Nossaman Develops Model Social Infrastructure P3 Bill

Many federal, state and local government agencies are looking for innovative and cost effective methods to deliver essential social infrastructure such as educational facilities, hospitals and criminal justice facilities and related infrastructure.  As a result, these agencies are increasingly interested in assessing and pursuing the P3 delivery model.  However, these agencies often lack clear statutory authority to use a P3 delivery model for social infrastructure.  Recognizing this gap, Nossaman has developed a model social infrastructure P3 bill, based on its extensive experience in advising US public agencies on the use of innovative delivery methods for other classes of infrastructure.  A copy of the model bill can be viewed here.   

A draft version of the model bill was released for industry comment on April 28, 2014, and was favorably received and generated interest and input from various sectors.  A few minor revisions were made to the bill following the comment period, which closed on June 11, 2014.

The model bill seeks to provide the authorizations that a public sponsor would need to engage in the P3 delivery of social infrastructure projects.  At the same time, the model bill is designed to provide flexibility to a public sponsor to fashion its project and procurement to suit its unique needs and goals.  As such, it avoids setting out detailed, rigid rules that a public sponsor must follow in the execution of a P3 project.

The model bill is not designed to address the specific requirements of every jurisdiction.  Rather, the model bill presents options and issues for consideration by legislators and addresses hurdles to P3 delivery that are common across many jurisdictions.  Every jurisdiction will have its own unique legal and policy restrictions and requirements that would need to be taken into account in the development of its authorizing legislation. 

Nossaman welcomes your comments and suggestions on the model social infrastructure P3 bill.  Please send any comments or inquiries to Yukiko Kojima at ykojima@nossaman.com or to Andrée Blais at ablais@nossaman.com.

Andrée Blais co-authored this entry.

Bi-partisan Infrastructure Bill Introduced in U.S. Senate

On November 14, a bipartisan group of ten U.S. Senators, led by Mark Warner (D-VA) and Roy Blunt (R-MO), introduced legislation to create a new independent Infrastructure Financing Authority (IFA) to issue loans and loan guarantees for transportation, water, and energy transmission, storage and distribution infrastructure.  S. 1716, titled the “Building and Renewing Infrastructure for Development and Growth in Employment” or “BRIDGE” Act, has been referred to the Senate Committee on Commerce, Science and Transportation for review. Other cosponsors are Lindsey Graham (R-SC), Kirsten Gillibrand (D-NY), Dean Heller (R-NV), Chris Coons (D-DE), Amy Klobuchar (D-MN), Roger Wicker (R-MS), Claire McCaskill (D-MO), and Mark Kirk (R-IL).  The bill has attracted the support of many organizations, including the Transportation Construction Coalition, the American Trucking Association, the American Association of Port Authorities, and the Bipartisan Policy Center.

The Senators note that decreasing federal funding for infrastructure, combined with increasing demand, means that in the next five years alone the U.S. will fall $1.1 trillion short of necessary funding for our nation’s needs.  The BRIDGE Act would initially seed the newly-created IFA with federal funding for loans and loan guarantees, but like the structure of the U.S. Export-Import Bank, the ultimate goal is a self-sustaining IFA “bank,” financing infrastructure projects with repayments and modest interest received.  The loans themselves would have long maturity terms (up to 35 years) and use interest rates similar to U.S. Treasury securities.  IFA and the Office of Management and Budget would work together to set additional fees or premiums to address any costs to the government.  The IFA would generally focus on large projects (greater than $50 million in anticipated costs and of national or regional significance), but the bill does not exclude rural infrastructure projects, affording applicants a lower project-size threshold through a 5% budgeting set aside).  Importantly, IFA would finance no more than 49% of the total cost of the project, as the Senators want to incent private investment in the ultimate project financing.

Senator Warner is the Chair of the Senate Commerce Committee’s Subcommittee on Surface Transportation and held a hearing about innovative financing in September to inform this legislation.  While Congress is scheduled to depart for the year in mid-December, he is actively looking to move the legislation forward. He has said he is open to attaching this bill to any other legislative vehicle that is moving.

Oregon Legislature Passes Nation's First VMT Bill

On July 6, 2013, Oregon became the first state to establish a voluntary road usage charge system for transportation funding.  Senate Bill 810 authorizes the Oregon Department of Transportation (“ODOT”) to charge up to 5,000 motorists 1.5 cents for every mile they drive rather than the traditional 30-cent gas tax.  The law comes on the heels of two ODOT pilot programs that examined alternative funding mechanisms to the gas tax and tested the vehicles-miles traveled fee (“VMT”) system. 

As reported here, the Executive Director and CEO of the International Bridge, Tunnel and Turnpike Association, Patrick D. Jones, called the bill’s passage, “a major victory for alternative forms of transportation funding across the country at both the state and federal level.”  The bill’s bi-partisan support was largely attributable to the voluntary nature of the program—vehicle owners can apply to participate in the VMT program and may terminate at any time by notifying ODOT.  The bill also tackled privacy concerns by requiring enrolled drivers to select a third party, certified by the State of Oregon, to track their vehicle mileage.  ODOT has yet to determine the mileage tracking method; however, previous pilot projects involved smartphone applications and GPS devices.  Whatever the method, the third party will supply the in-vehicle data collection device, as well as offer billing and payment collection services. 

With the gap between gas-tax-based revenue and the cost of highway construction and maintenance growing due to stagnant tax rates and the increase in fuel efficient cars on the road, taxing motorists on a per-mile basis offers a potential, albeit controversial, highway funding solution. 
 

Digital Sign War Heats Up With Lawsuit By Scenic America Challenging FHWA Guidance on Sign Lighting

A lawsuit recently filed by Scenic America strikes at a guidance issued by the Federal Highway Administration (FHWA) in 2007 related to the use of changeable electronic variable message signs (CEVMS) also known as digital billboards.  These CEVMS, which are seen with increasing frequency on sites adjacent to and intended to be viewed from the highway right of way, rely on state of the art digital technology to provide changeable, high definition commercial messages to the traveling public. 

The FHWA guidance being challenged addresses an issue raised by the Highway Beautification Act (HBA), the federal law that regulates billboards outside the boundary of the right of way and within 660 feet of the edge of the right of way.  The HBA is implemented by state Departments of Transportation by negotiation of Federal State Agreements (FSAs) between the state DOT and the FHWA.  Those FSAs customarily contain restrictions regarding size, lighting and spacing of billboards. In respect to lighting the standard provision prohibits signs that have “intermittent, flashing or moving” lights. In the pre-digital era, compliance was fairly straightforward, but with the advent of LED/LCD signs, the restriction became problematic.

