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

Ted Houghton is the new chair of the Texas Transportation Commission. Governor Rick Perry announced Houghton's appointment, effective October 7.  Houghton succeeds Deirdre Delisi, who recently resigned.  Delisi had served as chair since 2008.

Houghton was first appointed to the Commission in 2003 and was reappointed in 2009. A native of El Paso, Houghton is self-employed in the financial services industry. He is the first resident of El Paso to serve on the Commission.

"I'd like to thank Governor Perry for his trust in me to continue TxDOT down a path of responsiveness, change and modernization,” Houghton said.  “I look forward to leading the department as it becomes a better TxDOT, living up to the expectations of the Governor, the Legislature and our stakeholders.  Texas is a national leader in infrastructure and transportation system development, and I intend to reaffirm our place among the best, strongest and most innovative states as TxDOT delivers the projects the Legislature, our local partners and Texas motorists expect."

Houghton previously served on the School Land Board, the El Paso Water Utilities Public Service Board, El Paso's Rapid Transit Board, the board of directors of the El Paso Electric Company and as president of the Sun Bowl Association. He was also a member of the 1984 Los Angeles Olympic Committee.

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At its first regular meeting since the retirement of Amadeo Saenz, Jr. at the end of August, the Texas Transportation Commission named its choice for his replacement.  Effective October 17, 2011, former Texas Secretary of State Phil Wilson began his new job as TxDOT’s 19th Executive Director.  Mr. Wilson comes to TxDOT from Luminant, a Dallas-based electric generation company, where he was the senior vice president of public affairs.

In addition to his position as Texas’ Secretary of State, Mr. Wilson’s history of public service includes time working for both former U.S. Senator Phil Gram and current Texas Governor Rick Perry.  He also served as the chairman of the Governor’s Competitiveness Council where he fostered ideas for improving the state’s economic position for continued long term success including proposals to re-examine public-private partnerships, expand inland ports, repair and maintain existing infrastructure and promote rail relocation efforts.

In 2009, Texas adopted new legislation removing the requirement that TxDOT’s executive director must be a professional engineer.  Mr. Wilson will be the first non-engineer to hold the position since the new law passed.

“I am honored to be selected as the next executive director of TxDOT.  This is an agency with a rich history in successfully building for our future with dedicated employees,” said Wilson.” I look forward to working with the agency, Commission, Legislature and local communities on the most efficient ways to build infrastructure for Texas.”

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If you want to know what a mature, effective federal and state P3 policy can look like, we need not look very far beyond our U.S. borders.  Two Canadian provinces, Ontario and British Columbia, provide us a road map for building successful, sustainable P3 programs and policies.

At the International Bridge Conference in Pittsburgh last month, panelists for a workshop on P3s, including Len Kozachuk with Infrastructure Ontario (IO), described the essential features of this agency and its “alternative financing and procurement” program.  The contrast with how our federal and state policy makers view P3s was striking:

• All three major political parties in Ontario support the use of P3s.  They do so because the track record proves the benefits of P3s. The woeful experience in the U.S. is that if one party supports it in a particular state, usually the other party opposes it.
   
• IO has plenary province-level authority over P3 procurements for all forms of transportation and social infrastructure.  It is a center of expertise.  We are aware of no state entity with comparable procurement powers or expertise.  Virginia is making an effort in this direction with its recently announced Office of Transportation Public-Private Partnerships.
   
• IO handles a wide range of project types, from transportation to social infrastructure such as hospitals, courts, schools and water projects.   It is a rarity in the U.S. to find any state even considering use of P3s for social infrastructure, and only a handful of states have transportation projects under active consideration for P3s.
   
• IO is staffed with a strong group of financial, technical and legal professionals and analysts.  IO carefully screen projects for P3 suitability and does not hesitate to reject those that are not ready or suitable.  They then run the procurement, and negotiate and administer the contracts.  In most states, we witness P3 offices in state DOT’s formed as an afterthought, often understaffed, with insufficient prior training and experience and inadequate support from other DOT divisions.
   
