OCTA 91 Express Lanes Bonds Get 2 A's from S&P

In an historic move, Standard & Poor’s upgraded the Orange County Transportation Agency SR91 Express Lanes Toll Revenue Bonds to “AA-”, making it one the highest rated managed lanes projects in the world.  The bonds were issued last year to refund bonds that were issued in 2003 when OCTA acquired the SR91 Express Lanes project from the private consortium that developed the project under California’s prior P3 law.

The 91 Express Lanes is a four-lane, 10-mile toll road built in the median of California’s Riverside Freeway, State Route 91, between the Orange/Riverside County line and the Costa Mesa Freeway, SR 55. “It was the first privately financed toll road built in the U.S. in more than 50 years, the world's first fully automated toll facility, and the first application of value pricing in the U.S.,” according to the S&P report.

S&P analysts cited an expectation that the region's fundamental economic and demographic trends will continue to support growth for the upgrade, and that traffic and revenue performance will meet or exceed projected levels.  Annual traffic volume in the corridor grew to 12.1 million vehicles in fiscal 2013 from 5.5 million in 1996, according to the S&P report.  The availability of high-paying jobs in Orange County combined with the more reasonably priced homes available in Riverside and San Bernardino counties has kept traffic to the managed-lane toll road robust.
 

Six Teams Submit SOQs for UC Merced 2020 P3 Project

The Regents of the University of California (the “Regents”), on behalf of the University of California, Merced (“UC Merced”), announced on August 1, 2014 that it received Statements of Qualifications (SOQs) from six teams in response to a Request for Qualifications for the UC Merced 2020 P3 Project.

The respondents and their equity members are (in alphabetical order):

- Edgemoor Plenary EdR Partners (EP2):  Edgemoor Infrastructure & Real Estate LLC, Plenary Group USA Ltd., and Education Realty Trust, Inc.
- E3 2020:  Balfour Beatty Investments, Inc.
- Gateway2Learn:  HOCHTIEF PPP Solutions North America and Meridiam Gateway2Learn, LLC
- Innovation Partners:  Hunt Development Group LLC and Shikun & Binui, Ltd.
- Merced Campus Collaborative:  Lend Lease (US) Investments, Inc., Macquarie Capital Group Limited and American Campus Communities, Inc.
- Merced 2020 Partners:  Skanska Infrastructure Development Inc. and Fengate Capital Management Ltd.

The complete list of respondent team members may be found at the UC Merced 2020 Project website.

The Project represents the second phase of campus development under UC Merced’s Long Range Development Plan and involves a significant campus expansion to support projected enrollment growth from 6,200 current students to 10,000 students by the year 2020. 

The project consists of the comprehensive development, design, construction, and financing of academic, administrative, research, recreational, student residence and student services buildings, together with utilities and infrastructure, outdoor recreation and open space areas, and associated roadways, parking and landscaping.  The project will also include operations and maintenance of some or all of these facilities.  The Regents intend to make shortlist decisions in November, 2014. 

Tae Yeon Do co-authored this post.
 

President Unveils Build America Investment Initiative Today

President Barak Obama today announced the Build America Investment Initiative (the “Initiative”).  According to the Fact Sheet released by the White House in advance of the announcement, the purpose of the Initiative is to “increase infrastructure investment and economic growth by engaging with state and local governments and private sector investors to encourage collaboration, expand the market for public-private partnerships (PPPs) and put federal credit programs to greater use.”

The transportation industry will be the first to benefit from the Initiative.

The Fact Sheet lays out some of the portions of the Initiative, including a “Build America Transportation Investment Center” (the “Center”) to be housed within the United States Department of Transportation (“US DOT”), envisioned to be a “one-stop shop” for both public- and private-sector parties interested in innovative financing and project delivery for transportation projects; a “Build America Interagency Working Group” (the “Working Group”), to be chaired by Secretary of the Treasury Jack Lew and Secretary of Transportation Anthony Foxx (or designees), to address barriers in private investment in industries including water, ports and harbors, communications, and energy; and an “Infrastructure Investment Summit,” to be hosted by the United States Department of the Treasury on September 9, 2014, intended to bring together federal, state, and local officials with project developers and investors to discuss innovative financing approaches for infrastructure.

After the announcement today, the President signed a Presidential Memorandum that uses the President’s executive authority to set policy related to collaboration on infrastructure development and financing, to articulate the requirements for establishing the Center within the US DOT, and to communicate the parameters for the Working Group.

In particular, the Center is subject to the following conditions:

  • The Center must be established within 120 days;
  • The Center must develop and make available tools useful to the establishment of innovatively financed and delivered projects, including case studies, best practices, and analytical tools;
  • The Center must develop a Web site to serve as a source of information for both public- and private-sector entities interested in transportation financing programs; and
  • The Center must coordinate with the Steering Committee on Federal Infrastructure Permitting and Review Process Improvement to provide technical assistance regarding environmental review.
     

TRB Hosts 5th Annual International Finance Conference

The Transportation Research Board’s (TRB) 5th annual International Conference on Financing Surface Transportation will be held from July 9-11, 2014 at the Arnold and Mabel Beckman Center in Irvine, CA.

The conference will examine the current status of transportation finance and future possibilities through thought-provoking program offerings with presenters from the fields of transportation research, government, and the private sector.

Conference sessions include:

  • Innovation, Experimentation and Exploration – The Landscape of Transportation Funding and Finance in the U.S.
  • The Impacts of Technology on Transportation Revenue
  • Industry Views on Future Transportation Finance- What’s New and What’s Next?
  • Creative Ways to Consider Funding Future Transportation
  • Applying Lessons Learned to Move the Transportation Industry Forward

Conference sessions will be followed by breakout sessions to allow for more focused, in-depth discussions that will encourage transportation colleagues from around the world to share the latest finance techniques and innovations.

The registration fee includes all general sessions, breakout sessions, committee meetings, meals, breaks and Welcome Reception. Hotel lodging will be held at the Marriott Newport Beach Hotel where pre-conference workshops will take place on Wednesday, July 8.