The FHWA responded in 1996 by adopting a “guidance” in the form of a memorandum issued by the agency, advising that FHWA’s view was that digital signs were “acceptable” so long as they were determined by the state DOT to be consistent with its FSA.  State DOT responses to the 1996 guidance varied and in 2007 the FHWA issued a new guidance, effectively concluding that CEVMS that met the State DOT’s requirements expressly did not violate the “intermittent, flashing or moving” lights prohibition in the FSA.  The guidance resulted in a significant increase in the number of digital signs allowed to be operated, to the point that digital signs have become an issue of controversy.

In its complaint, Scenic America asserts that the guidance was an illegal rulemaking, since the FHWA did not follow its own Administrative Procedures Act procedures for the implementation of agency regulations.  FHWA and the Outdoor Advertising Association of America, which intervened in the suit, have filed a motion to dismiss the suit, arguing that APA procedures were not followed because the guidance was merely that and not a formal rule or regulation of the agency. 

The stakes are high since the outdoor advertising industry is inexorably moving in the direction of electronic signs.  The motion to dismiss has been briefed by the parties and is awaiting oral argument.  The case is Scenic America, Inc, Plaintiff,. v. United States Department of Transportation, Ray LaHood, Federal Highway Administration and Victor Mendez, Defendants, and Outdoor Advertising Association of America, Inc., Intervenor-Defendant, United States District Court for the District of Columbia, Civil Action No 13-cv-0093.

USDOT Issues Guidance on MAP-21 Tolling Program

On September 24 the Federal Highway Administration issued policy guidance on various aspects of MAP-21, including a memorandum to its Division Administrators on the tolling provisions in MAP-21 and questions and answers on federal tolling laws.

The tolling guidance addresses (1) the “complete replacement” of the prior statutory language of 23 U.S.C. 129(a), (2) the application of the existing HOV/HOT lane provisions in 23 U.SC 166, and (3) the status of the four existing toll pilot programs.  It is a must-read for anyone concerned with federal tolling law and policy.

Sections 129 and 166

The guidance recognizes the important expansion of tolling rights under Section 129 to newly constructed lanes added to existing toll-free Interstate highways, and to initial construction of highways, bridges, and tunnels on the Interstate System.  These provisions mainstream the interstate construction and express lanes demonstration programs.  Inexplicably, it does not mention another important expansion of tolling rights – for reconstruction of existing Interstate facilities, provided the number of toll-free, non-HOV lanes is preserved.

Sections 129 and 166 have overlapping provisions addressing conversion of HOV lanes to tolled lanes.  New Section 129(a)(1)(H) authorizes conversions and is free of conditions or limitations on the tolling method and rates.  Standing alone, it allows tolling of HOV vehicles in what were formerly HOV lanes.  Existing Section 166(b)(4), on the other hand, allows non-HOV use of HOV lanes if the non-HOV vehicles – but not the HOV vehicles - are tolled under a demand management automatic tolling system.  So there is an issue under MAP-21 whether Section 129(a)(1)(H) is limited by Section 166(b)(4) and its lack of authority to toll HOV vehicles.

The FHWA guidance on this issue is creative, to say the least:

"MAP-21 makes the conversion of HOV lanes to toll facilities eligible under Section 129. However, since Section 129 does not provide specific authority allowing vehicles not meeting the occupancy limitation to operate on HOV lanes, such authority can only come from Section 166, and its provisions will thus apply to all conversions of HOV lanes to toll operations."

FHWA apparently takes the view that tolling agencies must continue to allow HOVs to have toll-free use of converted HOV lanes at all times of day.  It was not necessary for FHWA to reach this conclusion.  It was equally possible for it to conclude that Section 166 provides the authority for non-HOVs to use HOV lanes and pay a toll, and that Section 129 authorizes tolling of the HOVs.  In other words, it is reasonable to conclude that new Section 129(a)(1)(H) on its face allows a tolling agency to take an HOV lane out of circulation and make it a completely tolled facility.  While we question whether FHWA's interpretation is correct, we at least now have some more clarity on the issue.

The guidance also acknowledges that tolling agreements are no longer required under Sections 129 and 166.  Previously executed agreements will continue in effect.  FHWA will take no further action for those agreements in process but not yet signed.  In the same breath, however, FHWA is now recommending that tolling agencies use (the catchphrase is “may wish to enter into”) a form of “Memorandum of Understanding” regarding tolling of a project.  The form MOU, included in the guidance, looks conspicuously similar to a Section 129 agreement and would create a binding contract.  It remains to be seen whether FHWA division offices will leave use of the MOU to the discretion of tolling agencies or mandate their use despite clear Congressional intent to do away with tolling agreements.

Pilot Programs

MAP-21 left a lot of guesswork as to the status of the pilot programs.  The guidance and answers to questions do a good job of clarifying where the programs stand.

The Express Lanes Demonstration Program expires this September 30.  Agreements for five of the 15 slots have been executed and will remain in effect.  The projects for which slots were allocated but no agreement signed will receive no further processing under this pilot program but will be addressed under Section 129.

The Interstate System Construction Toll Pilot Program, while technically continuing until 2015, is effectively defunct.  Because new interstate system construction is now a statutory right under Section 129, FHWA will accept no further applications under this pilot program.

MAP-21 does not change the Interstate System Reconstruction and Rehabilitation Pilot Program.  This pilot program authorized only three slots, and all of them are currently reserved.  Tolling agreements are required under this pilot program.

The most important continuing pilot program is the Value Pricing Pilot Program.  It provides considerable flexibility in introducing congestion pricing mechanisms to existing interstates and highways.  For instance, the VPPP could be used to authorize a regional managed lanes program, or a cordon pricing program.  Of the 15 available slots, seven are permanently reserved under executed statewide tolling cooperative agreements; and the other eight are reserved to selected state agencies for studies or non-toll projects.  The eight slots will become available again once the studies are done.  The guidance indicates that FHWA will use the VPPP only for situations that are not authorized under the new Section 129.  Tolling agreements are required under this pilot program.

