UC Merced Celebrates One-Year Anniversary of Groundbreaking for 2020 Project

This week, the Regents of the University of California and the University of California, Merced are celebrating the one-year anniversary of groundbreaking for the $1.3 billion, 1.2 million GSF UC Merced 2020 Project (the “Project”).

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 Merced campus, including the simultaneous construction of 13 new buildings, and is expected to nearly double the physical capacity of the campus. As the first higher education project in the United States to be undertaken using the P3 availability payment model, the successful completion of the first year of construction marks an important milestone for the Project and for the U.S. social infrastructure P3 market more generally.

First buildings complete by fall 2018

The first year of construction has proceeded smoothly, with the first phase of the Project expected to be delivered on schedule in fall 2018. Included in the first delivery are 700 new student beds, a 600-seat multipurpose dining facility, new classrooms, and 940 new parking spaces.  Developed by Plenary Properties Merced, the construction team, led by Webcor Construction LP, has begun assembling the steel components of the new dining facility’s distinctive sloped roof, and is working on a second bridge connecting the campus expansion to the existing campus.  The team has also begun work on the campus’ tallest building to date, a six-story mixed-used student residential facility in the heart of the campus.

Governance structure is critical component

According to the University, what has been instrumental in the Project’s progress is the campus’ internal governing structure to manage the Project. “We worked very hard to establish a comprehensive governance structure that taps into expertise across the University,” said University spokesperson Richard Cummings.  “It is enabling us to monitor the University’s obligations under the Agreement and to timely respond to questions that have arisen during the construction process.”

In addition, a campus-led Project management team is closely monitoring progress on a daily basis. The team is comprised of campus staff in construction and space planning, and is advised by consulting subject matter experts housed together on the construction site.

Economic benefits

The Project is generating significant economic benefits in Merced and surrounding regions. Approximately 400 construction workers are on site in Merced each day, and the Project is anticipated to create 2,500 construction jobs annually in the San Joaquin Valley during the four-year construction period.  Based on a third-party analysis by Oakland-based Economic & Planning Systems, development of the Project is estimated to inject $1.9 billion into the economy of Merced County and $2.4 billion statewide.  By 2022, it is anticipated that ongoing operations of the Project will increase spending by more than $200 million per year in the state.

“UC Merced is a big partner in our economy with its 2020 Project,” said Merced City Manager Steve Carrigan in a quote to the Merced-Sun Star. “That is a lot of construction jobs in four years and a lot more jobs for faculty and staff.”

Looking ahead

The Project is scheduled to be delivered in three phases and will enable the campus to expand enrollment to 10,000 students. The first set of deliveries occurs in the fall of 2018; the second set of deliveries in the fall of 2019; and the remainder of the Project in 2020.  Every building will achieve at least LEED Gold certification.  Following overall substantial completion of the Project, the developer’s lead facilities management firm, Johnson Controls, Inc., will operate and maintain the assets to contractually specified standards for the remainder of the 39-year contract term.

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

A special thank you to Richard Cummings, Director of Strategic Communications at UC Merced, for his valuable contributions to this post.

 

 

UC Merced and LA Mayor Win Big at P3 Awards

The UC Merced 2020 Project was a big winner at P3 Bulletin’s annual P3 Awards ceremony held in Washington D.C. last month, claiming the Gold Award for Best Social Infrastructure Project, along with the Silver Award in the Government Agency of the Year category. The award comes approximately one year after the historic groundbreaking on the project, which is currently under construction.

The project consists of the comprehensive development, design, construction, financing, operations, and maintenance of academic, administrative, research, recreational, student residence, and student services buildings. The campus expansion is intended to support projected enrollment growth from 6,200 current students to 10,000 students by the 2020-2021 academic year. The project is the first higher education availability payment P3 project to be awarded in the United States. (Stay tuned to the Infra Insight blog for a project update, coming soon).

