Federal Highway Trust Fund Funding Problem Will Hit State Projects This Fall

Posted by guest blogger William Moore.

William Moore of Vianovo works with the Transportation Transformation Group,  a consortia of public and private entities that looks at ways of improving the funding and financing of the nation's transportation infrastructure, which is co-chaired by Nossaman Partner Geoffrey Yarema.

Absent swift action by Congress, state departments of transportation will begin to have cash flow problems that could delay payments to vendors and slow projects.  Without action by the fall, new projects may have to be shelved until Congress can resolve the funding crisis that confronts the Highway Trust Fund.

For many years, the U.S. Department of Transportation has insisted it must keep a cash cushion of $4 billion in the highway portion of the Highway Trust Fund and $1 billion in the transit portion. This July, absent action to stem the negative cash flow, the highway fund will dip below the minimum in July; the transit fund will succumb in August.

This is not unprecedented. A similar situation occurred in 2008, but it was brief dip below the minimum balance and involved only the highway account.

As in 2008, the Federal Highway Administration, the agency in charge of highway spending, is expected to begin delaying reimbursements to states. Some expect reimbursements will occur only once every two or four weeks, instead of the current practice of daily payments. Without additional funding, no new surface transportation projects would be funded by the HTF in 2015.

Reflecting the uncertainty of funding, Moody's Investors Service in February downgraded the ratings of 16 GARVEE bond issues tied to U.S. road money. The rating agency said it had decided to cut the scores from A1 to Aa3 for those GARVEEs that rely solely on federal monies and lack cash-funded debt reserves or other structural protections against possible interruption to the flow of federal money. The bonds were issued by agencies in California, Georgia, Idaho, Kentucky, Maine, Michigan, Montana, New Hampshire, North Carolina, Oklahoma, Rhode Island, Washington, West Virginia and Washington, D.C. It also cut the ratings of GARVEEs issued by Michigan and New Jersey agencies from A1 to A2.

Since 2008, revenues from motor fuels taxes into the Highway Trust Fund have dropped. In response, Congress has transferred $53 billion into the fund from the government’s general fund. DOT Acting Undersecretary for Policy Peter Rogoff told a House committee March 12 that when balances fall below the minimum this summer, the department will have to implement emergency measures to maintain a positive balance. The measures will cause cash flow problems for state transportation agencies that pay contractors for highway and transit capital projects.

The current surface transportation authorization expires September 30, 2014. Congress will need to find an additional $16 billion per year to maintain current Highway Trust Fund spending levels, leading many to anticipate that this year’s bill will be more about revenue than about policy. In order to avoid massive layoffs mere months before the November congressional elections, Congress may have to enact a short-term revenue bill this summer to temporarily maintain the program while working towards an end-of-the-year long-term solution. 

Disclaimer: The views and opinions expressed in this post are those of the author and do not necessarily reflect those of Nossaman LLP.

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Congressional Panel Explores Industry's Views on Public-Private Partnerships

On Wednesday, March 5, the House Transportation and Infrastructure Special Panel on Public-Private Partnerships held a hearing entitled "Overview of Public-Private Partnerships for Highway and Transit Projects" to review the role of P3s in delivery of highway and transit projects. The witness list and links to their testimony are as follows:

Mr. Joseph Kile, Assistant Director for Microeconomic Studies, Congressional Budget Office (CBO) Written Testimony

Mr. James M. Bass, Interim Executive Director and Chief Financial Officer, Texas Department of Transportation Written Testimony
 
Mr. Phillip Washington, General Manager, Regional Transportation District Written Testimony
 
Mr. Richard A. Fierce, Senior Vice President, Fluor; on behalf of Associated General Contractors of America Written Testimony
 
The hearing was well-attended by Members of the panel, who all expressed their interest in the issue and usefulness of the hearing, and the question and answer period delved into a variety of subjects, from if and how the federal government should be involved in P3s to exploring specific examples of how P3s would be beneficial.
 