Congress Passes WIFIA Pilot Program

Following the 412-4 vote in the U.S. House on Tuesday and the 91-7 vote in the U.S. Senate yesterday, the president is expected to quickly sign into the law the Water Resources and Reform Development Act of 2014 (WRRDA).  In addition to $12.3 billion earmarked for 8 current and 34 new water projects, a key provision of the WRRDA is the Water Infrastructure Finance and Innovation Act (WIFIA) which establishes a 5 year pilot program administered by the EPA and Corp of Engineers to provide low cost loans for water, waster\water and flood control infrastructure projects. 

Modeled after the popular Transportation Infrastructure Finance and Innovation Act (TIFIA), the program aims to stretch federal dollars by leveraging nonfederal funds by providing loan guarantees and direct loans at long-term Treasury rates. WIFIA funds can achieve a significant leverage because they only have to cover the risk of project defaults, and the history of default in water projects is only 0.04%, according to the American Water Works Association.

In order to be eligible for WIFIA, projects must be deemed creditworthy, with loans repayable from a dedicated revenue source within 35 years of substantial project completion.  The program generally limits WIFIA support of a project to 49% of the project’s costs, with an overall limitation of 80% for all federal assistance in any project (with an exception for certain federally funded projects in Indian tribal communities), and provides that tax-exempt debt cannot be used to pay the non-federal share of project costs. However, in any year, up to 25% of appropriated funds may be used in projects exceeding the 49% limitation.

While sharing many similarities with TIFIA, WIFIA will start out on a much smaller scale.  Whereas the 2014 authorization for TIFIA under MAP-21 is $1 billion, funding for the WIFIA program totals $350 million over the entire 5-year pilot.  Despite the funding limitations development of the program is viewed as an important victory by the water industry.

“The imminent creation of the Water Infrastructure Finance and Innovation Authority is a significant breakthrough in confronting the U.S. water infrastructure challenge,” said David LaFrance, Chief Executive Officer of the American Water Works Association. “WIFIA will reduce the financing costs of critical infrastructure projects, allowing communities to fix and expand water systems at a lower cost to their customers. Our elected representatives and senators deserve our gratitude.”
 

New Round of TIGER Announced

The U.S. Department of Transportation announced Monday that it is making $474 million in financing available through its transportation investments grant program pursuant to the Full-Year Continuing Appropriations Act, 2013 (Pub. L. 113-6, March 26, 2013).  The appropriation is similar to the appropriation for the “TIGER” program and USDOT will continue to refer to the program as ‘‘TIGER Discretionary Grants.’’ As with previous rounds of TIGER, funds for the FY 2013 TIGER program will be awarded on a competitive basis for projects that will have a significant impact on the Nation, a metropolitan area or a region.  

“President Obama has challenged us to make sure our nation’s transportation infrastructure is up to the job of attracting and supporting businesses and the families that rely on them," U.S. Transportation Secretary Ray LaHood said in a statement. “And because the Appropriations Act that funds TIGER requires that funds be obligated by October 1, 2014, this round of TIGER will be making a difference soon.”  To give USDOT enough time to obligate funds by the statutory deadline, a project must be ready to go by June 30, 2014.  

Grants will range from $10 million to $200 million to fund eligible projects, which include highways and bridges; public transit; passenger and freight rail; intermodal facilities; and marine and port investments.   According to the USDOT, at least $120 million of the $474 million must be awarded to projects in rural areas.

TIGER money can be used to fund up to 80% of a project’s total cost, though if a project can show that is has a significant amount of nonfederal funds included in its overall financing package, the project may have a competitive edge, the USDOT has said.

Recent projects that have benefitted from TIGER include the 3.3 mile M-1 Rail project in Detroit, which received $25 million, and the Port of Corpus Christi, Texas, which received a grant of $10 million to expand rail service at the port with a new rail yard.

This is the fifth round of financing being distributed under TIGER since the program was put in place by the American Recovery and Reinvestment Act of 2009.  Since its inception, demand for funding under the TIGER program has been significant.  According to the USDOT, in the first four rounds of the TIGER program, the USDOT received more than 4,050 project proposals seeking more than $105.2 billion.  While demand has been great, only approximately $3.9 billion in transportation project grants have been given out so far under the program.

Interested applicants can review the USDOT’s grant resources page and view the full Notice of Funding Availability.   Applications for grant money are due by June 3.

Knik Arm Crossing Files $500 Million TIFIA Letter of Interest

Last night the Knik Arm Bridge and Toll Authority, responsible for development of the $750 million Knik Arm Crossing project in the Anchorage, Alaska region, filed a letter of interest with the USDOT for TIFIA credit assistance.  It is one of the first, if not the first, letters of interest filed under the USDOT’s July 27 Notice of Funding Availability implementing the MAP-21 amendments to TIFIA.

KABATA filed a letter of interest in November 2011 for a $308 million TIFIA loan.  With the changes in MAP-21 authorizing TIFIA credit assistance up to 49% of eligible project costs and expanding what are eligible costs, KABATA has increased its request to $500.5 million.

The Knik Arm Crossing is planned to be a toll project, delivered under an availability payment public-private partnership.  The plan is to use toll revenues, together with state appropriations, to fund a reserve for availability payments and other contract obligations.  Based on the transaction structure, KABATA expects that both the senior debt and the subordinate TIFIA debt will achieve investment grade rating, something the TIFIA law requires if the principal amount of the TIFIA debt exceeds the senior debt.

The toll revenues are slated to be used in part to help fund future capacity expansions of the project and planned regional transportation needs.  As the letter of interest points out, the 49% TIFIA financing will free up more toll revenues to meet these other transportation needs, and in this way effectively leverage much more than the initial project.

As far as we are aware, the Knik Arm Crossing is poised to be the first project to submit a letter of interest to USDOT under MAP-21’s new TIFIA provisions for rural projects.  The application indicates that 78% of the project, in terms of lane miles, and 57.6%, in terms of project costs, are in rural areas.  The new TIFIA law defines rural areas as those outside a city with 250,000 or more population.  Rural treatment for a portion of the project will lower interest costs and enhance the project’s feasibility.  The new TIFIA law provides for an interest rate at half the normal rate for credit assistance supported by the 10% of the annual budget authority reserved for rural projects.

KABATA is taking advantage of the new TIFIA rolling application procedures to move quickly to reserve TIFIA budget authority for its project.  How the TIFIA JPO processes and handles this letter of interest may tell the industry a lot about the USDOT’s administration of the new TIFIA program.

Evan Caplicki co-authored this entry.