This year’s awards also saw the Best Individual Contribution Prize celebrating work done at the municipal level in the U.S., with the award going to LA Mayor Eric Garcetti. Mayor Garcetti was instrumental in the recently re-opened Angels Flight® project, and serves as the Chairman of the LA Metro Board of Directors.

Sonoma-Marin Area Rail Transit District Begins Revenue Passenger Service

The Sonoma-Marin Area Rail Transit (“SMART”) District kicked off passenger rail revenue service in Sonoma and Marin counties last week. The 43-mile rail line includes ten stations from the Sonoma County Airport to Downtown San Rafael.

The new service operates across former Northwestern Pacific Railway Co. (“NWP”) rail line. Acquisition of the rail line dates back to 1969 when the California Legislature directed the Golden Gate Bridge, Highway, and Transportation District to develop a transportation facilities plan. In its plan, the district recommended the preservation of right-of-way for rail service on the rail lines of the NWP.

Various public agencies acquired portions of the NWP corridor through the 1980s and 1990s when the California Legislature created the Northwestern Pacific Railroad Authority (“NWPRA”) to hold title to the right-of-way. The California Legislature then created the SMART District in 2002 to develop passenger rail service across the line and to dissolve the NWPRA. SMART only has authorization to operate passenger service. Freight rail is managed by another creature of the legislature, the North Coast Railroad Authority which outsources freight rail service to a short line operator.

SMART seeks to expand rail service to Larkspur, California. The expansion would extend the rail line 2.2 miles. The Larkspur extension is currently in the design phase.

Denver City Council Approves Great Hall Project Development Agreement

In the early hours of August 15, 2017, the Denver City Council approved a $1.8 billion development agreement between the City and County of Denver’s Department of Aviation and Denver Great Hall, LLC, a consortium led by Madrid-based Ferrovial, for the Great Hall Project. The City Council’s approval follows a 12-month predevelopment and negotiation phase and represents an opportunity for the airport to leverage the expertise of the Ferrovial-led team to relocate and modernize its security screening facilities and revitalize and expand concessions offerings within the Jeppesen Terminal using a P3 delivery model.

Following the vote, Mayor Hancock stated: “This project represents what Denver has long excelled at – preparing our city for the future. The Great Hall project will address vulnerabilities, improve the passenger experience, create hundreds of new jobs and provide the capacity to match the world’s growing desire to travel to and from the Mile High City.”

The final vote of the City Council was 10 votes in favor and two against, with one abstention, following a rigorous review by Council members of the proposed terms of the Development Agreement and overcoming concerns expressed by airlines operating at the airport. Airport and Developer representatives fielded numerous questions from City Council members in the weeks leading up to, and during, the City Council hearing, and airport representatives have held several meetings with the airlines to discuss potential ways in which to address their concerns relating primarily to the relocation and design of the security screening area.

The Development Agreement provides for a 34-year term, comprising an anticipated four-year construction period followed by a 30-year operating period, during which the Developer is responsible for developing and managing a revamped concessions program and maintaining associated areas within the Terminal. The $1.8 billion price tag includes a $650 million capital cost, almost three quarters of which will be paid by the airport by way of progress payments, plus a $120 million contingency for potential Owner-initiated changes, and a $24 million maximum annual supplemental payment (adjusted for inflation) following substantial completion.  The capital cost payable by way of progress payments roughly corresponds to the percentage of the capital work that will be handed back by the Developer to the airport for operation and maintenance following completion of the design and construction work.  In addition, revenues from the concessions program will be shared, with 80% to be retained by the airport and 20% to be retained by the Developer.  The supplemental payments and Developer’s share of the concessions revenue will be subject to monetary deductions for failures to meet contractually specified performance standards.  The Development Agreement also provides for M/WBE goals of 33% for the design work and 18% for the construction work, as well as an ACDBE goal of 26%, which will be updated every ten years.

The Developer team includes equity members Ferrovial Airports, Magic Johnson Enterprises/Loop Capital and Saunders Concessions, and a design-build team comprising Ferrovial Agroman West and local contractor, Saunders Construction.