Both Members and witnesses discussed the importance of evaluating each potential project for its suitability to proceed as a P3.  There was wide agreement that P3s are a valuable tool for infrastructure projects, but they are not a “silver bullet” for solving our nation’s infrastructure needs.  There were many questions directed at Mr. Kile from the CBO as Members tried to drill down on whether savings exist in the short and long term by using P3s versus traditional financing and project delivery.  The CBO’s research is limited by the number of major P3s to examine, but Mr. Kile noted that they are delivered slightly faster and are slightly less expensive.  Witnesses also said that P3s, particularly those involving the operation and maintenance of projects, may benefit from efficiencies as the private sector takes into account life-cycle costs during the design and construction of the project. 
 
Members and witnesses also identified environmental streamlining as an area where project timeframes and costs can be reduced. Mr. Bass noted that as a result of MAP-21 provisions, Texas will be taking lead responsibility for environmental reviews, which will create permitting efficiencies.  Additionally, as states go through the procurement process with P3s, it is critical that environmental reviews of projects stay on schedule.
 
Rep. Sean Patrick Maloney (D-NY), a self-professed fan of P3s, asked panelists whether the PAB and TIFIA programs are structured correctly as is, or if they need expansion.  Witnesses universally expressed the importance of these two particular programs to successful P3 projects, with Mr. Fierce of Fluor advocating to lift the cap on PABs. 
 
Del. Eleanor Holmes Norton (D-DC) expressed some concern at how “private” some P3s are, given the common use of PABs, the TIFIA program, or other federal funding sources to make up a large portion of the project funding.  Witnesses clarified that in some projects, the private equity bridges a gap in funding that allows a project to move forward faster than it otherwise could. 
 
Rep. Michael Capuano (D-MA), while saying he likes the idea of finding new tools to upgrade our country’s infrastructure, noted that P3s would play a lesser role if policymakers made the politically unpopular decisions to increase taxes or other fees and fully fund the Highway Trust Fund and local funding sources. 
 
Rep. Candice Miller (R-MI), from a state without a P3 law, focused on eliciting from witnesses what states have had success with P3s.  Witnesses pointed to Virginia as a leader, and also to the useful role the U.S. Department of Transportation has taken in bringing together folks with expertise in P3s in various states to share thoughts with other states considering adopting a P3 law. 
 
Simon Santiago co-authored this entry. 

President Obama Announces a Proposal to Fund a Four Year Surface Transportation Bill at $302 Billion

On February 26, President Obama announced a proposal to fund a four year surface transportation bill that would increase spending by 22% for highways and 70% for transit over current levels.  The White House provided a Fact Sheet that outlines to proposal.   The current law, the Moving Ahead for Progress in the 21st Century Act (MAP-21) expires at the end of September.  That means that a new bill or an extension must be agreed to by both Houses of Congress by that time.  The President's envisions a $302 billion four year bill that builds on the substantive provisions of MAP-21.  More specifically, 

  • Administration envisions finding an additional $150 billion for a one time infusion into the Highway Trust Fund through various tax reforms.  This would cure the current shortfall and provide for an additional $90 billion dollars over current trust fund revenues, allowing for the four year $302 billion dollar bill.  
  • The plan highlights a “Fix-it-First” approach to encourage greater emphasis on repairing existing transportation facilities. 
  • The proposal would provide $206 billion for highway projects, $72 billion for transit, $19 billion for rail, and $10 billion for a multimodal freight grant program. 
  • The program would continue the TIFIA program at the current level of $1 billion per year. 
  • Also envisioned are new provisions to enhance program efficiency, improving project delivery and expediting the regulatory review process. 
  • The program would continue current themes of focusing on transportation design to support more resilient communities.  
AASHTO welcomed the announcement, particularly because of the additional funding it would provide for transportation funding and for addressing the growing shortfall in the Federal Highway Trust Fund.  Chairman Shuster of the House Transportation and Infrastructure Committee was encouraged by the President's proposal, noting that Chairman Camp of the House Ways and Means Committee also proposed funding transportation through $125 billion in tax reforms.  
 
The White House Fact Sheet was not clear as to whether the Administration plans to send a bill to Congress.  It also said nothing about additional funding for high speed raid projects.  Finally, the statement made no mention of long term fixes for highway trust fund, such as additional or alternative users fees, beyond the life of the four year proposal.
 
The White House also announced a new $600 million for TIGER grants from the Consolidated Appropriation Act, signed by the President on January 17, 2014.  It is clear that the Administration would like to continue TIGER grants for the foreseeable future.
 