What’s Next

In the short term, expect to see increasing use of the expanded tolling authority under MAP-21, as state DOTs and local transportation agencies struggle to find new revenue sources to meet critical needs.  As Bob Poole notes, the number of managed lane projects is proliferating (Surface Transportation Newsletter #107).

In the long run, the combination of shrinking federal funding for transportation and continuation of federal restrictions on tolling is not sustainable.  Unless another robust revenue source is identified, tolling across all lanes of Interstates will be critical to finance the major Interstate reconstruction and rehabilitation that looms.  Federal law still prohibits such tolling.  There may be an opportunity to further expand federal tolling rights as part of the negotiation in Congress and with the Administration of the “Grand Fiscal Bargain” after the November elections.

In my view, there is no sound policy reason for federal law restrictions on what facilities may be tolled, at least in urbanized areas where the predominant traffic is local and regional.  Policy decisions on tolling are driven by state and local needs and local citizen input.  Local transportation bodies and the elected officials that appoint them are accountable to the voters directly affected by tolling policy decisions.  Where there is accountability, the decisions will reflect the balance of local interests and needs.  Federal law and policy should accommodate, rather than inhibit, those decisions.

MAP-21: Treatment of Public-Private Partnerships Under Surface Transportation Reauthorization

The Moving Ahead for Progress in the 21st Century Act (MAP-21) contains meaningful reforms that collectively represent a significant improvement in federal surface transportation law.  For the most part, federal law directly on the subject of public-private partnerships saw little change of significance.  Other federal laws, though not directly addressing PPPs, also affect the viability as a project financing mechanism.  Changes to the TIFIA program and to federal tolling law that will markedly improve project finance via public-private partnerships were addressed in our earlier postings.

Meaningful Reform:

  • Private Sector Participation.  MAP-21 requires the Secretary to develop policies and procedures to (1) promote public understanding of the role of private investment in public transportation projects and (2) better coordinate the public and private sectors with respect to public transportation services.  To that end, the bill further requires the Secretary to identify impediments to the greater use of public-private partnerships and to address them by developing and implementing procedures similar to those used in FHWA's "SEP-15" process.  The SEP-15 process allows the Secretary to waive statutory and regulatory requirements on a case by case basis in order to increase project delivery flexibility and promote public-private partnerships.

To continue reading, click here.

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.

MAP 21: Tolling Rights Expand Under Surface Transportation Reauthorization

Congress recently passed the Moving Ahead for Progress in the 21st Century Act (MAP-21) and under prior law, with few exceptions, tolling was prohibited on Interstate highways and many other federal-aid highways.  The bill expands the exceptions, in recognition of the fact that federal fuel tax revenues are stagnant and new revenue sources are imperative to meet the growing funding gap in surface transportation.  This expansion is tempered, however, by the fact that Congress has curtailed the existing toll pilot programs.  Nevertheless, under the new law, tolls will play an increasingly important role in transportation financing.

Government sponsors of large transportation projects will have new toll revenue options at their disposal.  They will need to develop strategies to take advantage of this new array of tolling opportunities, including use of toll concessions, as well as availability payment public-private partnerships that use tolls to reimburse public sponsors for all or a portion of the payments.

To continue reading, click here.

MAP-21 Creates Potential to Accelerate Project Delivery

MAP-21, a measure to reauthorize transportation funding through the end of 2014, is the product of a robust effort by transportation advocates to streamline the lengthy, complex, and cumbersome federal environmental process.  Nossaman played an important role in this debate.  As was widely reported during the Congressional debate, it requires an average of 15 years to obtain approvals to build a major new transportation project.  It is not uncommon for large projects to languish in NEPA (National Environmental Policy Act) purgatory for decades.  The House and Senate versions of MAP-21 sought to reduce materially the time required to deliver major transportation improvements, but without sacrificing the environment.

MAP-21 reflects considerable horse trading by conferees on environmental streamlining.  Whether the ultimate product will achieve the stated legislative objective will depend on the terms of regulations to implement MAP-21 and continued vigilance by the transportation community.

To continue reading, click here.

Arizona Adopts Electronic Toll Enforcement Legislation

The Arizona Legislature sent to Gov. Jan Brewer on April 4, 2012 the landmark bill HB 2491, creating state-of-the-art toll collection and enforcement authority for the Arizona Department of Transportation (ADOT).

The bill follows on the heels of the state’s enactment of its public-private partnership (P3) law two years ago.  While that law authorizes tolling, it lacked the enforcement mechanisms needed for effective open road electronic tolling, essential to modern toll road financing and operations. 

HB 2491 includes a three-notice system, increasing charges for delayed payment, an administrative hearing process, and a panoply of means to enforce collection, including license suspension and denial, vehicle registration denial, and towing and impoundment.

The P3 law included the right of toll road users to obtain refunds of fuel taxes on fuel consumed using tolled facilities.  This unusual and administratively impractical provision, backed by the trucking industry, was repealed by HB 2491.  In exchange, the trucking industry accepted a provision limiting the toll enforcement law to new transportation facilities, which could include new tolled lanes.

Arizona does not yet have tolled transportation facilities.  ADOT is considering a potential P3 for a tolled bypass facility at the Nogales border crossing, and the Maricopa Association of Governments is actively studying a managed lanes system for the Phoenix metropolitan area, which could include conversion of HOV lanes to HOT lanes.

Nossaman assisted ADOT in drafting the legislation.

State DOTs Send Letter to Congress in Opposition of MAP-21 Amendments

Representatives from a coalition of Departments of Transportation (DOTs) across the United States have joined to send a letter to Speaker of the House of Representatives John Boehner  to oppose inclusion into the House's surface transportation reauthorization bill two amendments, introduced by Senator Bingaman, to the recently passed S. 1813, entitled Moving Ahead for Progress in the 21st Century (MAP-21). The DOTs that signed the letter include Arizona, Pennsylvania, Florida, North Carolina, Indiana, Texas, Kansas, Virginia, and Ohio.
 
The DOTs say the two provisions of note (specifically, section 4039 and section 104(c)(1)(C) of Title 23USC as amended by section 1105)  would remove or discourage important optional financing tools that states can use to build, maintain, and operate highway infrastructure. The letter, which can be read in full here, asks that the House not include either of these provisions in HR 7, the American Energy and Infrastructure Jobs Act, and requests that in conference, the House stand firm against the Senate provisions and not include either in a conference report. 
 