• IO is dedicated to maintaining a pipeline of P3 projects - over 50, worth $23 billion, since 2005.  Compare this to 96 projects throughout the entire U.S., worth $54.3 billion in transportation P3 contracts, over the past 22 years, a bunch of which are design-build only (see Public Works Financing, May 2011 issue, p. 4-5).  And IO has something like 20 more projects concurrently under active procurements, dwarfing any U.S. state effort. 
   
• When IO folks commence a P3 procurement, they finish it, because they have the political support, authority, analysis, staffing and funding to do so.  This track record has bred credibility for the IO in the P3 industry.  In most states, the use of P3s is decided on a project-by-project basis, with little promise of a steady stream of opportunity.  Delayed, prolonged procurements, and too many failed procurements, undercut acceptance of P3s and industry confidence.
   
• Every Ontario infrastructure project with estimated capital costs of $50 million or more must be analyzed for P3 suitability.  This is the law for any project seeking Canadian federal support.  Indeed, IO’s working presumption is that P3 will be the preferred method of project delivery for such projects.  In the U.S., nowhere do we find a presumption in favor of P3s for significant projects, much less a standing policy to evaluate for P3 suitability.  P3s are usually viewed as a last resort, when no other means to close a funding gap can be identified.
   
• The driver behind the presumption favoring P3s in Ontario is life cycle cost efficiency.  “We believe this model — with the inherent private-sector efficiencies — will create an overall lower cost for taxpayers than if the government financed projects directly.” [From website]  Time and again IO has found that P3s produce the best value for money over the useful life of large, complex projects.  While cost effectiveness should be the central reason for using a P3 (see Public Works Financing, May 2011 issue, p. 24), the driver for using P3s in the U.S. is lack of traditional financing.  If the necessary capital can be raised through any non-P3 means, that is usually the choice, even though a P3 approach can delivery quality assets and performance at a lower life cycle cost.

The story is the same in British Columbia, where Partnerships British Columbia has successfully pursued P3s for dozens of transportation and social infrastructure projects.  It analyzes projects for P3 suitability and manages the P3 procurements for provincial and municipal government owners.  All projects of $50+ million are “considered first … to be built as public-private partnerships (PPPs) unless there is a compelling reason to do otherwise.” It delivered 35 PPP projects between 2002 and 2010, worth $12.5 billion. P3s are expected to meet 10-20% of the province’s infrastructure capital needs.  P3 market share in the U.S. since 2008 is about 2% (see Public Works Financing, May 2011 issue, p. 6).

In a nutshell, the Ontario and B.C. governments champion P3s, because they know they produce the best value for the public when applied to the right projects in the right way.   We need many more states with well-positioned elected and executive officials steadfastly advocating a change from episodic to programmatic P3 decision making (see TR News Magazine May-June 2011, p.23).  Our northern cousins are showing us how.

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The just ended InfraAmericas P3 conference in New York City brought together virtually every active participant, public and private, in the U.S. transportation P3 industry.  A number of public agencies showcased their plans and projects, and there was a palpable sense that opportunities to bring U.S. projects forward are growing significantly.

Perhaps the project producing the most buzz at the conference is the Knik Arm Bridge and Toll Authority’s Knik Arm Crossing project in Alaska.  KABATA came to the conference loaded for bear (a not infrequent pastime in this bountiful state).  The day before the conference, KABATA hosted a very well attended industry forum at the Citicorp World Headquarters.  Attendees were greeted with messages from key political stakeholders, including Congressional representatives, Alaska Gov. Sean Parnell, state representatives and local officials.  In attendance were key policy and decision makers from the state, including State Sen. Linda Menard, KABATA’s Chairman Mike Foster, CEO Andrew Niemiec, CFO Kevin Hemenway and executives from the Departments of Revenue and Transportation.

During the two-day conference, KABATA held 17 individual meetings with major concessionaires, equity funds and constructors.  The appetite for this project appears large and growing.  KABATA received useful input and provided the industry with information on project status and the intended P3 procurement.  It was quite evident that teams are forming, some in an advanced stage and some still gelling.