California Successor Agencies Rejoice: IFD Law Now Includes Redevelopment Project Areas

By Albert Reyes

In a move that should make successor agencies to redevelopment agencies happy, a new law was passed and approved by the Governor on February 18, 2014 (AB 471) that, among other things, amends Section 53395.4 of the California Government Code to allow infrastructure financing districts to finance a project or portion of a project located within a redevelopment project area or former redevelopment project area.

Infrastructure financing district law now provides a mechanism to finance projects that would have otherwise been financed by redevelopment agencies but for their elimination.  Cities or counties (which generally act as the successor agency, in charge of implementing the dissolution of redevelopment agencies), can now form a infrastructure financing district over a redevelopment project area to finance redevelopment projects that were not yet completed prior to the dissolution of redevelopment agencies.

Section 53395.4(c) states: “A district may finance a project or portion of a project that is located in, or overlaps with, a redevelopment project area. The successor agency to the former redevelopment agency shall receive a finding of completion, as defined in Section 34179.7 of the Health and Safety Code, prior to the district financing any project or portion of a project under this subdivision.” The debt or obligation created under Section 53395.4(c) will be subordinate to an enforceable obligation of the former redevelopment agency.

AB 471 did not amend the formation or bond issuance process for infrastructure financing districts.  The formation of the infrastructure financing district and the issuance of bonds must be approved by the two-thirds vote of qualified electors (unless the vote is a landowners vote, if there are fewer than 12 registered voters). The newly formed infrastructure financing district can issue bonds to pay for real or other intangible property with an estimated useful life of 15 years or longer and certain public capital facilities of communitywide significance and such bonds will be secured by any increase in property tax revenue (assuming taxing entity consent) over the assessed value of the property within the infrastructure financing district.

AB 471 is effective immediately.  

FHWA and FTA Issue New Guidance On MAP-21 Exclusions

By Ben Rubin and originally posted on the California Eminent Domain Report blog.

On July 6, 2012 President Obama signed into law MAP-21, which, among other things, contained new National Environmental Policy Act ("NEPA") requirements for the Federal Transit Administration ("FTA") and Federal Highway Administration ("FHWA").  In January 2014, pursuant to a mandate in MAP-21, FTA and FHWA adopted new regulations, which became effective this week on February 12, governing the implementation of two new categorical exclusions. The two new categorical exclusions apply to (1) projects within an existing right-of-way, and (2) projects receiving limited Federal funding. 

The benefit of qualifying for one of these two new categorical exclusions is that the FTA and FHWA will not require the preparation of an environmental assessment or environmental impact statement, both of which often require a great deal of time and money. Of particular note, the regulations state that the categorical exclusion for projects within an existing right-of-way does not apply to "construction of a project in an undeveloped area simply because the real property interests were previously acquired," because the "use of the modifier 'existing' to describe the operational right-of-way means that a transportation facility must already exist at the location where the proposed project will be built." The regulations detail a number of other important nuances and caveats, so be sure to consult the regulations (or better yet, your NEPA expert) before you assume that a project qualifies for one of these new categorical exclusions.

A Pilot Program for Performance-Based Social Infrastructure in California

California Senate Bill 593 (“SB 593”), introduced by Senator Ted Lieu (D-Torrance), shows the interest of some State legislators in implementing performance-based infrastructure (“PBI”) in social programs.

SB 593 would require the California Office of Planning and Research to administer a “Social Impact Partnership Pilot Program” (the “Pilot Program”) beginning in 2015.  The Pilot Program would authorize the Director of the Office of Planning and Research (“Director”) to identify and submit proposed “social impact partnerships” to the California Legislature for its consideration each year (until the Pilot Program sunsets in 2020).  SB 593 passed the Senate Appropriations Committee on January 30, 2014 and is currently awaiting further reading and hearing. 

The social impact partnerships, also known as “pay for success” or performance-based schemes, would be for social programs traditionally administered by state agencies and non-governmental organizations, such as targeting recidivism, mental illness, homelessness, and primary care and preventative health services. 

The Pilot Program includes a funding component – SB 593 would create a Social Innovation Financing Trust Fund (with funds appropriated from the State Treasury) from which to fund the pilot projects.  The bill may provide an opportunity for private sector involvement in the delivery of state services via an availability payment-type contract structure.  Periodic payments will be made to a private partner, conditioned on the achievement of targeted performances and budgetary savings. 