The letter suggests that the coalition may take other joint positions on key provisions of the bill and in the process may be expected to grow its base of support.

New York State Passes Historic Design-Build Legislation

On Friday, Dec. 9, 2011, New York Gov. Andrew Cuomo signed historic design-build legislation into law, giving five state entities - the New York State Department of Transportation, the New York State Thruway Authority, the Office of Parks, Recreation and Historic Preservation, the Department of Environmental Conservation and the New York State Bridge Authority - general authorization to enter into design-build contracts for capital projects for physical infrastructure.  Previously, only public universities had legislative authorization to use design-build. 

The legislation contemplates a two-step procurement process, with the first step involving submittal of statements of qualifications and establishment of a shortlist of design-build teams eligible to submit proposals.  Step two involves "best value" selection based on a review of proposals, and allows the procuring agency to engage in negotiations with the selected firm prior to contract award.  The procuring agency has discretion to establish payment and performance bonds for design-build projects, as it deems necessary, thus resolving concerns about the chilling effect on competition for large projects associated with a 100% bonding requirement.

HudsonSunset07 - 01.jpg

The legislation also permits alternative procurement methodologies for construction contracts, allowing award based on (a) a best value determination, (b) guaranteed maximum prices accompanied by cost data and other information, and (c) lump sum bids.

The new legislation took effect immediately and will sunset three years after the date of enactment (although procurements already in process as of the sunset date will be permitted to proceed).   The passage of this legislation is particularly noteworthy since New York, which represents a significant portion of the public works market, has now opened-up for design-build contracting. This chart provides information about other states that have previously passed laws allowing use of design-build for transportation projects. Significantly, the New York legislation allows for design-build projects over $1.2 million, with no limit on the type or number of projects.

It is anticipated that this legislation will play a central role in assisting the State of New York to pursue more innovative, alternative project delivery methods to meet its backlog of infrastructure and capital needs.  Among other things, the new Infrastructure Investment Act (2011 N.Y. Laws ch. 56) will enable the New York State Department of Transportation and the  New York State Thruway Authority to use design-build for the Tappan Zee Hudson River Crossing Project.  The Tappan Zee Project, which will replace an existing bridge across the Hudson River (pictured above),  was granted expedited federal approval by President Obama and U.S. Transportation Secretary Ray LaHood in October of this year.

Tristan Robinson contributed to this post.

*Author Nancy Smith is chair of the Design-Build Institute of America's Legislative Committee.

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.

Geoff Yarema Testifies Before House Committee on Transportation and Infrastructure Subcommittee on Highways and Transit

Nossaman's Geoff Yarema, chair of the Firm's Infrastructure Practice Group and a Commissioner on the Congressionally mandated National Surface Transportation Infrastructure Financing Commission, provided testimony this week to the U.S. House of Representatives Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit, "Hearing on National Infrastructure Bank: More Bureaucracy & More Red Tape."

View the video of the hearing here.

 

Update: Proposed Legislation Threatens Design-Build and P3s in California

Fred Kessler co-authored this post.

We are pleased to report that AB 294--the bill that was the subject of our blog yesterday--is no longer in play. 

Proposed Legislation Threatens Design-Build and P3s in California

Fred Kessler co-authored this post.

A last-minute amendment to California Assembly Bill 294, if passed, would wreak havoc on Caltrans and local agency plans to use design-build for state highway projects (Public Contract Code section 6800 et seq.) and to enter into public-private partnerships (P3s) for highway projects (Streets and Highways Code section 143).
 
The language added to the bill would preclude local agencies from hiring consultants to work on the projects, stating that all work must be done through Caltrans employees or consultants under contract with Caltrans.  Project consultants are often hired well in advance of the decision to use design-build or P3s for the project--which means that this bill would create significant inefficiency by requiring new consultants to be brought on board once that decision is made.   

Given the existing sunsets for P3 projects (January 1, 2017) and design-build projects (January 1, 2014), this bill could make public-private partnerships and design-build a hollow tool for California highway projects.
 
This appears to be an attempt by the Professional Engineers in California Government (PECG) to do an end-run around a recent California appellate court ruling regarding the Presidio Parkway P3 agreement.  Although the legislation would not affect contracts that have already been awarded, such as the Presidio Parkway agreement, the bill would impact future P3 projects under Section 143 and future design-build projects under Section 6800, possibly including some projects that are already in the procurement process.  In the Presidio Parkway case, PECG sought a determination that the agreement was invalid because engineering consultants under contract with the San Francisco County Transportation Authority performed services on the project while section 143 allegedly requires the consultants to be under Caltrans direct contract and supervision.  Caltrans and the SFCTA have pursued the project for many years under a series of cooperative agreements.
 
The bill, authored by Assemblyman Portantino, was originally short-titled "Design-sequencing contracts" and is now called "Transportation projects: procurement."  It would appear more appropriate to call it "Increased inefficiency in government."
 
The legislative session closes at the end of next week (September 9), and September 2 is the last day to amend existing bills.  It seems likely this bill will make it to the floor.  The authors of this blog urge readers to contact their legislators and ask them to oppose the bill.

AASHTO President Among Chorus of Voices Urging Swift Transportation Funding Action

Susan Martinovich, president of the American Association of State Highway and Transportation Officials (AASHTO), together with representatives of several state departments of transportation, held a news conference yesterday to urge Congress to take action before September 30 to extend the gas tax and to reauthorize federal highway and transit programs at current funding levels.  The press conference was held at the annual meeting of the Southeastern Association of State Highway and Transportation Officials.

A press release reporting the news conference quoted Martinovich, who is also the director of the Nevada Department of Transportation, as saying that "Congress must take action by September 30th, or the federal highway and transit programs that support thousands of jobs in every state will shut down." Both the 18.4-cents-per-gallon gas tax and the seventh extension of the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) are set to expire on September 30.

AASHTO also reports that state transportation officials around the country are taking advantage of the congressional summer recess to advocate for a reauthorization that would maintain existing funding levels.  And in recent remarks, President Obama has also been urging Congress to take action, telling audiences:  “Tell Congress to get past their differences and send me a road construction bill  so that companies can put tens of thousands of people to work right now building our roads and bridges and airports and seaports.”