U.S. Department of Transportation Launches Historic Expansion of TIFIA Program

On July 27 U.S. Transportation Secretary Ray LaHood announced the availability of over $16 billion in TIFIA credit assistance for critical infrastructure projects across the country as a result of the recently enacted MAP-21.  The notice of funding availability can be found here.  The TIFIA Joint Program Office is conducting a web conference tomorrow, August 1, on its plans for TIFIA implementation under the new law.

MAP-21’s TIFIA amendments provide $1.75 billion in budget authority over two years for the TIFIA credit assistance program and will be the largest transportation infrastructure finance fund in the USDOT’s history.  Each dollar of federal funds (except funds to pay program administrative costs) can provide approximately $10 in TIFIA credit assistance (or approximately $16.1 billion) and can leverage up to $20-$30 billion in transportation infrastructure investment.  As a whole, the federal loan program could support up to $50 billion in Federal, state, local and private sector investment.

To date, the TIFIA program has used $9.2 billion in funding to leverage more than $36.4 billion in capital to help build 27 major transportation projects around the country.  The new funding will build on this impressive record and stimulate the development of necessary highways, bridges, tunnels, passenger rail projects and other transportation projects and provide a significant boost to the American economy.

A variety of transportation projects are eligible for the funding and many qualified, large-scale projects that where previously postponed may be able to progress due to the flexibility provided by the TIFIA program.

Although the TIFIA amendments do not take effect until October 1, the USDOT is acting with urgency to encourage early submissions of letters of interest, which start the process for obtaining TIFIA financing.  The USDOT has adapted its form of letter of interest to the amended eligibility criteria.  However, the notice also requires a preliminary rating opinion on senior and TIFIA debt and a $100,000 fee in order to conduct a robust initial screening of projects before inviting the project sponsor to submit a formal application.  The USDOT intends to retain financial and legal advisors at this early stage to help determine whether the eligibility criteria, especially creditworthiness, are satisfied.

MAP-21 ushers in a paradigm shift in the TIFIA program, from a merit-based project selection and evaluation system to a system of objective eligibility criteria under a rolling application process.  Nevertheless, the USDOT seemingly is unable to complete this shift and still clings to the role of arbiter of what projects deserve TIFIA support and in what amount.  The notice of funding availability requires that the letter of interest include quantitative or qualitative information on the project’s “public benefit” so that the USDOT can “evaluate each Letter of Interest to determine whether it would be in the public interest to provide credit assistance to the proposed project.”  The letter of interest also must contain the rationale for the amount of TIFIA credit assistance requested to “help DOT ensure that it allocates TIFIA’s budget authority effectively.”  Apparently, the USDOT intends to place the burden on the project sponsor to justify assistance greater than 33% of eligible capital costs, even though Congress expressly authorized loans up to 49%.  These provisions in the notice may generate controversy.

Secretary LaHood also announced the creation of the Project Finance Center (“PFC”), which will help state and local government project sponsors analyze financial options for highway, transit, rail, intermodal and other surface transportation projects facing funding challenges.  Through the PFC, the USDOT will have an opportunity to provide technical assistance to state and local sponsors of surface transportation projects seeking financial support and make the development process easier for all parties involved.

The notice of funding availability invites public comments by September 1.  The comments may broadly address any aspects of USDOT’s implementation of the TIFIA amendments in MAP-21.

Barney Allison co-authored this entry.

Webinar: MAP-21 - Meaningful Reforms and Practical Implications

Congress recently passed the Moving Ahead for Progress in the 21st Century Act (MAP-21), a measure to reauthorize transportation funding through the end of 2014. MAP-21 contains meaningful reforms that collectively represent a significant improvement in federal surface transportation law. It will have far-reaching implications for the transportation industry and will dictate how large, complex projects can be developed in the coming years.

What does it mean to you?

Join our panel, including key house staff members critical to MAP-21, for a 90-minute discussion on selected aspects of the Act and listen as they address the effects it will have on the transportation industry.

GEOFF YAREMA, Chair of Nossaman's Infrastructure Practice Group, is a nationally recognized leader in infrastructure development and finance and was a member of the National Surface Transportation Infrastructure Financing Commission.

JIM TYMON is the Republican Staff Director of the Highways and Transit Subcommittee of the U.S. House of Representatives Transportation and Infrastructure Committee.

JENNIFER HALL is Counsel to the U.S. House of Representatives Transportation and Infrastructure Committee.

FRED KESSLER represents state DOTs and other transportation agencies in design-build and public-private partnerships project delivery and financing using tolling, TIFIA, PABs and other financing tools.

ROB THORNTON represented transportation agency clients on project delivery issues in MAP-21 and has successfully defended projects with a construction cost of over six billion dollars against environmental challenges.

Attendees will receive insight on:

  • Final compromises reached
  • Expansion and update of the TIFIA program
  • Environmental streamlining
  • Changes in tolling policies
  • Public-private partnerships
  • Congressional role in implementing the legislation

To register for this informative webinar, click here.

Surface Transportation Reauthorization Ushers in Significant Changes to TIFIA

On June 29, 2012 Congress passed the Moving Ahead for Progress in the 21st Century Act (MAP-21), a compromise measure to reauthorize transportation funding through the end of 2014.  A bipartisan and bicameral measure, MAP-21 contains meaningful reforms that, although marred by some missed opportunities, collectively represent a significant improvement in federal surface transportation law.

We foresee continued heavy demand for TIFIA credit assistance, particularly given the more attractive features of the reenacted TIFIA program.  We have some concern that the combination of the increase in coverage from 33% to 49%, the significant simplification of eligibility criteria, the removal of FHWA discretionary selection authority, the rolling application process, the availability of master credit agreements to obtain early conditional commitments, and the fairly forgiving project readiness eligibility requirement will result in a race to submit applications prematurely.  Government sponsors of large transportation development projects will need to develop timely, proactive strategies to take advantage of the new TIFIA program.

To continue reading, click here

U.S. Department of Transportation Announces Fourth Round of TIGER Discretionary Grants

The U.S. Department of Transportation (USDOT) announced a much-anticipated fourth round of funding for USDOT’s popular TIGER Discretionary Grants program, totalling $500 million for capital investments in surface transportation infrastructure.

