industrial products to agricultural commodities and limestone.  Service is provided on the Cowboy Sub by the Stillwater Central Railroad through a track lease and operating agreement which is scheduled to expire at the end of 2017.

The Oklahoma DOT is also seeking to sell its Blackwell Sub from Hunnewell, Kansas (on the Oklahoma/ Kansas border) to Blackwell, Oklahoma.  Oklahoma DOT originally purchased the Blackwell sub from the Central Kansas Railway L.L.C. in 1997.  The current operator of the rail line is the Blackwell & Northern Gateway Railroad Company, Inc.

The Department is considering the sale of the rail lines in order to increase economic activity utilizing private operators, sustain rail access, and enhance customer service on the lines.

Oklahoma DOT has experience in preserving and then returning rail lines to private ownership.  As of 2014, Oklahoma had acquired 882 miles of rail lines.  Approximately, 749 miles of which have since been sold back to the private sector.  A notable Oklahoma DOT line sale was the Sooner Sub line, sold in 2014.  The Stillwater Central Railroad purchased the Sooner Sub for $75 million which included financial commitments to improve track infrastructure as well as a passenger rail service pilot program.   The line extends from Sapulpa, Ok to Midwest City, Ok, a span of approximately 100 miles.

Oklahoma provides an example of a state returning rail lines to the private sector after the state preserved the lines from abandonment.  Other states may follow the Oklahoma model, especially in areas with rail infrastructure historically utilized to transport coal.  As coal shipments decline, Class I railroads are already shuttering rail lines and rail facilities dedicated to coal.  If these rail lines are to be preserved, states may need to get into the railroad business.

FAA Proposes More Flexible Eligibility Criteria For Expenditure Of Passenger Facility Charge Funds On Airport Rail Projects

The Federal Aviation Administration (FAA) proposes to amend (81 Fed. Reg. at 26611) (May 3, 2016) a 2004 rule, restricting expenditure of proceeds from passenger facility charges (PFC) funds to airport access infrastructure used only by airport patrons and workers, in order to allow more flexibility on the use of PFCs on airport rail projects. The proposed PFC policy change could provide additional funding and finance options for airports and transit systems working to improve intermodal connections and give the public better access to the nation’s airports.

PFCs are airline ticket excise taxes and airport fees assessed to fund airport improvements and services. The PFC expenditure limitation (81 Fed. Reg. at 26611) prevents PFC proceeds from subsidizing roads and rail facilities also utilized by the general public.

However, the FAA says strictly applying the rule might not adequately promote the agency’s statutory mission to “expand intermodal links at the nation’s airports,” (81 Fed. Reg. at 26613) “produce financially and practically inefficient outcomes” (81 Fed. Reg. at 26611) and “may not be in … the public interest” (81 Fed. Reg. at 26612). The inefficiency arises in the context of rail airport access projects, because airports are not always located at the logical endpoint of a rail transit line; in these cases, rail riders will happen to travel through the airport to destinations beyond the airport.

This is an outgrowth of urban and suburban expansion around some airports.  “Many airports that were originally constructed on the periphery of population centers, now find themselves ensconced as suburban growth has extended to and beyond the airport. As such, it may no longer make sense for a ‘downtown’ rail or transit line to terminate at the airport, as there now exists a pool of potential users beyond the airport.” (81 Fed. Reg. at 26612).

For example, in March 2014, the FAA received a request from the Metropolitan Washington Airports Authority (MWAA) to use PFCs to help fund a portion of the Dulles on-airport tracks of the Washington, DC Metro system.  The on-airport tracks would not be exclusively used by airport patrons and employees because the Metro line would run to other destinations beyond Dulles airport. The FAA has approved parts of the MWAA request, but deferred consideration of “the track portions of this project (beyond the Airport station footprint).” (81 Fed. Reg. at 26613).