Major differences between the proposals currently under consideration are complicated by the fact that Congress has only 11 legislative days scheduled between its return to Washington and the September 30 deadline.  Because of the time squeeze, in a conference call to industry stakeholders last week, Sen. Barbara Boxer announced a proposal to extend  SAFETEA-LU for another four months at current funding levels, to allow time for Congress to debate and pass a multiyear reauthorization.  AASHTO’s report on that proposal is available here.  The bipartisan two-year reauthorization bill outlined by Sen. Boxer and Sen. James Inhofe in July would maintain funding at current levels.

Pennsylvania Commission Issues Final Transportation Funding Report

The Pennsylvania Transportation Funding Advisory Commission just issued its final report on a strategy to improve the commonwealth's transportation funding. Aside from a list of recommendations for streamlining operations, the Commission made the following key recommendations for solving the commonwealth's transportation revenue and funding problems:

  • Expand program management and outsourcing, including bundling "individual projects into programs—such as rehabilitating 100 to 300 bridges at one time—and engag[ing] experienced private sector program managers to produce benefits for PennDOT as well as local governments."
  • Adopt P3 legislation. The report expressly recognized the cost efficiencies and construction time savings that PPPs generate. It cautions that "for PPPs to be an option, there would need to be revenue generation for operations and maintenance associated with the facility (e.g., tolling, fare collection)." A PPP bill has been tied up in the Legislature, but sources indicate that the Legislature may be poised to act now that the Commission has endorsed PPP authorizing legislation.
  •  Create state authority to toll all interstates and devote the revenues exclusively to each corridor. The report also recommends flexibility to use existing public as well as private toll operators. The report recognizes that federal restrictions on tolling interstates will also need to evolve, an issue the commonwealth is acutely familiar with after FHWA denial of its SEP-15 application to toll I-80.
  • Undertake a detailed study on how to transition from the fuel tax to "a new method of revenue generation for highway funding." The report emphasizes that any new method charge users "equally based on their usage." Without using the acronym "VMT," the report clearly is pointing toward vehicle miles traveled as the fundamental basis for generating reliable, fair, and equitable highway funding revenues.

Amtrak Exit Déjà Vu

On June 15, House Transportation and Infrastructure Committee Chairman John Mica and Rep. Bill Shuster, Chairman of the Railroads, Pipelines and Hazardous Material Subcommittee, introduced the Competition for Intercity Passenger Rail in America Act.

Chairman Mica said: “After 40 years of costly and wasteful Soviet-style operations under Amtrak, this proposal encourages private sector competition, investment and operations in U.S. passenger rail service.” The legislation would force Amtrak to sell the Northeast Corridor (“NEC”) to the U.S. government, establish a committee to manage NEC assets, privatize NEC operations, set performance standards for a 2-hour trip from Washington, D.C. to New York City, double train frequency and require the “highest level of private sector participation and financing” and the “lowest level of federal funding” with full implementation in 10 years.  The legislation also would set the ground work for privatizing what are now state-sponsored Amtrak routes as well as the Amtrak transcontinental long-distance trains.

This brings me back to the “go-go” 1980s, when President Reagan and Budget Director David Stockman tried to kill Amtrak.  (I passed the bar and had a job…Sure was glad I didn't go to work for Amtrak; that would have been a short first “real” job.) That effort died in the Senate.

Then there was the Republican Revolution (version 1), the Amtrak Reform and Accountability Act of 1997 and Newt Gingrich’s proposed shuttering of Amtrak. (I had friends that went to work for Amtrak…Couldn't they see the writing on the wall?) The Amtrak Reform Council eventually recommended that Amtrak’s assets be purchased by the government, but that idea was not implemented.

Then on two separate occasions in 2003 and 2005, President George W. Bush and Transportation Secretary Norman Mineta tried to reform or abolish Amtrak.  These efforts also came to nothing.

Is there a role for the private sector in the improvement of U.S. intercity passenger rail service?  Almost certainly.

Is there political support for the proposition that eliminating Amtrak is the best way to improve U.S. intercity passenger rail service on the Northeast Corridor?  On four prior occasions the answer has been “No.”

Rail Safety Changes Besides Postive Train Control

The roll-out of positive train control (“PTC”) is a daunting task for many railroads.  Even without PTC we would still call this a very busy time in the realm of railroad safety.  The Rail Safety Improvement Act of 2008 (“RSIA”), which included the PTC mandate, was the most comprehensive rail safety legislation in several decades.  It would be easy in light of PTC to lose sight of all the other RSIA initiatives underway, but that would be a mistake.

In an effort to help our readers stay current, we will devote some space here to a series of posts on RSIA implementation issues other than PTC.  I will be speaking on this topic next week on a panel with an FRA representative and commuter rail CEO’s at the American Public Transportation Association’s Rail Conference in Boston.

To begin with, let’s review the status of passenger hours of service limits.  RSIA made major changes in the Hours of Service Act, but provided that the changes would not apply to Amtrak and commuter railroads if FRA finalized an alternative set of passenger rail requirements by October 16, 2011.  With that deadline in mind, FRA published a proposed rule in March.

For multiple tour limits, FRA proposes to treat all shifts in two categories.  A “type 1” shift would be any shift within the window from 4 a.m. to 8 p.m.  Generally, the rule would allow a maximum of 14 consecutive type 1 shifts before a two-day off duty period.

A shift that involves any time outside of the 4 a.m. to 8 p.m. window would be a “type 2” shift.  Here is where we get the big changes.  For type 2 shifts, generally the rule would allow a maximum of six consecutive shifts before a 24-hour off duty period.  All type 2 shifts would be analyzed against a defined fatigue threshold, the railroad would be required to mitigate fatigue above the threshold or show that mitigation is not possible.  Type 2 shifts that fall below the fatigue threshold could be treated as type 1 shifts.

Several commuter railroads, trade associations and unions filed comments on the proposed rule.  Passenger railroads and the American Public Transportation Association expressed concern with respect to implementation costs, including the significant costs for new hires, fatigue training costs and licensing fees for fatigue modeling software.   If the comments filed are indicative, rail labor is generally very satisfied with the proposed rule and considers the changes long overdue.

The final rule for passenger rail hours of service is scheduled for release in August 2011, in time to meet the statutory deadline for implementation of October 16, 2011.

House Transportation Committee Conducts Field Hearing in Florida

On Monday March 14, House Transportation Committee Chairman John L. Mica (R-FL) conducted the latest of a series of field hearings, this one in his home district in Central Florida, to discuss pending major transportation legislation. It was the only scheduled field hearing in Florida on the transportation bill. The hearing was focused on improving and reforming our nation's surface transportation programs.