Pre-applications must be submitted by Feb. 20, 2012 and final applications must be submitted by March 19, 2012.  Previous rounds of competitive TIGER grants were heavily over-subscribed.  The last round attracted 848 applications with funding requests for $14.29 billion, while USDOT awarded funds in December 2011 for 46 capital projects totaling $511 million.

USDOT did not make many substantive changes in this week's notice to the TIGER application and selection process as compared to previous TIGER funding rounds.  Authorizing legislation for this round allows for an amount not to exceed $175 million of the $500 million total to be used to pay the subsidy and administrative costs for a project receiving credit assistance under the Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) program.  Applicants for these TIGER TIFIA payments must submit a TIGER application and a separate TIFIA letter of interest.

USDOT will also specifically make up to $100 million in TIGER funds available to high speed and intercity passenger rail projects, which have fallen out of favor in Congress but remain an Obama Administration priority.

More detailed information can be found in USDOT’s Notice of Funding Availability published in the Jan. 31, 2012 Federal Register.

Will there be a TIFIA Loan for Your Project in 2012? Letters of Interest Are at 12 Times Availability

On Nov. 3, 2011 the TIFIA Joint Program Office announced availability of limited funding for TIFIA credit assistance for fiscal year 2012 and invited submission of letters of interest (LOIs) by Dec. 30, 2011.  While we are aware of no official announcement, sources inform us that the TIFIA JPO received LOIs from 26 project sponsors seeking over $13 billion in credit assistance to finance almost $36 billion in new infrastructure investment.

This current interest continues a three-year trend in strong demand for TIFIA credit assistance, and, so far anyway, a limited amount of available subsidies.  The TIFIA program only has $110 million in TIFIA subsidies available for fiscal year 2012, capable of supporting approximately $1.1 billion in credit assistance.  According to our math, the LOIs represent demand of almost twelve times the available appropriation for the program.

The pending Senate federal reauthorization bill would increase annual TIFIA subsidies to $1 billion.  Reports indicate that the House Transportation and Infrastructure Committee will include the same sharp increase in the TIFIA program in its reauthorization bill.

A multimodal working group is evaluating the LOIs.  Transportation Secretary Ray LaHood reportedly wants decisions issued on the LOIs in March or April.  Unfortunately, once again the vast majority of projects will be turned down or invited to apply for far less support than requested.

USDOT Announces TIGER III Grantees

This morning, U.S. Department of Transportation (USDOT) Secretary Ray LaHood announced the winners of the extremely competitive TIGER III grant application cycle.  Forty-six projects in 33 states will share $511 million in grant funds.  The announcement was made several months earlier than the originally scheduled date.

As has been the case with the previous two rounds of TIGER grants, this cycle was wildly oversubscribed.  According to the announcement, USDOT received 848 project applications from all 50 states, Puerto Rico, and Washington, DC, requesting a total of $14.29 billion, far exceeding the amount available under the TIGER III program. 

“The overwhelming demand for these grants clearly shows that communities across the country can’t afford to wait any longer for Congress to put Americans to work building the transportation projects that are critical to our economic future,” said Secretary LaHood. “That’s why we’ve taken action to get these grants out the door quickly, and that is why we will continue to ask Congress to make the targeted investments we need to create jobs, repair our nation’s transportation systems, better serve the traveling public and our nation’s businesses, factories and farms, and make sure our economy continues to grow."

Of the grants awarded, only three included payments to support TIFIA loans.  The projects that will receive TIFIA payments are the SR-91 Corridor Improvement Project managed lanes being developed by the Riverside County Transportation Commission; Virginia DOT’s I-95 HOT Lanes; and Dallas Area Rapid Transit’s Orange Line Extension.

TIGER grants are awarded to transportation projects that have significant national or regional impact.  USDOT allocated the TIGER III funds to transportation projects in both urban and rural areas.  The funding was distributed between a broad array of road and bridge, transit, port and freight rail projects.  The three rounds of TIGER grants have resulted in an award of over $2.6 billion for critical transportation funding.

Big Changes Proposed for TIFIA

Moving Ahead for Progress in the 21st Century (MAP-21), the draft reauthorization bill unanimously voted out of the Senate Environment and Public Works Committee, contains major improvements to the TIFIA program that many, including those of us at Nossaman, have been advocating.  These changes, if enacted, will greatly expand availability and eliminate much of the uncertainty over whether a project will be selected.

  • The bill eliminates virtually ALL of the selection criteria, converting availability from a discretionary competitive selection process to a simple objective determination of project eligibility.
  • It adopts a rolling basis for applications and availability.  No more waiting for annual notices of funding availability; it is up to the project sponsor to decide when to apply.
  • The bill gives applicants the right to pay the subsidy from other sources, included federal grant funds, if budget authority runs out.
  • Alternatively, if budget authority runs out, the bill allows an applicant to enter into a master credit agreement to obtain budget authority in a later year when available.
  • The bill increases the size of the TIFIA credit assistance from a maximum of 33 percent to a maximum of 49 percent of eligible project costs.
  • The Senate EPW Committee recommends an annual TIFIA budget authority of $1 billion.

Other features of the bill's amendments include:

  • Beefed up credit standards, including "an investment grade rating from at least two rating agencies on debt senior to the Federal credit instrument; and a rating from at least 2 rating agencies on the Federal credit instrument."   For small projects (up to $75 million, rural projects, and ITS), only one rating agency rating is required.
  • As a requirement for project eligibility, the applicant must first submit a letter of interest (LOI), followed by an application.  Presumably, the LOI and application requirements will get a lot simpler and quicker with fewer eligibility criteria.
  • The bankruptcy springing lien has an exception for senior debt that is for an agency's program and is secured by tax revenues or system revenues.
  • 50 percent of unused annual budget authority (if any) can be carried forward; the balance is returned to the states via federal share.
  • Administrative fees for the program are set at 1 percent of the annual budget authority.  At $1 billion of annual budget authority, annual administrative fees will be $10 million, a large increase from the $2.2 million under existing law.

There are a few issues that cause us concern.