A similar type of performance-based program has been initiated on the federal level, with the introduction of a “pay for success” program for social infrastructure in 2012.  In 2013, the U.S. Department of Treasury issued a Request for Information that will help design a proposed $300 million Incentive Fund to further expand performance-based contracts.  National and state policymakers, including California, are increasingly embracing performance-based programs as an alternative means to finance public social infrastructure projects using less public funds. 

The concept of performance-based infrastructure was initially envisioned in California by former Governor Schwarzenegger.  The first PBI-type project in California was the Presidio Parkway Project under SBX2 4.  The contractual parameters under SB 593 appear to fit well with the availability payment contract structure used in PBI projects.

More information about SB 593 can be found on the California Legislative Information Website.

Tristan Robinson co-authored this entry. 

House Transportation Committee Establishes Panel on Public-Private Partnerships

House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) and Ranking Member Nick Rahall (D-WV) announced the creation of a special committee panel to examine public-private partnerships (P3s) in the United States.  This panel will inform the Committee’s work this year on reauthorizing surface transportation programs and other legislative activity.

Committee Vice Chairman John J. Duncan, Jr. (R-TN) will serve as the Chair, while Rep. Michael Capuano (D-MA) will be the Ranking Member.  Joining them are five other Republicans - Candice Miller of Michigan, Lou Barletta of Pennsylvania, Tom Rice of South Carolina, Mark Meadows of North Carolina and Scott Perry of Pennsylvania, and four Democrats – Peter DeFazio of Oregon, Eleanor Holmes Norton of Washington D.C., Rick Larsen of Washington, and Sean Patrick Maloney of New York, to look at “P3s across all modes of transportation, economic development, public buildings, water, and maritime infrastructure and demand.”

More specifically, the Committee says the panel will identify: “(1) the role P3s play in development and delivery of transportation and infrastructure projects in the U.S., and on the U.S. economy; (2) if/how P3s enhance delivery and management of transportation and infrastructure projects beyond the capabilities of government agencies or the private sector acting independently; and (3) how to balance the needs of the public and private sectors when considering, developing, and implementing P3 projects.”

The format of panel events will resemble the activities of last year’s Panel on 21st Century Freight Rail Transportation, which held hearings in Washington, D.C., and around the country to examine the future of freight rail. The first event of the P3 panel has yet to be announced. This is not the first time the Transportation and Infrastructure Committee has focused on the use of P3s for various kinds of infrastructure.  Rep. Barletta’s Economic Development, Public Buildings and Emergency Management Subcommittee has held several meetings about the use of P3s in redeveloping underutilized federal properties, Rep. Denham’s Railroads Subcommittee has held several meetings regarding the use of innovative financing in intercity passenger rail, including a roundtable in Chicago, among other events.

Bipartisan Budget Agreement Offers Little Holiday Cheer for Transportation Funding

Posted by guest blogger William Moore.

William Moore of Vianovo works with the Transportation Transformation Group,  a consortia of public and private entities that looks at ways of improving the funding and financing of the nation's transportation infrastructure, which is co-chaired by Nossaman Partner Geoffrey Yarema.

Don’t let anyone tell you the Bipartisan Budget Agreement (BBA) enacted this week by Congress and President Barack Obama is good for transportation. The BBA rolls back the sequester of discretionary spending scheduled for 2014 and 2015 and increases discretionary spending by $45 billion this year ($22.4 billion each for defense and non-defense) and $18 billion for 2015.  But those increases are not increasing mobility.

The BBA leaves in place sequestration for mandatory spending, including cuts to the Highway Trust Fund.  The BBA requires a $960 million cut from the general funds transfer to the HTF that is provided by existing law.   In addition, it changes House budget rules to require offsets to future transfers if the next surface transportation bill authorizes them – making the writing of new highway bill in 2014 more fiscally difficult.

The BBA also will take away resources from transportation appropriations, probably cutting USDOT appropriations 2 percent from last year’s funding level.  Appropriators will be developing an omnibus spending bill against a January 15 deadline, and we won’t have bill language until the deadline approaches.  Without the details it is impossible to say whether the cuts will land hardest on Section 8 housing grants, personnel to process TIFIA loans or other programs.  But in its totality, no one can say the BBA is a good deal for transportation.