Financial close for the project is anticipated to occur in the fourth quarter of 2017.

 

 

FTA Proposes New Rule to Encourage P3s

As part of an effort to facilitate the use of public-private partnerships (P3s) in public transportation capital projects, the Federal Transit Administration (FTA) issued on Monday a Notice of Proposed Rulemaking (NPRM) that aims to streamline the project approval process.

Under the proposed “Private Investment Project Procedures” (PIPP) set forth in the NPRM, recipients of Federal funding for public transportation projects would be able to request a modification or waiver of specific FTA requirements if the recipient demonstrates that those requirements discourage the use of P3s. The FTA would then have discretion to grant a modification or waiver of such requirement(s) if it determines that:

    1. The FTA requirement(s) discourage the use of P3s;
    2. The proposed modification or waiver of the FTA requirement(s) is likely to encourage a P3;
    3. The amount of private sector participation is sufficient to warrant such modification or waiver of the FTA requirement(s); and
    4. The modification or waiver of the FTA requirement(s) can be accomplished while protecting public interest and any public investment.

The NPRM specifies that requirements under the National Environmental Policy Act and any other provisions of Federal statutes are not subject to modification or waiver.

    “As more public transportation project sponsors find willing and able private partners, we must ensure that federal regulations or procedures do not stifle innovation,” said FTA Executive Director Matthew Welbes. “FTA’s Private Investment Project Procedures will help us maintain procedures that are truly beneficial while allowing for discretion to waive those that simply impede good projects.”
    The FTA is accepting public comments on the NPRM until September 29, 2017.

LAWA’s APM Makes Tracks

Los Angeles World Airports (LAWA) released the Final Request for Proposals (Final RFP) for the procurement of the elevated 2.25-mile Automated People Mover train (APM) at Los Angeles International Airport (LAX) on July 28, 2017. The Final RFP was provided to the three short-listed Proposer teams participating in the APM procurement.

The project is the first APM system to be procured through an availability payment public private partnership (P3) delivery model.  The selected Proposer will design, build and partially finance the APM system, and then will operate and maintain the APM system over a 25 year period.

The APM is an essential component of LAWA’s Landside Access Modernization Program (LAMP), which also includes two intermodal transportation facilities and a consolidated rental car center (ConRAC).  The APM  will be an electric powered train with six stations that will connect travelers to light rail, regional buses, parking and terminals. APM stations within the central terminal area will connect travelers to the terminals via pedestrian bridges with moving walkways.

Technical Proposals are due in November 2017, Financial Proposals are due in December 2017 and LAWA expects to make a selection decision in January 2018. 

SH 130 Concession Company Emerges from Chapter 11 with New Financing

SH 130 Concession Company, the private entity that operates and maintains the 41-mile southern section of State Highway 130, has emerged from Chapter 11 protection with new ownership, new senior management and $260 million in new financing. The financial reorganization has removed $1.4 billion in debt from the balance sheet of SH 130 Concession Company and will significantly improve the liquidity of the business.

SH 130 Concession Co. operates and maintains Segments 5 & 6 of SH 130 from Mustang Ridge to Seguin, Texas. The road is owned by the Texas Department of Transportation, which has leased the facility to SH 130 Concession Co. for 50 years.

The new ownership group — led by funds managed by Strategic Value Partners, LLC or its affiliates (‘SVPGlobal’), a leading global investment firm — has hired Louis Berger Services to operate and maintain the roadway. Transportation industry veteran Andy Bailey has been named Chief Executive Officer of the concession, effective immediately.

“SH 130 Concession Company has emerged from the Chapter 11 process as a much stronger company,” Bailey said. “Our capital structure has been transformed and the company’s new owners are committed to investing in the improvements, technology and people needed to enhance the driving experience for our existing customers and attract new drivers to the roadway.”

Mr. Bailey spent 25 years with the Virginia Department of Transportation before retiring as Deputy Commissioner, the highest career level position in the department, in 2002. As Deputy Commissioner, he was responsible for highway design, construction, maintenance and operations for the third largest state transportation system in the United States. He went on to oversee major infrastructure rebuilding projects in Iraq for the U.S. Department of Defense and later for Louis Berger in Afghanistan and Sudan.