  • Project readiness is not a prerequisite for TIFIA eligibility.  Such a requirement seems especially needed given the new first-come, first-served approach to budget authority allocation.
  • Improved and expedited procedures are needed to overcome the inordinate processing delays that characterize the TIFIA program.  We are quite concerned that applications, credit processing and loan documentation will get bogged down, and bureaucracy rather than budget authority will be the new constraint on TIFIA expansion.
  • The exponential increase in TIFIA demand that will occur if this bill comes to fruition has real potential to overwhelm the TIFIA JPO, particularly because applicants can pay in subsidies on top of the $1 billion budget authority.  The bill’s increase in the annual administrative budget to $10 million may not be enough. Consideration should be given to increasing the administrative budget so that the TIFIA JPO can staff up to handle in a timely manner the growth in demand.
  • There is no provision calling on the TIFIA JPO to process LOIs, applications, term sheets and loan documentation during the period it will be rolling out regulations for carrying out the amended program.  It would be quite detrimental to the states if things grind to a halt while USDOT goes through a long procedure to adopt regulations.

There is reason to believe that the House reauthorization bill will contain comparable improvements to this vital federal credit assistance program.

GDOT's Northwest Corridor Project Invited to Apply for TIFIA Loan

On July 19, 2011, the Georgia Department of Transportation issued a press release stating that GDOT was invited to apply for a TIFIA loan in the amount of $270 million for the Northwest Corridor Project – a project to add managed lanes along I-75 and I-575 in the metro Atlanta region with approximately $968 million in capital costs.  The press release followed an announcement by Governor Nathan Deal that the procurement of the Northwest Corridor Project will proceed to the next phase through the issuance of a final Request for Proposals.  Three consortia – consisting of major national and international companies – have been shortlisted to submit proposals to design, build, finance, operate and maintain the Northwest Corridor Project.

The Northwest Corridor Project will be the largest transportation infrastructure project in Georgia to date and is expected to generate over 9,700 jobs statewide.  The Northwest Corridor Project is the cornerstone of GDOT’s Managed Lanes System Plan, which is a plan to construction a $16.2 billion managed lanes network in the metro Atlanta region.

Analysis of Infrastructure Investments Produces Surprising Findings

Posted by guest blogger Ryan J. Orr

A recently published paper analyzes returns on infrastructure investments and produces some rather surprising findings. The paper, “Risk, Return and Cash Flow Characteristics of Infrastructure Fund Investments” by Florian Bitsch, Axel Buchner, and Christoph Kaserer, examines an extensive dataset of infrastructure and non-infrastructure deals and finds that the data does not back up the conventional wisdom that infrastructure investments offer “long-term, stable and predictable, inflation-linked returns with low correlation to other assets.”  Unfortunately, while the study was an ambitious effort by the Center for Private Equity Research (CEPRES), the authors’ dataset of “infrastructure deals” fails to consider the distinction between asset classes and therefore, we believe, one can hardly argue that it is an accurate representation of the global infrastructure asset class as it has been defined by most institutional investors.

The authors draw from what is perhaps the most complete dataset of infrastructure investment performance ever assembled—that of CEPRES, a private consulting spin-out of the University of Frankfurt that is also supported by Technische Universität München and Deutsche Bank Group.  The 363 infrastructure deals and 11,223 non-infrastructure deals studied are all unlisted pure equity deals done by private equity firms with an initial investment and ultimate exit between 1971 and 2009.  Uniquely, the authors had access to the full history of cash flows for each. Through a series of regressions, they compare the infrastructure and non-infrastructure deals. Among their most interesting findings: infrastructure deals do not have a longer time horizon, do not provide stable cash flows, do not have inflation-linked returns, do correlate with other kinds of assets, and are also somehow low risk and high return.

What’s going on here? If these findings are true, they turn the entire world of infrastructure investing on its head.

Looking closer at the data, drawn primarily from North America (43%) and Europe (43%), the dataset is largely telecommunications (58.7%) and natural resources (24.8%). This is a heavy skewing. Typically, both natural resources and telecom investments have full demand risk and lack contractual and regulatory protections that give infrastructure its hallmark downside protection. Social infrastructure is absent from the sample, and it is unclear what is included in “natural resources.” (Do oil and gas exploration and production count as infrastructure?) Additionally, 52.9% of the deals are labeled as venture capital, which clearly diverges from the risk/return profile of mature operating infrastructure companies. On the whole, we conclude that this dataset of “infrastructure deals” is poorly circumscribed.

Admittedly, the industry’s lack of a universal definition of “infrastructure” is partially at fault for this. Still—to paraphrase Justice Potter Stewart’s 1964 concurring opinion in Jacobellis vs. Idaho—“I know infrastructure when I see it, and it is not this.” A more focused cross-section of investment performance might suggest a conclusion more in line with the traditional investment profile of infrastructure assets.

Ultimately, the most significant legacy of this paper could be broader awareness of the dataset behind it. Future researchers should be able to carry out more segmented and nuanced investigations of performance of subsets of the infrastructure asset class, which should yield more precise conclusions.

Dr. Ryan Orr is Executive Director of the Collaboratory for Research on Global Projects at Stanford University. He teaches Global Project Finance and Infrastructure Investment to students in the university's Engineering School and Graduate School of Business.

U.S. Department of Transportation Announces Third Round of TIGER Funding

As discussed in our previous blog post, the U.S. Department of Transportation (“USDOT”) announced this week the availability of nearly $527 million in FY 2011 funds for the third round of USDOT’s wildly popular TIGER Discretionary Grant program.

Pre-applications for the funds are due by October 3, 2011, and final applications are due by October 31, 2011.  USDOT will host a half-day seminar and webcast providing information and guidance on the TIGER application process on July 18, 2011.

The TIGER program awards funds on a competitive basis to projects that will have a significant impact on the nation, a metropolitan area, or a region.  Unlike previous rounds, this third TIGER round does not provide funding for planning grants.  Additionally, TIGER applicants are now limited to three applications submitted as lead applicant this round.  Otherwise, all other material requirements and details of the two earlier TIGER funding rounds, including selection criteria, have not changed in this third round.

While USDOT will apportion the majority of these funds as discretionary grants, USDOT can use up to $150 million of this funding round to pay the subsidy and administrative costs of the TIFIA credit assistance program.  This $150 million could support approximately $1.5 billion in credit assistance under the TIFIA program.

USDOT requires applicants for TIGER TIFIA funds to both submit an application for this round of TIGER funding and a separate TIFIA letter of interest.  Additionally, USDOT reserves the right to offer TIFIA credit assistance to TIGER applicants who did not specifically request TIFIA funds.  Therefore, USDOT strongly recommends all TIGER applicants to consider the viability of their project for TIFIA credit assistance in addition to traditional discretionary grants.