Among those asked to testify were:

  • Geoffrey Yarema, Partner, Nossaman LLP
  • The Honorable Frank Bruno, County Chair, County of Volusia
  • Ananth Prasad, Assistant Secretary for Engineering and Operations, Florida Department of Transportation
  • Bob Burleson, President, Florida Transportation Builders Association
  • Randy Whitfield, Staff Director, Palm Beach MPO
  • Richard P. Lawless, President and CEO, U.S.-Japan High-Speed Rail
  • Cheryl Stone, on behalf of the transportation disadvantaged community

Geoff's testimony, which you can read in full here, includes a list of planned U.S. highway projects with potential TIFIA funding. This list is a work in progress and we welcome your feedback with suggested corrections, additions and refinements in our comments section.

Governors ask Senate to Safeguard State P3 Authority and Flexibility

Last week the National Governors Association strongly urged key Senators to stand with them against new restrictions on public private partnerships and tolling in the House T&I Committee’s draft surface transportation bill. In their letter to chairs and ranking members of the Senate Environment and Public Works, Finance, and Banking, Housing and Urban Affairs, the NGA highlighted the efforts of state and local governments to pursue innovative financing options to complement traditional sources, and asked the Senate to omit the proposals from the Senate’s reauthorization bill. 

The proposed restrictions would be in addition to the measures already included in State P3 authorizing statutes, which commonly include strict oversight of performance standards, toll policies, labor protections, revenue sharing, risk allocation, use of toll proceeds, transparency, public participation, length of concession, and bidding procedures, as detailed in FHWA’s recent report:  Public Policy Considerations in Public-Private Partnership Arrangements.

If enacted, the new law would (i) repeal current law that enables states to toll and place new limits on tolled facilities (§1301); (ii) impose new requirements and mandate certain public-private partnership contract provisions (§1504 ); and (iii) create a new federal office to review and approve all toll rate schedules and public-private partnership agreements (§§1204 - 1205). 

These changes would have far-reaching consequences, chill private investment in infrastructure projects, and increase costs associated with oversight and litigation risk for those projects already in the pipeline.  NGA opposes these changes, and wants state and local governments to retain the flexibility to determine the appropriate level of private sector participation in their surface transportation programs. 

FRA Announces Availability of $2.345 Billion in FY 2010 High-Speed and Intercity Passenger Rail Funds

On July 1 the Federal Railroad Administration (FRA) issued two Notices of Funding Availability (NOFA) for high-speed and intercity passenger rail (HSIPR) development.

The NOFA for service development programs,  published at 75 Fed. Reg. 38,344 (PDF), outlines selection criteria and application procedures for $2.1 billion in FY 2010 HSIPR funds.  A second NOFA addressing $245 million available for individual construction projects within a corridor, was published at 75 Fed. Reg. 38,365 (PDF).

Applications pursuant to these NOFAs are due to FRA by August 6. Grant awards are expected to be announced by September 30.

The NOFAs both indicate that FRA is preparing draft guidance to establish a long-term framework for the HSIPR program. This forthcoming guidance does not apply to the $2.3 billion in FY 2010 HSIPR funding but is intended to provide further clarification about future project development processes (from planning and design through construction and operation), and technical assistance for successful project development and delivery. FRA has stated that outreach on proposed new guidance will begin this fall.

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Ways and Means Turns Focus to Infrastructure Bank Proposals

The powerful House Ways and Means Committee recently heard testimony from state and local officials on how to create and fund a new National Infrastructure Bank.  Witnesses highlighted efforts around the country to find new ways to finance transportation projects, from the “Measure R” dedicated sales tax in Los Angeles to Kentucky’s new Green Bank (a revolving fund dedicated to promote energy efficiency, capitalized with ARRA funds).  

Witnesses emphasized the need for new transportation funding, noting that the United States has fallen far behind certain competitors in our relative investments in infrastructure (China invests nine percent of GDP, while the U.S. invests less than two percent) but disagreed as to how a national infrastructure bank should be structured. 

Governor Rendell noted that an infrastructure bank could help draw private funds into the mix of transportation funding options available by providing credit enhancement and loan guarantees – strategies that require minimal investment in terms of federal dollars.  He asserted that the infrastructure bank could help finance critical investments in projects of national significance, as the TIGER grants have done with stimulus dollars.

It is noteworthy that the taxing committees have turned their focus to infrastructure finance.  Several proposals pushed forward in this past year, including the Administration’s National Infrastructure Innovation Finance Fund, may demonstrate a political appetite for enacting new infrastructure financing programs in the near future.  These efforts may provide a welcome boost in transportation investment.  A new financing program could be structured to function with relatively low cost/capitalization when compared to multi-year grant programs like the transportation authorization bill, which has been repeatedly delayed due to funding concerns.

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.

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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.  

Obama Administration Proposes New Role for FTA in Transit Safety Oversight

 

The Obama Administration recently outlined its proposal for enhanced federal safety oversight of subways, light-rail and municipal bus systems. USDOT Secretary Ray LaHood said, “Now, would we prefer that states regulate their own systems? You bet. But some states simply lack the resources to do that. And, in a pinch, some state will cut safety items from their budgets. For transit passengers those cuts are too dear.”     

The proposed “Public Transportation Safety Program Act of 2009” would authorize the Secretary, through the Federal Transit Administration (FTA), to set and enforce minimum federal transit safety standards and ensure that transit safety efforts grow in tandem with increased ridership.

USDOT is currently prohibited from establishing federal transit safety standards, and instead relies on 27 State Safety Oversight Agencies (SSAs) to monitor transit safety as provided in 49 CFR Part 659.   Following several transit incidents earlier this year, FTA Administrator Peter Rogoff announced the Administration’s intent to enhance federal oversight.  [See “FTA Considering New Safety Oversight for Rail Transit.”]  Funding, independence, and enforcement powers are critical concerns for SSAs, which average less than one staff person per transit agency and in some cases rely on transit revenues from the systems they oversee.  

Under the proposed program, FTA would be authorized to promulgate minimum national standards for rail transit safety, applicable to all fixed rail systems not currently under Federal Railroad Administration jurisdiction. (The legislation would also authorize bus safety regulatory authority but DOT expects its initial focus to be on rail transit safety.)