Disclaimer: The views and opinions expressed in this post are those of the author and do not necessarily reflect those of Nossaman LLP.

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Congressional "P3 Caucus" Holds First Public Meeting

The Congressional Public Private Partnerships (P3) Caucus held its first public event on Tuesday, November 19 in the Cannon House Office Building.  Co-chairs Reps. Mike Rogers (R-AL) and Gerald Connolly (D-VA) were joined by caucus member John Delaney (D-MD) for an hour-long discussion entitled “Innovating public service delivery with P3s."  Panelists were Porter K. Wheeler, Ph.D., P3 Policy Program at George Mason University; Drew Preston, Manager, Congressional and Public Affairs, U.S. Chamber of Commerce; Matt Reiffer, Director, Transportation Programs, American Council of Engineering Companies; and Joseph Fengler, Director Defense Logistics Policy, Honeywell. 

The Caucus’s members and panelists held a wide-ranging discussion, touching on the use of P3 strategies in the defense, transportation, and education spaces for both infrastructure and services.  The group addressed at length issues regarding legal authority for P3s, the “language barrier” between the private and public sectors, and cited examples of successful P3s both domestically and internationally.

Rep. Connolly highlighted “win-win” transportation P3s in Virginia, including the I-495 Express Lanes in northern Virginia and the Dulles rail line, each examples of new infrastructure financed up front by the private sector.  He noted, however, a public policy challenge with P3s being the perception of a loss of direct accountability of a concessionaire to the public.  Additionally, Rep. Connolly highlighted a similar public policy concern where a private company takes over existing public roads.

As a member of the Armed Services Committee, Rep. Rogers is especially interested in P3s as they relate to the military, where he has already seen an example of a successful P3 in his district.  Mr. Fengler of Honeywell discussed the successful P3 between Anniston Army Depot and Honeywell, highlighting the differences between a traditional government purchase contract and a typical P3-type service contract.  Rep. Rogers, however, voiced concerns he hears as a member of the Homeland Security Committee about cancelled RFPs by other agencies. He has heard that after private sector responses suggesting alternative service delivery are offered, instead of meaningful public-private partnerships being explored, the RFPs are cancelled, betraying a private perception of governments as inflexible and agency leadership difficult to approach.

The group uniformly noted the lack of unity in P3 enabling laws at the federal and state level and across different spaces, in contrast to Canada and Puerto Rico, perceived to have progressive and further developed P3 infrastructure in place.  Mr. Fengler noted that the Department of Defense does not engage in the kind of decades-long contracts that may allow for additional efficiencies and “thinking big,” where state transportation agencies mostly focus on long-term projects. Mr. Wheeler of George Mason University noted that 33 states have P3 enabling laws, but no two are the same, and furthermore, there is no formal federal legal structure, which creates uncertainty for potential P3 partners seeking opportunities in the United States. Rep. Delaney noted that no panelist could identify a repository of “best practices” for P3s in the U.S. 

Rep. Rogers ended the meeting by promising that the P3 Caucus would meet again, and regularly, to continue a useful discussion on the place and utility of P3s in the United States.

The Government Shutdown's Impacts on Federal Transportation Agencies

In anticipation of the US federal shutdown which occurred on October 1st, this year, the U.S. Department of Transportation (USDOT) on September 27th outlined its shutdown plan, which includes furloughs for more than 18,000 of its approximately 55,000 employees. 

The various agencies within USDOT have been impacted differently by the shutdown, depending on the extent to which their activities are funded through the federal government’s annual appropriations process, which lapsed this year and resulted in the current funding gap that caused the shutdown.  

The shutdown’s impact on the Federal Highway Administration (FHWA) has been minimal. While the transportation appropriations bill is a part of the annual appropriations process, FHWA is funded out of the Highway Trust Fund, for which MAP-21 granted multi-year spending authority through the end Fiscal Year 2014 (September 30, 2014).  In general, federal activities funded with multi-year appropriations of budget authority that did not expire at the end of Fiscal Year 2013 were not subject to the shutdown.  As a result, all of FHWA’s operations continue as normal.