Why does this project command the intense attention it is receiving?  We think a number of factors have converged to uniquely position the project.  What do you think?

• Project maturity.  The project is well-defined.  The ROD and a no jeopardy biological opinion regarding beluga whales are in hand, permitting is well on its way, KABATA should have all ROW in place by the time of P3 award, and site conditions are well documented.
• The political climate for the project has never been more favorable.  The essentiality of the project to the state-wide economy is broadly recognized.
• KABATA’s decision to convert from a toll concession to an availability payment concession has better aligned the project with market realities and drawn attention from many players.
• Analysis of the project’s financial feasibility is well-developed, realistic and positive, with industry leaders HDR, Wilbur Smith Associates, and Citgroup providing cost estimation, revenue estimation and financial planning.
• KABATA’s plan for legislation in the Senate (SB 79 and SB 80) and the House (HB 158 and HB 159) to enhance the availability payment credit will underpin the project with the state’s AA appropriation debt rating.
• Few new U.S. transportation projects are commencing serious, active procurement in the next few months.  The timing is excellent.

Stay tuned.  The RFQ is expected next month.
 

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The Reason Foundation, a non-profit, public policy think tank based in Los Angeles, seeks a policy analyst in transportation.  Qualified candidates should have a relevant degree, a solid understanding of free-market public policy, and an aptitude for written communication. 

Ideal candidates will be very familiar with Reason's transportation policy work and be able to describe what they can contribute to the organization.  Work location is negotiable and salary commensurate with experience.  Applicants at all levels of experience are invited to apply. The application deadline is May 6, 2011.

To apply, submit a cover letter and resume to Amy Pelletier at  Amy.Pelletier@Reason.org. The cover letter should include an explanation of your interest in the Reason Foundation.

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

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

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

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

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

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

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

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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.

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This morning, members of the National Surface Transportation Infrastructure Financing Commission and National Transportation Policy Project of the Bipartisan Policy Center released a joint statement urging Congress to take steps toward several transportation policy principles designed to help guide deliberations over how to extend, fund and improve the federal surface transportation program in the face of dire fiscal realities. Some of the key proposals include the call for Congress to incentivize and remove barriers to increased state and local revenues from direct user fees and the need to transition to a more direct user fee based on vehicle miles traveled (VMT). With the emergence of electric vehicles and the need to be able to more accurately price road use, today's joint statement says moving to a VMT-based system is critical.

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AASHTO recently sponsored a Congressional Forum on funding and financing surface transportation in the coming decade.  Academic co-sponsors were America 2050 at the Regional Plan Association; Fels Institute of Government at the University of Pennsylvania; Georgia Institute of Technology; Humphrey Institute at the University of Minnesota; Keston Institute of Infrastructure and Public; Finance at the University of Southern California.

Over 25 staff members of Senate and House committees participated.  John Horsley, Executive Director of AASHTO, made one of the presentations.  He explained in stark terms the short term funding crisis the Highway Trust Fund currently faces and offered a new solution – to replace the current excise tax on gas and diesel with a national sales tax on motor fuels.

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 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. 

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The Federal Railroad Administration (“FRA”) recently published a progress report (PDF) presenting its ambitious vision for the congressionally-mandated National Rail Plan (“NRP”).  The NRP is being developed as part of the Passenger Rail Investment and Improvement Act of 2008.  The progress report builds upon the Preliminary National Rail Plan (PDF) submitted to Congress last year.  When completed, the NRP is expected to present a framework for improving our transportation network for future generations.