States could choose to continue transit safety oversight on behalf of FTA, but only when FTA finds that the SSA has:  

  •          an adequate number of fully-trained staff to enforce federal regulations;
  •          been granted sufficient authority by its governor and state legislature to compel compliance by the transit systems it oversees; and
  •          sufficient financial independence from any transit systems under its purview. 

 

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Senate EPW to Hotline Transportation Funding

 

Senators Boxer and Inhofe are preparing to hotline a six-month extension of the federal surface transportation programs, which would provide funding at gross FY2009 levels, with an additional $8.7 billion in contract authority to replace the funds rescinded on September 30.  

The bill would also extend funding for projects of national and regional significance (SAFETEA-LU 1301) and national corridor infrastructure (SAFETEA-LU 1302) according to 2009 receipts. House Transportation and Infrastructure chairman Jim Oberstar’s 3-month extension, which recently passed in the House, would allow USDOT to distribute the money as discretionary grants, and did not address the September rescission of contract authority. (See Transportation Reauthorization: House T&I Committee's 3-Month Extension Fails to Address $8.7 Billion Rescission).

“Hotlining” involves notifying all 100 Senate offices of the bill and checking to see if they have any objection to the legislation being considered and passed by unanimous consent at the close of the day’s business. Boxer and Inhofe hope to hotline the bill today Monday, October 26, if Oberstar can be convinced to accept the new legislation without amendment. 

The six month extension will not require an infusion from the general fund into the Highway Trust Fund, which FHWA expects to remain solvent through the first eight months of FY2010.   The bill would provide a total of $24.6 billion in highway formula contract authority.

Senator Voinovich, who had held back the previous 18-month extension bill on the grounds that it was too long, is trying to persuade Oberstar to accept the Senate’s offer as states begin to shut off contract bidding for lack of contract authority. 

California Advances Public Toll Financing Option for Transportation Projects

California will soon have a new authority that can authorize California transportation agencies to toll transportation facilities, eliminating the need for legislative approval for each tolling project. 

AB 798, a bill sponsored by state treasurer Bill Lockyer and recently signed by Governor Schwarzenegger, creates a new state level agency, the California Transportation Finance Authority, with the limited purpose of issuing revenue bonds for new capacity or improvements to the “state transportation system” at the request of a public sector “project sponsor”. Project sponsors include the state department of transportation (Caltrans) as well as regional or county transportation agencies. Eligible projects include a wide range of transportation improvements, including highways, streets, rail bus or related facilities owned and operated by Caltrans or other project sponsors. The Authority is governed by a seven member board chaired by the State Treasurer, and includes local agency representatives appointed by the State Legislature.

In addition to establishing a statewide “conduit” revenue bond issuer, the new law makes further advances in the use of pricing to pay for needed transportation improvements. 

With passage of AB 798, highway projects that meet the normal planning and environmental review requirements would be eligible for tolling if they meet the requirements for financing through the new Authority, even if they are financed by other means. 

The only political approval that would be required for these new toll projects would be a majority vote by the board of the project sponsor authorizing the imposition of tolling, OR majority approval of the voters in its jurisdiction. 

AB 798 has been described by Treasurer Lockyer as promoting “public-public partnerships” vs the “public private partnerships” for transportation projects approved earlier this year, thus giving Caltrans and local transportation agencies another option to consider.

CTC Approves P3 Policy Guidance

California is now ready to assess P3 candidate projects. At its October 14th meeting, the California Transportation Commission approved policy guidance addressing the Commission’s role in selecting proposed P3 projects. The CTC developed the guidelines to assist Caltrans and regional transportation agencies (RTAs) as they move to develop P3 transportation projects, taking advantage of the new authority granted to them under Senate Bill X2 4, enacted in February of this year.

The enabling legislation requires the CTC to select projects nominated by Caltrans or an RTA seeking to use the P3 model. The CTC policy guidance describes the selection process, including the project report and information required to be submitted to the CTC, the CTC’s criteria for evaluating projects, and the timing and scope of the CTC’s role. 

California Conference Highlights State Funding Options

With the delay of the federal transportation re-authorization and federal transportation funding in limbo, state transportation agencies across the nation are trying to cope any way they can. In California this week, 19 “self help” local transportation financing agencies - that collectively generate more than $4 billion a year for transportation - drew a large crowd of transportation public agency officials, elected officials, contractors and consultants to the 20th Annual Focus on the Future Conference in Los Angeles to explore their options. Conference speakers discussed current developments in transportation funding, environmental compliance and project delivery. The news on project delivery and innovation was positive, the environmental compliance news mixed, and the funding news pretty discouraging.

Interspersed with the grim chronicling of the current state and federal funding landscapes, the conference highlighted some bright spots, including federal ARRA funds, Measure R funding in Los Angeles, and innovative project delivery, PPPs and congestion pricing.

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Does NJ Law Signal P3 Trend in Social Infrastructure?

Included in New Jersey’s Economic Stimulus Act of 2009  are provisions to allow the use of PPPs to design, build, finance, operate and maintain higher education facilities.  Is this the start of a trend for developing social infrastructure in the US?

Social infrastructure includes housing, educational, recreational and law and order facilities that support the community's need for social interaction.  As reflected by several projects in Canada, this is not a new concept for North America.  Along with the recent use of a PPP for development of the Long Beach Courthouse, New Jersey’s authorization of PPPs for higher education projects may indicate that the US market is warming to the idea as well.

Under the  new law, a State or county college may enter into a PPP that permits the private entity to assume full financial and administrative responsibility for the on-campus construction, reconstruction, repair, alteration, improvement or extension of a building, structure or facility of the institution.  The project must be financed in whole by the private entity, and the State or institution of higher education retains full ownership of the land upon which the project is completed.

Proposals for higher education PPP’s must be submitted to the New Jersey Economic Development Authority within 19 months of the law’s July 2009 enactment for review and approval.  In order to be considered, proposals must include, at a minimum:         

  • A public-private partnership agreement between the State or county college and the private developer; 
  • A full description of the project;
  • The estimated costs and financial documentation for the project (including a long-range maintenance plan);
  • A timetable for completion of the project extending no more than five years after consideration and approval; and
  • Any other requirements that the Economic Development Authority deems appropriate or necessary.