In contrast, staffing for the Federal Transit Administration (FTA) is dependant on the annual appropriations process, so almost all of the agency’s staff was furloughed as a result of the shutdown.  Consequently, much of FTA’s normal activities were suspended, including the obligation of grants, the reimbursement to grantees for ongoing operations and construction projects, and the carrying out of environmental, legal, civil rights, and other reviews essential for advancing projects to the point of a funding obligation. 

As to TIFIA, we understand that that Joint Program Office is working during the shutdown but that USDOT is not granting PABs allocations because of staff furloughs.

Click on the following link to view the UDSOT’s shutdown plan which describes the operations of all its agencies during the shutdown: http://www.dot.gov/sites/dot.dev/files/docs/DOT%202014%20Plan%20for%20Approp%20Lapse.pdf.  And for a detailed explanation of the causes, processes, and effects of the federal shutdown visit: http://www.fas.org/sgp/crs/misc/RL34680.pdf.

Tolling for the Next Generation Interstate System

We are now a short distance away from expiration of MAP-21, with no solution in sight for sources of funding to sustain the federal highway program.  There is no stomach in Congress to increase federal gas taxes or to make real progress toward replacing gas taxes with mileage-based user fees.

As for tolls, Rep. Bill Shuster, Chair of the House Transportation and Infrastructure Committee, said in a speech last week that they “might be even more difficult to do than some of the user fees."  Tolling of interstates that have been free for decades would not be kindly received by voters, according to Rep. Shuster.

This is the same political mentality that drove decisions on expansion of federal tolling authority under MAP-21.  MAP-21 created new authority to introduce tolling to fund construction of new interstate capacity and interstate reconstruction, but in both situations MAP-21 prohibits any net reduction in the number of toll-free, non-HOV lanes.  This means that, with the except of potentially converting existing HOV lanes to HOT lanes, only new lanes may be tolled in connection with interstate reconstruction or expansion. 

With this restriction, the toll revenues that can be generated from the MAP-21 tolling provision pale in comparison to the costs to reconstruct and expand the interstate system.

Bold and broad thinking on the future of the interstate system will have to well up from industry leaders and state government if there is ever to be a change in the current federal ban against tolling existing capacity of the interstates.  Bob Poole of the Reason Foundation just published a year-long study on the feasibility of interstate tolling to pay for the estimated cost to reconstruct and expand the interstate system.  The Reason study is an audacious and timely exercise that just might frame the national debate on the subject, for several key reasons:

  • It finds that the job can be accomplished at feasible toll rates – 3.5 cents/mile for cars and 14 cents/mile for trucks, on average.
  • It includes a state-by-state analysis, concluding that almost every state is capable of funding its next generation of the interstate system via tolling.
  • It is based on the premise that tolls are not introduced until value is added – i.e., until an interstate corridor is reconstructed and modernized so that it will operate at a higher level of service.
  • It proposes that the use of the toll revenues be restricted to the purpose of interstate reconstruction and expansion.
  • Modern, all-electronic tolling is assumed.
  • It would represent a significant transitional step toward a universal mileage-based user fee system, as the interstates account for 25% of total vehicle miles traveled.
  • It encompasses funding of on-going interstate maintenance as well as future improvements.
  • It even proposes to rebate fuel taxes for vehicle miles traveled on tolled interstate corridors, to avoid any claim of “double taxation.”

Tolling of the interstates under the terms enunciated in the Reason study recognizes that major portions of the interstate system are close to the end of their original design life and that modernization, rehabilitation, replacement and expansion make up the next generation of the interstate system.  It is true that federal and state fuel taxes paid for the bulk of our current, aging and capacity-constrained interstate system and so, with a few exceptions, was never intended to be tolled.  It is equally true, however, that Congressional abhorrence of higher fuel taxes and mileage-based user fees assures us that the future federal transportation program will fail to pay for the next generation interstate system.

Eliminating the federal ban on tolling interstate capacity can be viewed politically as an act of federalism rather than Congressional endorsement of interstate tolling.  In reality, it would mean that the federal government is neutral regarding the matter.  It would neither bar nor mandate interstate tolling.  It would mean that each state would make its own political decision on whether, when and on what terms to implement interstate tolling.