The progress report emphasizes the importance of efficient and effective rail infrastructure to the nation’s economy and then details the need to build a nation-wide system of high-speed and intercity passenger rail while preserving the nation’s freight rail network.  FRA’s plans include a tiered network of passenger rail corridors, with each tier tailored to the size and needs of the various areas serviced by the system.  These tiers would include Core Express Corridors, which would consist of high-speed rail service on a dedicated track and connect large urban areas separated by distances of up to 500 miles.  The middle tier, Regional Corridors would use a mix of dedicated and shared track to provide service ranging in speed from 90-125 mph and link mid-size urban areas as well as smaller communities in between.  Finally, Emerging/Feeder routes would use shared track and provide smaller or more distant areas with service speeds of up to 90 mph.  FRA’s goal for each of these tiers is to provide connections with communities, and integrate passenger rail with other modes of public transportation. 

The FRA also uses the report to address its plan for High Performance Freight Rail and the need to improve the nation’s freight rail network to accommodate long-term capacity needs.  The report emphasizes that freight system performance can also be improved by enhancing the connections between individual modes of transportation in order to make the best use of the inherent efficiencies of each mode, including pipelines, airfreight, waterways, and trucking.  Such improvements to corridors and connections will, in turn, enhance the nation’s economic competitiveness. 

Success will require a long-term commitment to passenger rail at the Federal, State, and local levels, similar to the dedication shown to the interstate highway network in the latter half of the 20th century.”

The next steps in the development of the NRP may prove to be the most critical in terms of garnering the political support necessary for an endeavor whose significance and breadth the FRA compares to the development of the interstate highway system in the 1950s.  USDOT and FRA are currently developing criteria to identify regions of the country where Core Express, Regional and Emerging/Feeder corridors could be feasible, analyzing the costs and benefits of high speed and intercity rail and High Performance Rail, and continuing extensive public outreach to identify and aid in the resolution of challenges associated with the initiative.  When issued, the final NRP is expected to include a comprehensive strategy for implementation, including legislative, policy and administrative recommendations.  The ultimate strategy will need to anticipate and overcome the numerous financial and political challenges to such an ambitious undertaking.

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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. 

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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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U.S. Department of Transportation Secretary Ray LaHood has asked Federal Highway Administration Chief Counsel Karen J. Hedlund to serve as Chief Counsel of the Federal Railroad Administration, effective June 29.

Hedlund moves to FRA to help advance DOT's new high-speed and intercity rail development program, one of the Obama Administration's signature initiatives with more than $10 billion already appropriated.  During her tenure at FHWA starting in 2009, Hedlund helped implement the American Recovery and Reinvestment Act, including new investments in highway, intermodal and freight rail facilities.  Hedlund has 35 years of experience in transportation and is recognized nationally for her expertise in structuring public-private partnerships.

All of us at Nossaman congratulate our former partner Karen Hedlund on her new appointment.

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This is no longer simply a question of who gets to sell fast food to weary travelers. The question is: how will we maintain our interstates to truly serve motorists’ changing needs at a time when increasing funding shortfalls and skyrocketing liability concerns are causing states to close existing rest areas in unprecedented numbers? 

As just one example of how these rest stops might be valuably utilized without impinging on off-right of way private sector services, the Pacific Coast states (California, Oregon, and Washington) are trying to ensure the availability of alternative fuels along the I-5 corridor from British Columbia to Baja California, one of USDOT-designated critical “corridors of the future”. A backbone like this would serve to jumpstart the development of a wider distribution network essential to spur a wider acceptance of alternative fuels vehicles in passenger and freight fleets and consequently substantially reduce emissions. Private fuel distribution networks will be less likely to make this investment in advance of a large customer base demanding the service.

There are other examples of how the use of rest areas within the interstate system should be allowed, while at the same time protecting the many excellent and important businesses off-right of way currently serving the traveling public. It is increasingly clear that a black and white policy, based upon 1950’s definitions of commercial activity, no longer reflects an optimal transportation policy combination of technology. In key areas policy appears to be unnecessarily protecting businesses at the expense of innovative and integrated ideas for the future of our transportation infrastructure.

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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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Jeffrey Parker, President of Jeffrey A. Parker and Associates, has worked closely with Nossaman on several projects, including two recent projects in Florida.  We are pleased to include his comments here as a guest to Infra Insight.