More detailed information can be found in USDOT’s Interim Notice of Funding Availability, published in the July 1, 2011 Federal Register.

Tags:

TIGER TIFIA - ROUND III

The federal fiscal 2011 budget compromise authorized a third round of stimulus spending on transportation capital projects, dubbed TIGER III, under the Transportation Investment Generating Economic Recovery program. $527 million will become available from the U.S. Department of Transportation for selected projects.

Of this amount, up to $150 million will be slated for direct loans and other credit assistance on terms similar to the TIFIA program. This more than doubles up on the $122 million TIFIA budget authority for the 2011 fiscal year.

What we are interested in seeing is whether the USDOT will actually approve credit assistance up to the full $150 million in budget authority assuming they receive enough requests for TIGER TIFIA payments.  TIGER I, part of ARRA, authorized $200 million in supplemental TIFIA budgetary authority but the USDOT only awarded five TIGER TIFIA projects using $60 million. TIGER II had a similar outcome.  In 2010, Congress authorized $600 million in TIGER II discretionary grants, $150 million of which could be used to subsidize TIFIA credit assistance. Over 1,000 applications were submitted for over $19 billion in projects. USDOT awarded 42 capital construction and 33 planning projects worth nearly $600 million. These included only one TIFIA financing, a $20 million award to LA Metro as a TIGER II TIFIA subsidy.

Numerous sources are urging significant expansion of the TIFIA program as part of the federal transportation reauthorization bills, and committee chairs Boxer and Mica are on record supporting a large increase in TIFIA budget authority. Let’s hope this augers well for use of the full $150 million. Current demand for TIFIA credit assistance, at least based on the latest list of LOI’s, clearly supports full use. By the way, word from FHWA is that decisions on the LOIs are expected in the near future.  Those not selected will be lining up for TIGER TIFIA – Round III.

Tags:

NCSL/AASHTO to Offer Free Webinar on Transportation Governance and Finance at the State Level--Find Out How It's Really Working

The National Conference of State Legislatures (NCSL) and the Center for Excellence in Project Finance at the American Association of State Highway and Transportation Officials (AASHTO) recently released the report entitled "Transportation Governance and Finance: a 50-State Review of State Legislatures and Departments of Transportation," and will be hosting a free webinar on June 21 at 2pm ET to present the findings of the study (previewed during a committee meeting in January).

Listening to the webinar and reading the study is a must for anyone who wants to understand how decisions regarding transportation development and funding get made at the various levels of state government.  In particular it's a valuable opportunity for private P3 developers to gain insights into the workings of state transportation decision-making.

Click here for more information and to register for the webinar.

Transportation Agencies Pen Letter to Congress on TIFIA Program

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.

AASHTO Conference Report on Highway Funding and Finance Released

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.

FHWA Extends TIFIA LOI Deadline; Tolling/Pricing Counts Toward "Sustainability"

 

FHWA has extended the deadline for FY2011 TIFIA Letters of Interest (LOI) to March 1, 2011. The previous Notice of Funding Availability (NOFA), issued on January 19, had allowed less than a month for interested applicants to prepare and submit LOIs. 

The January 25 revised NOFA included a new phrase addressing the role of tolling and pricing programs in enhancing environmental sustainability. Under the revised selection criteria, applicants can demonstrate that their projects help preserve and protect the environment through “the use of tolling or pricing structures to reduce or manage high levels of congestion on highway facilities and encourage the use of alternative transportation options.” 

This new tweak to the TIFIA selection criteria may indicate the Administration’s acceptance of pricing as a gateway to “greener” highways.   FHWA has found that managed lanes, which set tolls according to traffic demand, provide environmental benefits: “By reducing the number of vehicles traveling on the road and by smoothing traffic flow and maintaining freeway speeds, managed lanes help to reduce air pollution and may also contribute to a decrease in greenhouse-gas emissions.

There is still no indication of how much funding will be available for TIFIA in FY2011, so this may not be the last revision to the NOFA. FHWA also intends revise/replace the August 2010 template, and will likely update the template language on environmental sustainability.

TIGER II Grantees Announced, LA Metro Sole TIFIA Recipient

 Earlier this week USDOT Secretary LaHood announced the winners of the highly competitive TIGER II grant application cycle. Forty-two capital construction projects and 33 planning projects in 40 states will share nearly $600 million in grant funds.

According to the announcement, USDOT received nearly 1,000 construction grant applications for more than $19 billion from all 50 states, U.S. territories and the District of Columbia.  Roughly 29 percent of TIGER II money goes for road projects, 26 percent for transit, 20 percent for rail projects, 16 percent for ports, four percent for bicycle and pedestrian projects and five percent for planning projects. Grants sizes ranged from $1M for a small road extension project in Franklin County, Washington to $47.7M for Georgia’s Atlanta Streetcar project.  

“These are innovative, 21st century projects that will change the U.S. transportation landscape by strengthening the economy and creating jobs, reducing gridlock and providing safe, affordable and environmentally sustainable transportation choices,” said Secretary LaHood.  “Many of these projects could not have been funded without this program.”

The most significant project (in dollar terms) to receive funding is the Los Angeles County Metropolitan Transportation Authority’s (LA Metro) $1.7B Crenshaw/LAX Light Rail Line Project. LA Metro received a $20 million TIGER II TIFIA Payment, which is anticipated to support a $546 million TIFIA loan, covering nearly a third of project costs. This groundbreaking project is a key piece of Mayor Antonio Villaraigosa’s 30/10 initiative, an effort to accelerate 12 major transit projects in just 10 years, rather than 30 years, using innovative financing backed by the voter approved Measure R sales tax.  

The new 8.5-mile light rail line will provide a critical north-south link in Los Angeles, with six to eight stops connecting the South Bay Region and LAX Airport with major employment centers located in the Westside Region and the downtown area.   LA Metro expects to complete the environmental process in the spring of next year, and construction could begin in late 2011 and be complete between 2016 and 2018

USDOT Outlines $600M "TIGER II" Grant Program, $150M Available for TIFIA

USDOT has published interim guidance on its new “TIGER II” competitive grant program, a $600M successor to the popular $1.5B TIGER program included in the American Recovery and Reinvestment Act (ARRA).  The guidance outlines application deadlines, eligibility and project selection criteria, and indicates a shift in the focus of the program from near-term job creation to long-term outcomes.  