Mike Pillsbury now serves as the company’s Chief Operating Officer, bringing to the job more than 40 years of experience in construction and engineering management in both the public and private sectors.

Harry Quarls, an experienced Texas-based infrastructure executive, will serve as the new chairman of the company’s Board of Directors joined by new board members Deirdre Delisi, Jordi Graells, Daniel Han and Keith Min.

“SH 130 is a beautiful roadway that offers the fastest speed limit in the nation while also remaining incredibly safe,” Quarls said. “Our company is now positioned with the resources to succeed over the long-term.”

More than 7.68 million toll transactions were completed along the southern section of SH 130 in 2016, an 11 percent increase compared to 2015. Truck traffic increased by 15 percent during the same period.

STB Jurisdiction Over Intrastate Passenger Rail

In Florida, All Aboard Florida, a private entity, is about to launch passenger rail service from Miami to West Palm Beach, with future service extending to Orlando. In California, the California High-Speed Rail Authority is currently constructing a high-speed passenger rail line with the long-term goal of connecting the metro areas of San Francisco and the Los Angeles.  These projects have a common denominator: each envisions intercity passenger rail service entirely within one state.  But when it comes to economic regulation by the federal government, these projects are treated differently by the Surface Transportation Board (the “STB”).

STB jurisdiction carries with it preemption of state and local remedies, so STB regulation of an intrastate project can have a significant impact.  Not all proponents of intrastate projects want STB jurisdiction.  But, for those that do, preemption carries with it a powerful tool against would be project opponents.

STB Jurisdiction under ICCTA

STB jurisdiction over transportation by rail carrier is governed by 49 USC § 10501(a), enacted under the Interstate Commerce Commission Termination Act (“ICCTA”).  The STB’s jurisdiction “applies only to transportation in the United States between a place in …a State and a place in the same or another State as part of the interstate rail network.[1]  Under ICCTA, Congress specifically granted the STB authority over intrastate rail transportation if the transportation is part of the interstate rail network.

The question then becomes, how does the STB decide that an intrastate passenger rail project is part of the interstate rail network?  To answer this question, the STB applies a factoring test.[2]  Factors the STB will consider include whether the rail carrier will operate within a single state, whether the rail carrier will interchange with Amtrak (an interstate rail carrier), whether the rail carrier will arrange through ticketing with Amtrak, or whether the system is interconnected with Amtrak through use of the same stations.

All Aboard Florida

Applying those factors to the Florida project mentioned above, the STB concluded that it did not have jurisdiction because the project was not part of the interstate rail network.[3]  The Board considered the following factors that weighed against asserting its jurisdiction:

  • The project would conduct operations entirely within the state of Florida;
  • All passengers will board and deboard at local stations;
  • The fact that the project would serve local airports did not weigh toward a determination that it was part of the interstate rail network. Additionally, the fact that the line is to be constructed within the freight corridor of an STB regulated freight railroad, the Florida East Coast Railway (“FECR”), on track owned by the FECR did not sufficiently connect it to the interstate rail network. Nor did the fact that FECR will dispatch the passenger trains cause the STB to consider extending its jurisdiction over the project.

California High-Speed Rail Authority

In the STB’s California High-Speed Rail Authority (“CHSRA”) decision[4], the STB concluded that a proposed intrastate high speed rail system was sufficiently connected to the interstate rail system to warrant STB jurisdiction over the project.  The STB’s conclusion relied on a factoring analysis that gave significant weight to the CHSRA’s relationship with Amtrak.

Several factors in the CHSRA proposal weighed against a determination that the project was sufficiently connected to the interstate rail network to justify STB jurisdiction.  First, the CHSRA proposal lies entirely within the state of California.  Second, the CHSRA had no agreement with Amtrak to permit through ticketing for the CHSRA project.