The House Subcommittee on Highways and Transit invited me to participate in a hearing on April 14, 2010 on “Using Innovative Financing to Deliver Highway and Transit Projects.”  As a participant on the panel, I was pleased to share my firm’s experiences with availability payments and answer questions from the Subcommittee Members on the I-595 and Port of Miami Tunnel transactions.  My testimony is available online.  It was gratifying to see the subcommittee’s interest and the potential for these examples to help shape future federal policy. 

In addition to the P3 discussion, the Subcommittee demonstrated a strong interest in enlarging the current TIFIA loan program at USDOT, as well as in making railroad infrastructure loan financing (RRIF) more attractive. 

USDOT Chief Financial Officer Chris Bertram explained a number of concepts the Administration is developing for reauthorization of federal transportation programs, including the new national infrastructure loan and grant program.  Subcommittee members also sought feedback on the Federal Transit Administration’s “PentaP” Program and its impact on expediting the approval process for New Starts Projects.  Video of the entire hearing and a written summary are both available online.  

- Jeffrey Parker

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The IBTTA is discussing the future of tolling existing interstate capacity in light of the Federal Highway Administration’s decision to reject Pennsylvania’s application to toll Interstate 80.

My opinion?

The political barriers to tolling existing interstate capacity are just as real and monumental as raising the gas tax. In the short to mid term the more likely scenario is an acceleration of the trend to toll new capacity within existing interstate rights of way. The Ft. Lauderdale I-595, the Ft. Worth North Tarrant Express, and the Dallas I-635 are all recent examples of blending existing nontolled interstate upgrades with new tolled lanes. I project many more such projects which will benefit all concerned with less political friction. In reauthorizing the highway program Congress should follow the recommendations of the National Surface Transportation Infrastructure Financing Commission and give the states more leeway to utilize this tool.

You can see what others have to say about it at the ITBBA’s blog Tolling Points.

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The White House’s Council on Environmental Quality has issued two draft guidance memos regarding important NEPA compliance issues that may add another regulatory layer to infrastructure project development.

The draft guidelines on greenhouse gas (GHG) emissions, issued on February 18, 2010, require that environmental impact evaluations by federal agencies address GHG.  Among other things, federal agencies are required to quantify and describe expected direct and indirect GHG emissions, to discuss measures to reduce GHG emissions, and to qualitatively discuss the link between the proposed action's GHG emissions and climate change.  By adding to the list of matters an environmental impact statement or environmental assessment must address, the new guidelines not only are likely to increase the cost and time necessary to prepare NEPA documents, but also may provide additional avenues through which project opponents could challenge projects. 

Draft guidelines on NEPA mitigation and monitoring requirements are intended to require federal agencies to adopt (1) binding commitments to implement mitigation measures, (2) monitoring programs to "ensure" the mitigation is implemented, and (3) reporting systems so that the public knows if and how the mitigation measures are implemented.  The guidelines "are intended to reinforce existing requirements and responsibilities", but nevertheless could increase the impact of mitigation requirements on projects, in terms of both cost and time. 

The draft guidelines are open for comment for a 90-day period. 

Nossaman has issued an E-Alert providing a more detailed analysis of these new guidelines.

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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. 

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. 

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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.  

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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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TRB’s National Cooperative Highway Research Program (NCHRP) division has weighed in on road user fees based on vehicle miles traveled or VMT. Their latest report “Implementable Strategies for Shifting to Direct Usage-Based Charges for Transportation Funding” responds to VMT’s critics who say the transportation funding method would be too challenging and require a lengthy implementation period. The report outlines strategies for shifting to direct user-based charges for transportation funding, focusing on incremental VMT mechanisms which can be fully implemented in the next five years. The discussion is generally limited to the technical aspects of various VMT fee mechanisms, avoiding the thornier issues of public and political acceptance.

The issuance of the NCHRP report adds to a growing body of support for a revamping of the traditional means of funding highway construction and maintenance. In February of this year, the National Surface Transportation Infrastructure Financing Commission issued its final report recommending the use of VMT. Interim and long-term VMT strategies will no doubt have a central role in the upcoming debate over the surface transportation reauthorization measure.

