Infra Insight Blog : written by Nossaman LLP Infrastructure attorneys, covers infrastructure project delivery, including Public-Private Partnerships, Operations & Management Agreements, policy, and news.

The fiscally conservative House majority continues to pursue reductions in federal spending, and federal transportation spending is part of the mix.  Further use of the general fund to supplement the Highway Trust Fund motor fuel taxes, as well as increases in fuel taxes, are opposed by the House majority.  Cuts could come in several forms, including cuts in Title 23 programs overall or cuts to specific programs.

Given the diminishing role of the Highway Trust Fund in funding future transportation investment, federal credit assistance under the TIFIA program needs to grow in significance.  But concerns are rising that TIFIA will be among the U.S. Department of Transportation programs targeted for substantial cuts in the current and next fiscal years.  Such cuts would put in jeopardy the financial feasibility of most of the large, complex projects that are being delivered via public-private partnerships in the U.S.

In response, leaders of transportation agencies from across the country delivered a letter to Congress on Feb. 14 urging against such action.  The letter, signed by 21 leaders of state and regional transportation agencies, states:

"The TIFIA program remains one of the critical methods available in this country to advance major transportation projects by leveraging private sector funding. While we would like to see the program’s capacity increased and are working to do so as part of the SAFETEA-LU authorization process, it is critical that Congress provide the authorized level of $122 million this fiscal year.  Given the fact that this authorized level can be leveraged to over a billion dollars of infrastructure investment, there are few federal programs that provide this return-on-investment for the American taxpayer and the economy as a whole."

The letter is a summons to all in the surface transportation sector to make the case to Congress and the Administration to preserve, if not expand, the TIFIA program.

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On February 17, 2011, Judge Wynne Carvill of the Alameda County Superior Court filed a 38 page opinion denying the efforts of Professional Engineers in California Government (“PECG”), the union that represents Caltrans engineers, to stop Phase 2 of the Presidio Parkway project in San Francisco.  PECG sued the California Department of Transportation (“Caltrans”)  and the San Francisco County Transportation Authority (“SFCTA”), as well as the California Transportation Commission and officials of each of these agencies, seeking a halt to Phase 2, which had been awarded as a public private partnership (”P3”) contract, with an availability payment as a financing mechanism.  PECG had argued that this project did not meet the criteria set forth in the 2009 legislation authorizing P3 projects in California, Streets and Highways Code section 143.  Among other reasons, it asserted that tolls were the exclusive financing mechanism under the legislation and that availability payments could not be used.

Nossaman represented SFCTA in the litigation and Caltrans for the P3 procurement.
After the same judge dissolved a temporary restraining order and denied a preliminary injunction at the end of 2010, Caltrans, in cooperation with SFCTA, signed a contract awarding the project to Golden Link Concessionaire, LLC, a consortium led by Hochtief PPP Solutions North America and Meridiam Infrastructure North America.  Golden Link proposed a maximum availability payment of $28,549,189 for the 30-year contract to design, build, finance, operate, and maintain the project. 
 
The Presidio Parkway Project is the first project to reach award under California's new public-private partnership statute. For more about the Presidio Parkway Project and section 143, see Presidio Parkway Project Awarded,  Preferred Proposer Selected for Presidio Parkway Project, Final RFP for the Presidio Parkway Project Released, Presidio Parkway Reaches Two Important Milestones, and Presidio Parkway Project RFQ Issued.

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The National Conference of State Legislatures (NCSL) has released the report "Public-Private Partnerships for Transportation: A Toolkit for Legislators."  The text of the report is short and concise (32 pages, with multiple appendices), yet provides a thorough overview of the the pros and cons of PPPs.  It also sets forth nine principles for consideration by legislators in deciding if and how to pursue public-private partnerships.  
 
The report is very well sourced, with examples of how projects and jurisdictions addressed matters that affected their programs and projects.  The appendices include a number of resources for use in pursuing public-private partnerships.  Materials prepared by Nossaman are frequently cited by the NCSL among the resources and appendices.

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AASHTO, through its Center for Excellence in Project Finance, has released its final report on strategies for funding and financing surface transportation for the next decade. The report, Funding and Financing Solutions for Surface Transportation in the Coming Decade,  is available for download via AASHTO’s website at the following address:

http://www.transportation-finance.org/pdf/featured_documents/sep_30_report_final_2011_02_02.pdf

In September 2010, AASHTO convened a forum of members of Congress, representatives of state and local governments, and professionals from educational and private sector transportation-focused organizations and businesses. The forum was organized to address:

• Near- and medium-term funding options for the Federal surface transportation programs
• Current and potential future applications of Federal financing tools
• Funding and financing initiatives that are meeting with success at state and local levels of government and whose use could be expanded

The report highlights the findings of the Congressionally mandated National Surface Transportation Policy and Revenue Study Commission (Policy Commission), the National Surface Transportation Infrastructure Financing Commission (Finance Commission), and USDOT’s most recent Conditions and Performance Report. 

These groups found that revenues generated under current policies (e.g. fuel taxes) provide enough resources to meet only 44 percent of the requirements to maintain the current system, and will continue to lose power in the future. A broad array of existing and potential funding and financing sources were discussed in the report, which includes speaker white papers detailing the creative approaches advocated at the meeting.

Geoff Yarema, with contributions from Ed Kussy and Adam Horsley, provided insight on how Federal credit assistance programs like TIFIA, Private Activity Bonds, and the proposed national infrastructure bank could be expanded and improved to meet the nation’s growing needs. Several of Mr. Yarema’s suggestions expanded on recommendations he helped craft as a member of the Finance Commission.

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