The FAA notes that when it comes to usage there are “fundamental differences” (81 Fed. Reg. at 26612) (between rail transit systems and roads. “Without a very strict exclusive use requirement, users of access roads could take advantage of that infrastructure, and make a choice to [not use] the airport itself. Users of rail, however, have little choice of route and … are not taking advantage of the airport portions of track by choice, but are more likely to be passing through the airport because they cannot use rail travel to their destination without doing so.” (81 Fed. Reg. at 26612).

The FAA has identified three proposed means by which an airport could demonstrate eligible costs of on-airport rail trackage to be funded through PFC revenues. The first proposal would measure and allow PFC funding of the incremental cost (81 Fed. Reg. at 26613) of incorporating an airport station to a transit system; the second proposal (81 Fed. Reg, at 26614) would allow PFC funding if the through-track rail system was less expensive than a stand-alone people-mover bringing passengers in from an off-airport station; and the third proposal (81 Fed. Reg. at 26615) would allow PFC funding if the proportion of the rail system to be funded through PFC revenues would be no more than the prorated costs of the trackage on airport property, based on ridership forecasts and the percentage of airport-bound passengers and employees.

Comments must be received on or before June 2, 2016. Comments that are received after that date will be considered only to the extent practical.

FTA Releases Final EIS On Metropolitan Council’s Southwest LRT

On May 13th, the Federal Transit Administration (FTA) published the Final Environmental Impact Statement (FEIS) on the Metropolitan Council’s Southwest LRT Project, a major step forward for the $1.79 billion project. The Met Council is the regional policy-making body, planning agency, and a provider of essential services for the Minneapolis-St. Paul metropolitan region.

The FEIS

The FEIS outlines the Met Council’s commitments to deal with those impacts throughout construction and operation of the Southwest LRT Project.

“Input from the public directly shaped the Southwest LRT Project,” said Metropolitan Council Chair Adam Duininck. “The public raised concerns about noise, visual quality impacts, water resources and safety, among other issues. Project staff has worked with federal, state and local partners to make the appropriate design changes and incorporate them into the project plans. The Southwest LRT Project today is stronger – and enjoys broader support – because of the public’s input.

“This is a major step forward for the communities who have supported this project for years. It reinforces the need for the State Legislature to take action in the next week to provide the remaining $135 million to help us leverage $895 million in federal funds; without action, those federal funds will go to a transit project somewhere else in the country” said Metropolitan Council Chair Adam Duininck in a Press Release.

Noise & Vibration Impacts

Among many other mitigation measures outlined in the FEIS, Met Council will install resilient track fasteners in a LRT tunnel and adjust horn and bell usage to reduce or eliminate noise and vibration in the Southwest LRT Project alignment.

The FEIS describes the decision to co-locate freight rail and LRT in the existing rail corridor in St. Louis Park and Minneapolis based on extensive public input and analysis of freight railroad location and water resources issues.

“Community engagement has been critical in assuring the concerns of the public are heard and addressed. Thousands of people have weighed in over the last few years. Results from this extensive public input process have been incorporated into the FEIS and have helped to fine tune the final report resulting in a stronger project, sensitive to the needs and desires of those the Southwest LRT will serve,” Hopkins Mayor Molly Cummings said.

The Southwest LRT

The Southwest LRT Project (METRO Green Line Extension) will operate from downtown Minneapolis through the communities of St. Louis Park, Hopkins, Minnetonka, and Eden Prairie, passing in close proximity to the city of Edina. The line will connect major activity centers in the region including downtown Minneapolis, Methodist Hospital in St. Louis Park, downtown Hopkins and the Opus/Golden Triangle employment area in Minnetonka and Eden Prairie. Ridership in 2040 is forecasted at approximately 34,000 average weekday boardings. The project will interline with the METRO Green Line, which will provide a one-seat ride to destinations such as the University of Minnesota, state Capitol and downtown St. Paul. It will be part of an integrated system of transitways, including connections to the METRO Blue Line, the proposed METRO Blue Line Extension, the Northstar Commuter Rail line, a variety of major bus routes along the alignment, and proposed future transitway and rail lines. The Southwest LRT Project website is www.swlrt.org.