Despite the intrastate nature of the transportation and the lack of a thru-ticketing agreement with Amtrak, the STB determined that other aspects of the CHSRA’s proposal provided sufficient interconnectivity with Amtrak as to conclude that the proposed project was connected to the interstate rail network and justified STB jurisdiction.  The STB cited the CHSRA business plan and environmental documents to demonstrate the CHSRA planned to integrate with Amtrak through a “blended” approach to the construction and operation of the project.  This blended approach proposed:

  • Operating Amtrak’s San Joaquin service operating over the CHSRA tracks;
  • Locating CHSRA’s stations in Los Angeles, Sacramento, and San Jose so that the CHSRA project interconnected with Amtrak stations.

The STB distinguished the facts from the CHSRA project with those from its All Aboard Florida decision.  The STB said that it did not have jurisdiction over the Florida project “because the proposed rail line would serve only four local stations with no plans for through-ticketing and no connection to Amtrak or any other rail carriers.”

Conclusion

In determining whether it has jurisdiction, the STB views some type of arrangement with Amtrak as a factor because Amtrak is an interstate rail carrier.  But, the STB has not had the opportunity to consider a case where the intrastate passenger rail project holds an arrangement with some other type of interstate carrier.  Must the intrastate passenger rail project connect to another interstate railroad?  What if the intrastate project stopped at an airport and offered through ticketing with an interstate airline?  It might be a tough argument to sell to an agency primarily focused on transportation by rail, but with the right facts, the STB may be willing to extend its jurisdiction to an intrastate passenger rail carrier that connects to interstate commerce beyond Amtrak.

[1] 49 USC § 10501(a).
[2] All Aboard Florida – Operations LLC and All Aboard Florida – Stations Construction and Operation Exemption – In Miami, Fla. And Orlando, Fla., STB Finance Docket 35680, slip op at 3 (STB served Dec. 21, 2012).
[3] Id.
[4] California High-Speed Rail Authority – Construction Exemption – in Merced, Madera & Fresno Counties, California,  STB Finance Docket No. 35724 (STB served June 13, 2013)(“CAHRSA Decision”).

Air Traffic Control Reform – Is It an Idea Whose Time Has Finally Come?

President Trump kicked off “infrastructure week” on Monday, June 5th, by proposing to “corporatize” the U.S. air traffic control system, shifting about 35,000 workers, including unionized traffic controllers, technicians, and others, off of the government payroll, and removing the Federal Aviation Administration from its role operating the business that it regulates.  It’s an idea that has been in the national discourse since at least the 1980’s, and is supported by the major U.S. airlines and other key industry players, including the union representing air traffic controllers.

Under the administration’s proposal, some of the FAA’s current responsibilities would be shifted to a newly formed federally-chartered private nonprofit corporation.  The shift would be a reorganization, not an asset sale, with assets transferred to the new nonprofit corporation at no charge, over a three-year transition period.  The nonprofit corporation would be governed by an 11-15 member board comprised of representatives of aviation stakeholders, including airlines, airports, ATC employees, private-plane groups, and others.  Funding for air traffic control currently is reliant on the vagaries of the government’s budgetary process, with taxes collected on fuel and airline tickets.  Under the proposal the taxes would be eliminated and the corporation would be funded based on a customer user-fee model to be established by the board.  Proponents argue that the nonprofit corporation would be better able to enter into long tem commitments because it wouldn’t be dependent on annual appropriations, which would expedite modernization of the system, help address the shortage of air traffic controllers, improve safety, and reduce costs.

In part, the proposal is inspired by NAV CANADA, the world’s first fully privatized civil air navigation service provider, created in 1996 through the combined efforts of commercial air carriers, general aviation, the Canadian government, employees and unions.  NAV CANADA is the world’s second-largest air navigation service provider, managing 12 million aircraft movements a year for 40,000 customers over 18 million square kilometres.  NAV CANADA’s revenues come from aviation customers, not government subsidies.  It aims to keep customer charges stable and improve safety and flight efficiency by investing in operations and controlling costs.  Its services encompass air traffic control, flight information, weather briefings, aeronautical information, airport advisory services and electronic aids to navigation.