TIGER II is not constrained by ARRA’s focus on “shovel ready” projects and immediate job creation (funds must be awarded by 9/30/2012, but there is no deadline for expenditure or project completion).  Instead, TIGER II seeks long-term outcomes, though these outcomes fall in the same general areas as TIGER I: safety, economic competitiveness, livability, sustainability, and state of good repair (the extent to which a project improves the condition of existing infrastructure and minimize life-cycle costs).

Click below for additional details about the focus and requirements of TIGER II.

Continue Reading...

USDOT Announces $1.5 Billion in TIGER Grants - $60M in TIFIA Allocations

USDOT Announces $1.5 Billion in TIGER Grants – $60M in TIFIA Allocations

On February 17, the one year anniversary of the landmark American Recovery and Reinvestment Act, USDOT announced the final list of TIGER grant recipients. Grants range in size from $3.15M for a roadway rehabilitation/reconstruction in Burlington, VT to a $105M grant for construction of two new intermodal facilities in Memphis, TN and Birmingham, AL to support freight rail service from the Gulf Coast to the Mid-Atlantic.  

When combined with state and private funds, the TIGER funds will support approximately $4 billion in transportation investment, according to AASHTO, which estimates that States have already started or completed 12,250 recovery projects worth $26.4 billion.  

Shortly after releasing the final list of grantees, USDOT released a statement outlining key areas for investment, which included:

  • Freight Rail: 11 national freight projects to help get freight off America’s highways and onto rail.
  • Road and Bridge Repair: 13 highway infrastructure projects to make critical repairs to roads and bridges that are in dire condition.
  • Community Livability: 22 livability projects aimed at giving Americans more choices about how they travel and improving access to economic and housing opportunities in their communities.

These investments may be signaling a shift in federal policy, and build upon the HUD-EPA-DOT partnership to promote livability and sustainability which the Obama Administration announced last June. Each project was evaluated for its ability to help achieve the following goals:

  • A state of good repair for our existing transportation facilities;
  • Enhanced economic competitiveness;
  • Safer streets and communities;
  • Environmental sustainability; and
  • Enhanced community livability.

The Administration seems to be applying these principles to other discretionary programs as well, notably the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, which received $60M in new funding under the TIGER grant program, nearly half of the $122M annual apportionment it had been receiving under SAFETEA-LU. 

Five grantees will be eligible for the TIGER TIFIA Payment program, which allows grantees to pay the subsidy and administrative costs of the TIFIA credit assistance program using TIGER grant funds. 

The TIFIA TIGER payments will be leveraged with state and other funds to support several larger projects. The largest of these grants – $20M allocated to the North Texas Toll Authority for improvements to a high-growth corridor near Dallas-Ft. Worth – could support a federal loan of approximately $300-$400M. 

TIFIA Eligible Grantee

Project / Cost

TIGER Funding:

North Texas Tollway Authority (NTTA)

State Highway 161

$1.3 billion

$20M to support a direct TIFIA loan of approximately $400M.

North Carolina Department of Transportation (NCDOT)

I-85 Corridor Improvement and Yadkin River Crossing

~$374 -$461M

$10M with optional innovative financing enhancements to support a direct loan for up to one-third ($125 -$154M) of the project costs

South Carolina Department of Transportation (SCDOT)

I-95 Interchange & Access Project

$360M

$10M with optional innovative financing enhancements to support a direct loan for up to one-third ($120M) of the project costs

Arkansas State Highway and Transportation Department (AHTD)

Bella Vista Bypass

$358.1M

$10M with optional innovative financing enhancements to support a direct loan for up to one-third ($119M) of the project costs

Colorado Department of Transportation (CDOT)

U.S. 36 Managed Lanes/Bus Rapid Transit

~ $160 - $260M

$10M with optional innovative financing enhancements to support a direct loan for up to one-third ($53 -$87M) of the project costs

The TIGER TIFIA allocation fell short of the statutory cap, which would have allowed USDOT to apply up to $200M of the TIGER funds to federal credit assistance. In the past year, competition for TIFIA funds has intensified and USDOT has reinstated the competitive application process it abandoned in 2002. 

USDOT Announces New TIFIA Criteria, Deadline, and Proposed Pilot Program

USDOT has published new program guidance for the TIFIA Program which clarifies project selection criteria and processes. The new guidance is the product of long deliberation at USDOT, which withdrew an earlier proposal last spring. [See USDOT Withdraws Proposed Changes to the TIFIA Program.]

The notice:

  • Announces a change in TIFIA selection criteria and processes going forward – rather than the current first come, first served basis for project submission, the new process would pool all letters of interest and apply weighting criteria to choose the “best” projects.
  • Requests comments on a potential pilot program that would allow the borrower to pay the government’s subsidy cost for the project.
  • Announces funding availability for 2010 (beyond what has been reserved for projects already pending approval).

New selection criteria would weigh projects according to projected impacts on safety, livability, sustainability, economic competitiveness and state of good repair. The new process will implement application deadlines to allow staff time to evaluate projects according to the clarified criteria, prior to submission to the Credit Council for final selection.  For consideration in the FY 2010 funding cycle, Letters of Interest must be submitted by December 31, 2009, using the revised form on the TIFIA website. 

The proposed pilot program could greatly expand the reach of the TIFIA program.   By allowing borrowers the option to pay the full subsidy cost of TIFIA assistance, USDOT hopes to extend credit to qualified projects that would otherwise be denied assistance solely due to funding constraints. Comments regarding the potential pilot program must be submitted by December 31, 2009.

Nossaman will provide a detailed analysis of the notice, which will be available via E-Alert or on the firm’s website.  