Lower Fuel Prices Take a Toll on California’s Transportation Funding

Lower gas prices and decreased revenue from California’s Price Based Excise Tax (PBET) on gasoline are taking their toll on the state’s transportation funding.  California Transportation Commission (CTC) staff recently recommended enormous decreases in the upcoming five-year State Transportation Improvement Program (STIP).  The CTC Commission will consider the staff’s recommendations and is expected to make a final decision at its meeting on May 18 and 19.

The staff’s recommendations include no new transportation projects in the next five years, as well as cancelling already programmed projects and delaying many other projects.  Due to insufficient funds, not all projects programmed in fiscal year 2015-16 could receive allocations. To fully allocate funding to fiscal year 2015-16 projects, the staff recommendations include the delay of projects programmed in fiscal year 2016-17 of at least one year.

The 2016 Amended STIP Fund Estimate for the upcoming five-year term estimates a total statewide new programming capacity of negative $754 million.  This shortfall is largely caused by a decline in revenue from the PBET on gasoline, which is the primary source of funding for the STIP.  The PBET is adjusted annually by the Board of Equalization based on the price of gasoline.  Because gas prices have remained relatively low, the revenue from the PBET has remained low as well.

The PBET was first implemented in 2010 to replace a state sales tax on fuel.  At the time, it was set at 17.3 cents per gallon.  Since then, the level has dropped precipitously and will fall to less than 10 cents per gallon on July 1 of this year.   In addition to a decrease in revenue per gallon, the funding crisis has been exacerbated by an increase in the fuel efficiency of cars on the road.

According to Will Kempton, Executive Director of Transportation California, “The action pending before the California Transportation Commission constitutes the worst cuts in the State Transportation Improvement Program since the creation of the STIP funding structure nearly 20 years ago.”  Mr. Kempton went on to explain that without additional new revenue, California’s crumbling transportation infrastructure will get much worse and the costs to fix it will grow much higher.

Several members of California’s legislature have proposed legislation to provide additional resources for the program.  State Senator Jim Beall, a Democrat and Chair of the Senate Transportation and Housing Committee, introduced amendments to his bill (SB X 1-1) that include new revenues in support of transportation.  Several Republican legislators have proposed measures to shift existing revenue to transportation work.  Despite these efforts from both sides of the aisle, there is no agreement yet.

Without additional funding for the STIP, the budget shortfalls outlined in the Commission staff’s recommendations will only continue, with no relief for California residents and those businesses and other entities that rely on the state’s transportation infrastructure.

The Commission Staff Recommendations can be found here.

InfraAmericas and PBBC P3 Awards Gala Call for Nominations is Open

Voting and registration are officially open for the P3 Awards Gala hosted by InfraAmericas and The Performance Based Building Coalition (PBBC) which takes place on Monday, June 13 in New York City prior to the annual US P3 Forum held on June 15-16. The US P3 Forum is the P3 industry’s premier gathering of infrastructure professionals including infrastructure developers, investors, financiers, state and federal public officials and regional transportation authorities.

Voting

This industry awards dinner recognizes individual achievement in advancing P3 projects. The nominated individuals will be recognized in the following five areas:

  • Public Sector Championmanhattan-336708_1280
  • Best Transaction Advisor
  • Social Infrastructure Lawyer of the Year
  • Overall P3 Champion Award
  • Best Private Sector Innovator

To make your nominations, fill out the form here prior to May 6.

To purchase your ticket to the awards gala, please click here. To register for the P3 Forum, click here.

PBBC Golf Outing

In addition to the awards dinner, PBBC is hosting its Second Annual Golf Outing on June 13 at the Trump Golf Links at Ferry Point, Bronx, NY attended by senior leaders from the PPP industry. To learn more about the venue, schedule of events, or to buy a ticket, please click here.

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