NAV CANADA’s 15 member Board of Directors is elected by key stakeholders, all of whom are Canadian citizens and member s of the company: four elected by commercial carriers through the National Airlines Council of Canada; one elected by business and general aviation through the Canadian Business Aviation Association; three elected by the government of Canada; two elected by employee unions; four independent Directors elected by the Board; and the CEO.  The corporation has a 20 member advisory committee of aviation professionals elected at its annual meeting.

In announcing the administration’s plan to spin off U.S. air-traffic control from the FAA, the president’s top infrastructure adviser, D.J. Gribbin, said “You have what is in essence a technology business embedded in a governmental agency.”  NAV CANADA’s success in developing and marketing its suite of products and services illustrates Mr. Gribbin’s point. NAV CANADA developed its own advanced air traffic management (ATM) technology, NAVCANatm, including integrated ATM products, applications and services that is sold internationally and deployed at more than 100 sites worldwide.

Canada is only one of many jurisdictions that have effectively privatized air traffic control.  Other successful examples include Austria, Germany, New Zealand, and Switzerland.  A 2005 study in the Journal of Aviation/Aerospace Education & Research  determined that privatization of those systems into quasi-governmental corporations resulted in increased flight safety.  As of 2005, three out of four of the countries experienced an increase in efficiency.  Two of the countries indicated a decrease in ATC operating cost, while one experienced an increase in ATC operating cost.  Results suggested that applying corporate personnel management techniques increased safety and efficiency.  All of the subjects indicated that increased safety resulted from quicker equipment modernization that was not possible under previous bureaucratic governmental procurement policies.  Corporate procurement procedures for equipment reduced operating cost.  The study concluded  that reduced cost and increased safety would result from applying those models to the U.S.

“Privatization” and “corporatization” of the U.S. air-traffic control system may be an idea whose time has finally come.  Variations on the idea have been successfully implemented around the world.  However, the U.S. is not Canada, and whether or not, and to what extent, these models successfully translate to the vast network of the ATC System that the FAA operates all 50 states, Guam, American Samoa, Panama and Puerto Rico, may soon be demonstrated.

Recycling an Idea to Fund Infrastructure Improvements

Among other policy initiatives, the Trump Administration has advocated for the need to improve the nation’s infrastructure in order to maintain America’s economic competitiveness. In its recently released 2018 proposed budget, the Administration included $200 billion in outlays related to its infrastructure initiatives.  The Administration’s budget also focuses on leveraging private sector involvement as part of the overall solution to reform and change how infrastructure projects are regulated, funded, delivered and maintained.

There have been reports that one way that the Administration plans to leverage private sector involvement is through an idea known as “asset recycling.” Asset recycling involves a sale or long-term lease of an infrastructure asset owned by the public sector to the private sector.  In exchange, the private sector makes upfront or periodic payments to the public sector which the public sector will use to fund other infrastructure improvements.  The infrastructure asset that is sold or leased must generate its own revenue stream, such as an airport, toll road, parking facility or utility.

Australia is cited as the pioneer of asset recycling, with the Australian federal government offering a “bonus” payment to its local governments if the proceeds of the asset recycling are invested in infrastructure. To incentivize private sector involvement and to help bridge the infrastructure funding gap, the Trump Administration may employ a similar model by having a pool of federal funds available to pay bonuses to states and local governments that use proceeds from asset recycling to make other infrastructure improvements.  This would be consistent with the Administration’s budget objective of leveraging federal funds so that the end result is at least $1 trillion in total infrastructure spending.

Like many ideas, care must be taken in developing and implementing an asset recycling program for public infrastructure assets. Issues to consider include ensuring that the public’s interest is protected and that adequate input is obtained from all affected stakeholders. However, if the right projects are chosen for the right reasons and circumstances, asset recycling can be an effective tool to address some of our infrastructure needs.

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