Florida Department of Transportation Closes $900 million Port of Miami Tunnel Project PPP

The Florida Department of Transportation (FDOT), announced at a press conference in Miami today that it has reached financial close on the Port of Miami Tunnel Project

FDOT, in partnership with Miami-Dade County and the City of Miami, entered into an agreement with MAT Concessionaire, LLC (MAT) which includes Meridiam Infrastructure Finance, S.a.r.l. and Bouygues Travaux Publics as equity members. The $900 million public-private partnership (PPP) deal uses an availability payment structure that provides for payment to MAT over 30 years after completion of construction, which is expected to occur in five years. This is the second transportation infrastructure project in the United States to use an availability payment structure, following the recently closed FDOT I-595 Corridor Improvements Project

Financing for the project includes a $341 million low-cost federal loan through the Transportation Infrastructure Finance and Innovation Act, equity contributions from MAT, and $330 million in loans from the following senior lenders:

  • BNP Paribas
  • Banco Bilbao Bizcaya Argentina
  • RBS Citizens
  • Banco Santander
  • Bayerische Hypo
  • Calyon, Dexia
  • ING Capital
  • Societe Generale
  • WestLB

The Port of Miami Tunnel will link the Port of Miami facilities on Dodge Island with MacArthur Causeway and I-395 via twin 42’ diameter tunnels under Biscayne Bay, increasing the Port’s competitiveness and relieving congestion in downtown Miami by diverting passenger and freight traffic to I-395 and improving access to I-95. The project also includes widening of MacArthur Causeway and other roadway improvements.

Bouygues Civil Works Florida, Inc. will design and construct the project with engineering assistance from Jacobs Engineering Group, Inc. VMS, Inc. will serve as the lead operations and maintenance contractor. In addition to Nossaman, FDOT’s advisors include Jeffrey Parker & Associates (financial), Parsons Brinkerhoff and T.Y. Lin (technical), and Marsh (insurance).

USDOT TIGER Grants: 1400 Applicants Request a Total $57 Billion

USDOT is weighing 1400 TIGER grant applications (11 of which requested TIFIA funding) totaling $57 billion in funding requests. The TIGER (Grants for Transportation Investment Generating Economic Recovery) program provides for $1.5 billion in discretionary grants to high impact transportation projects, and could fund up to $200 million in TIFIA assistance. 

Applications were due on September 15. Secretary LaHood has assembled a team to expedite application review, and plans to announce grants in January 2010 – a month ahead of the statutory deadline.  

The program gives priority to “shovel ready” projects that can be completed on or before February 17, 2012. Selection criteria favor high-impact projects that lower life cycle costs, and enhance safety, sustainability, livability, and economic competitiveness. Grants can range in size from $20 – 300 million.

USDOT is required to ensure an equitable geographic distribution of funds, and may adjust its list of recommended projects after applying the program selection criteria described above. No state can receive more than $300 million in funds, and multi-state applications must allocate project costs to assist USDOT in determining funding levels for each participant.

TIFIA could significantly boost the program’s impact. TIFIA offers credit assistance (loan guarantees and direct loans) to states and their partners, and can leverage funding and help attract private investment as a way to fill a gap in the financial system between the risk-averse municipal bond markets and the high-interest loans available to the private sector. 

The Federal Highway Administration has estimated that allocating the full $200 million in TIGER TIFIA grants could support $2 billion in credit assistance, more than tripling the funding outcome for the TIGER program. While USDOT has not released an official estimate of TIGER TIFIA funding requests, fully utilizing the TIFIA allocation would amplify the TIGER program’s impact by drawing on infrastructure investment in high-traffic congested urban corridors, consistent with the program’s focus on high impact projects. 

Tags:

Massachusetts Authorizes PPPs

In addition to the recent passage of comprehensive P3 legislation in Arizona and California, the newly created Massachusetts Department of Transportation (MassDOT) has also been authorized to utilize public private partnerships for transportation projects. Provisions for design-build-operate-maintain (DBOM) and design-build-finance-operate-maintain (DBFOM) procurements are included in Senate Bill 2087, commonly known as the "Transportation Reform Act," under which MassDOT was formed. Under the Act, P3’s may be used for a new or existing highway, road, bridge, tunnel ferry, airport, parking facility, seaport, rail facility or other transportation facilities.

Massachusetts has opted to take markedly different approaches to funding DBOM and DBFOM projects. Payments under DBOM contracts must come in whole or in part from funds appropriated prior to award of the contract or must be secured by tolls or other user charges. In contrast, for DBFOM projects, no public funds may be appropriated to pay for the services provided by the contractor.  These restrictions could prove to be a significant hurdle to financing some projects.

Another notable feature of MassDOT’s new P3 program is the establishment of a P3 Infrastructure Oversight Commission which will comment on and approve all requests for proposals (RFPs) for DBOM or DBFOM services. The seven member commission will be composed of experts with experience in the fields of transportation law, public policy, public finance, management consulting, transportation or organizational change. At least one of the commission members will be a representative from the Massachusetts Organization of State Engineers and Sciences.

The P3 portion of the Transportation Reform Act also includes provisions for:

  • Asset sales and leases
  • Procurement method and evaluation factors
  • Stipends
  • Funding
  • Confidentiality
  • Contents of the concession agreement
  • Creation of a public-private partnership oversight commission.

Click here to view the entire Tranportation Reform Act.

Infrastructure Executives: Infrastructure Development Needs More Than Favorable Economic Conditions

A recent survey conducted by KPMG International confirms what many in the infrastructure industry already knew: current infrastructure investment is insufficient to support economic growth and politics frequently influences infrastructure development in the United States.  In this global survey, KPMG surveyed 455 infrastructure executives, including 118 from the United States.

While much of the recent industry press has focused on the lack of available financing as the primary challenge to delivering infrastructure, a vast majority of the respondents indicated that governmental effectiveness and current economic conditions are bigger hurdles than available financing.  The respondents expressed specific concerns over what they viewed as an overly politicized process, changing public policy, and excessive government bureaucracy.  When asked how governmental agencies could enhance their effectiveness in delivering infrastructure, respondents suggested making infrastructure delivery less influenced by political considerations, increasing transparency in infrastructure spending, and expanding the use of public-private partnerships (PPPs). 

Recent examples of PPP projects played out in the political arena include the SH 121 project in Texas and the proposed long-term leases of the Pennsylvania Turnpike and Alligator Alley.  California, which had pioneered PPPs in the early 1990s, only recently overcame objections from various political stakeholders in the intervening years.  We are hopeful that California’s new legislation authorizing design-build and PPPs for Caltrans and regional transportation authorities is a step toward improved transportation infrastructure delivery.  Given the current administration’s focus on infrastructure, Congress and the administration may now act to address the long-term needs for a stable means of funding infrastructure development and maintenance, without the political roadblocks.