 

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The Government Accountability Office (GAO) has endorsed USDOT’s policy of allocating Highway Trust Fund (HTF) apportionments based on total lane miles in each state – including miles of highway built, operated or maintained through public private partnerships (PPPs). 

Each state’s share of the nation’s highway system (quantified as “lane miles”) has factored in federal aid allocations since 1976, though initially this measure excluded tolled facilities. In 1998, Congress greatly expanded the use of the lane mile funding formula with TEA-21, and eliminated the exclusion of toll roads from the allocation formula.

On guidance from GAO, Congress has used lane miles as a proxy for need, rather than relying on direct measures of need.  Under a “direct need” model, a state that let its roads crumble might be able to demonstrate a greater need, and garner more federal aid, than a state that responsibly invested in maintenance.   

GAO’s report, prepared for Senator Jeff Bingaman of New Mexico, describes the high level approach Congress has taken, which bases funding decisions on “states' highway system needs taken as a whole, not on direct state highway system construction or operating costs.” Under this approach, states can pursue critical transportation projects through PPPs without fear of diminishing their share of HTF dollars. 

GAO’s ruling recognizes the political and fiscal realities facing state transportation agencies. Denying inclusion of these PPP projects in the HTF allocation calculus would put states that have demonstrated their need for more funds and taken positive steps toward self-help by reaching out to private partners at a disadvantage. 

The report follows on the heels of two new bills introduced by Senator Bingaman, one of which, if adopted, will place a heavier burden on states seeking to deliver transportation projects through PPPs.  The Transportation Equity for All Americans Act (S. 884) would reduce the funding such states receive through their Highway Trust Fund allocation by changing the grant allocation formulas for several programs to exclude privately operated facilities from the state network. The bills are currently before the Senate Committees on Environment and Public Works and Finance. 

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New subway safety standards may be coming soon to a city near you.  The Federal Transit Administration (FTA) has assembled a team of transportation safety experts to explore rail transit (subway, light rail, and commuter rail) safety reforms, which may extend to bus operations.   

FTA is currently prohibited by law from establishing national safety standards, requiring Federal inspections, or requiring specific operating practices, but that may soon change.  In testimony before the Senate Banking Committee, FTA Administrator Peter Rogoff condemned several recent transit collisions as “unacceptable” and announced the Obama Administration’s intent to pursue reform. 

Most rail transit is free from federal safety oversight. There are exceptions - certain commuter rail systems are funded by FTA but regulated by the Federal Railroad Administration safety regulations.  But the majority of urban rail transit systems are overseen by the State safety oversight agencies. 

Any new safety oversight requirements will probably be tied to FTA’s traditional role as a grant-making agency. Administrator Rogoff highlighted the need for new transit funding, citing a National Transportation Safety Board  preliminary report indicating that the “condition of equipment and age of the rolling stock may have resulted” in the Washington D.C. crash earlier this year, which killed 9 and injured more than 70 passengers.

Aging equipment is a serious concern nationwide.  FTA’s recent rail modernization study surveyed the seven largest transit operators, which carry more than 80% of the nation’s transit passengers.  More than 33% of the assets held in these systems were in marginal condition or had already exceeded their useful life.  Servicing this system’s backlog of unmet needs would cost a staggering $50 billion, by the study’s estimates.

As the new surface transportation authorization process gets underway the Administration’s plans will no doubt provide fodder for vigorous debate.  Administrator Rogoff’s testimony seems to hint that new safety measures may be linked to FTA’s discretionary New Starts program.  In the meantime, look forward to a follow-on FTA study identifying safety critical infrastructure and industry wide “state of good repair” needs.  

Video of the hearing "Rail Modernization: Getting Transit Funding Back on Track," along with written statements from the heads of the Chicago Transit Authority, the Washington Metropolitan Transit Authority, New Jersey Transit, and the Metropolitan Atlanta Rapid Transit Authority are available from the Senate Banking Committee's website.

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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.

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