With budgets stretched to the limit across the country, we’ll be watching to see if other states look to PPPs  to develop much needed social infrastructure.

Rescission of Transportation Funding: More from Infra Investor

Infrastructure Investor, a trade publication, examined how the proposed extensions to the transportation authorization could pull money from states through rescission. Monday’s article, “US states face $9bn in transportation funding cuts,” discusses the looming rescission of budget authority required by SAFETEA-LU, as well as the proposed extensions of program authority moving forward in the Senate. The article extensively quotes Ed Kussy, former Federal Highway Administration Deputy Chief Counsel, and current Nossaman partner. Excerpts from the article follow.

…the rescission was worked into the bill as a way to get the bill to “score”, or cost less. The bill’s sponsor, Republican Alaska Representative Don Young, wanted a higher score, while the Bush administration wanted a lower score, Kussy recalls.

By requesting that $8.7 billion in unspent contract authority be given back, the rescission allowed the bill to score lower and get the president’s approval. “So both sides got what they wanted. Well, now it’s come time to pay the piper,” Kussy said.

The rescission would not take money away from projects they’ve already contracted out, Kussy explains, but it would crimp their ability to obligate further projects.

Kussy said the extensions do not address the rescission, which he believes was meant as an “inducement to make Congress pass the next [transportation reauthorisation] bill on time”.


The full article is available online at:

http://www.infrastructureinvestor.com/Article.aspx?aID=0&article=46113

Transportation Reauthorization: House T&I Committee's 3-Month Extension Fails to Address $8.7 Billion Rescission

The House has passed a new bill (H.R. 3617) which extends federal highway and transit programs set to lapse at the end of September, when SAFETEA-LU expires, through the end of the calendar year. 

Yesterday, House Transportation and Infrastructure Chairman Jim Oberstar introduced the bill under an expedited process which waives committee approval and prevents amendment.  The bill does not address the $8.7 billion rescission required under SAFETEA-LU, which will force FHWA to cancel program funding apportioned under SAFETEA-LU (as amended by the EISA) on September 30.   

The rescission is a vital concern for States, which have relied on transportation projects to prop up soft economies and would face devastating losses if the rescission were enforced. AASHTO has warned, for example, that the rescission would cost Missouri $202 million in contract authority and disproportionately impact local bridges and metropolitan planning organizations.  Colorado would lose $115 million in contract authority.  Michigan's share of the rescission is $263 million; approximately a quarter of what that state received for highway and bridge funding through the recovery act.

Rescissions have been used in all of the recent transportation authorization bills, and are meant to force Congress to enact the next round of authorization. The problem with repealing the rescission is that the extra 8.7 billion cost would be attributed to the extension bill. Oberstar’s spokesman said a repeal of the rescission was excluded from the measure because budgetary scoring rules would require an offset to pay for the repeal through higher taxes or reduced spending elsewhere.

The bill now heads to the Senate, where it will compete with the Senate’s 18-month extension proposal.  The Senate Environment and Public Works committee has approved a different bill (S. 1498) to extend funding until March 2011, which would allow the stimulus transportation funding programs to run their course and delay the funding debate until after the 2010 election cycle has passed. The extension would provide an estimated 50% increase in current funding.

The major obstacle facing any transportation authorization bill is lack of funding. Raising taxes in the wake of the recession may prove difficult politically, though business groups, including the U.S. Chamber of Commerce and a number of blue ribbon panels – including the National Surface Transportation Infrastructure Commission and the National Surface Transportation Policy and Revenue Commission have all advocated increasing the gas tax

Congress is clearly motivated to avert an October 1 grinding halt to federal transportation funding, so it is likely that the Senate will follow the House’s lead in expediting review of these bills.  The Senate Finance committee has reported Chairman Max Baucus’ bill (S. 1474) would provide $27 billion in revenue to pay for the 18 month extension, and Senators Barbara Boxer, James Inhofe, and Christopher Bond have pledged that the rescission will be repealed before September 30.

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.

Arizona's P3 Legislation: New and Improved

Arizona has passed comprehensive P3 legislation on the heels of the passage of similar legislation in California.  Last month, Governor Jan Brewer signed House Bill 2396 which both updates Arizona’s existing toll road development and operations laws and gives the Arizona Department of Transportation (ADOT) broad authority to develop and operate a range of transportation projects through a variety of delivery methods. 

Under House Bill 2396  ADOT is authorized to use virtually  any innovative delivery method, including P3s.  Facilities eligible in the bill include: new or upgraded highways, rail, bus rapid transit, ferries, and intermodal systems.  ADOT may also grant P3 authority to other governmental agencies for specific projects.  The new law provides for both solicited and unsolicited procurements of P3 projects and authorizes  private parties to collect user fees or tolls.  Check out Toll Road News’ initial analysis of potential P3 projects in Arizona.

Arizona’s P3 law, generally considered very P3-friendly, includes several restrictions.  Toll increases allowed under a P3 agreement must either be based on a formula or subject to contract provisions regulating the private partner’s return on investment.  Additionally, concession or other P3 agreement terms are limited to 50 years, subject to extensions.  Finally, a novel provision in the law allows drivers paying tolls to apply for a refund or credit of motor fuel taxes paid by that driver while operating a vehicle on the tolled facility, stay tuned to see how ADOT works out the details for implementing such a credit or refund. 

California P3s: One Step Closer To Implementing Program

California is serious about using its new legislative authority to deliver some of the state’s much-needed transportation projects through public-private partnerships (P3s). On August 12, 2009, the California Transportation Commission issued draft guidelines addressing the Commission’s role in approving the P3 delivery method for specific projects.

The draft guidelines follow the California legislature’s momentous enactment of Senate Bill 4, referred to as SBX2 4.  That bill authorizes Caltrans and regional transportation agencies to enter into P3s for transportation projects.  Prior to commencing the procurement of a proposed P3 project, Caltrans or a regional transportation agency must first nominate the project and receive Commission approval.  The draft policy guidance issued by the Commission discusses the process for obtaining the requisite project approvals from the Commission. 

The guidelines are still in draft form and will be considered by the Commission at a meeting this fall. While the guidelines may be revised prior to becoming final, interested agencies and P3 industry participants will want to keep an eye on the provisions related to the scope of the Commission’s approval, timing and mandated components of the reports required to be submitted to the Commission as well as the impact these policies will have on the timing and structure of a P3 procurement.

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.