Political pressure from state governors, state legislators and state DOT executives will be essential to drive any action by Congress to lift the federal tolling restriction.  As Ken Orski writes in his latest cogent brief on this subject, “[t]heir collective judgment will be decisive in whether Congress votes in favor of lifting the current legislative restriction against Interstate tolling or leaves it in place.”  (NewsBrief, Vol. 24, No. 14, September 18, 2013, www.innobriefs.com)

USDOT Announces Fifth Round of TIGER Discretionary Grants

This morning, U.S. Department of Transportation (USDOT) Secretary Anthony Foxx announced the winners of the fifth round of the Department’s highly competitive Transportation Investment Generating Economic Recovery (TIGER) discretionary grant program.  From 585 applications requesting more than $9 billion, USDOT selected 52 transportation infrastructure projects in 37 states that will receive a total of $474 million. 

Notable grants awarded today include more than $9 million to the Michigan Department of Transportation for its Kalamazoo to Dearborn passenger rail project, $14 million for the San Diego Association of Governments for the Pacific Surfliner Coastal Railway Bridges project, nearly $14 million to the Florida Department of Transportation for the South Florida Freight & Passenger Rail Enhancement project, $20 million for the Kansas City Downtown Streetcar, and $18 million to the City of Atlanta to construct a portion of the Atlanta Beltline Corridor.  All projects selected today – which include, roads, bridges, railroads, ports, and transit systems – are summarized in these USDOT fact sheets.

USDOT awards TIGER grants on a competitive basis based on published selection criteria.  Unlike traditional federal programs, TIGER often funds large, multi-modal projects that are not suitable for other federal funding sources.  TIGER funds also leverage private and other non-federal funds, and USDOT reports that this current round of TIGER funding supports $1.8 billion in overall project investments.

Congress created the TIGER program through the American Recovery and Reinvestment Act of 2009 to provide economic stimulus during the previous recession, and Congress has continued to fund the program (albeit in decreasing annual amounts) over the last four years through annual appropriations.

FTA Offers More Insight on Evaluating New and Small Starts Projects

Today the Federal Transit Administration published final policy guidance to augment its New and Small Starts Program final rule published earlier this year.  The final rule established how the Federal Transit Administration evaluates new major transit projects that seek assistance under these funding programs authorized by Section 5309 of Title 49, U.S. Code.  The final rule does not address changes made by the MAP-21 legislation signed last July, rather it addresses parts of the program left unchanged by the 2012 legislation.

The New and Small Starts programs were developed as the Federal Transit Administration’s primary grant programs to fund major transit capital investments, such as rail, bus rapid transit, and ferries.  The final rule and its appendix created the framework for the New and Small Starts project evaluation process, while the final policy guidance supports the framework by providing additional insight into the process. 

The guidance issued today describes the methods for calculating both the financing commitment criteria and project justification criteria required for New Starts and Small Starts projects.  Project justification criteria include: mobility improvements, environmental benefits, congestion relief, economic development effects, land use and cost-effectiveness.  Meanwhile, financing commitment criteria includes: availability of reasonable contingency amounts, availability of stable and dependable capital and operating funding sources, and availability of local resources to recapitalize, maintain and operate the overall public transportation system.  Both the final rule and the final policy guidance are available on the Federal Transit Administration website.

USDOT Issues Temporary Exemption from Buy America for Certain Utility Relocations

Following up on our previous post regarding the uncertainty surrounding the application of Buy America requirements to utility relocations, the United States Department of Transportation (USDOT) has recently released two documents that provide further clarification on the matter.

On July 11, 2013, USDOT circulated an internal memorandum to Federal Highway Administration (FHWA) Division Administrators and the Directors of Field Services acknowledging that the broadened application of Buy America has created implementation issues for the utility industry and caused delays for ongoing highway construction projects.  To address these concerns, for non-Federally funded utility relocations, FHWA will allow utility companies until December 31, 2013 to take the necessary steps to ensure that the steel and iron products they use are in compliance with Buy America requirements.  On July 12th, the FHWA California Division issued a subsequent letter to the California Department of Transportation further noting that project-specific utility agreements executed on or before December 31, 2013, that do not have federal funding, are exempt from Buy America requirements.

Click on the following links to view the full memorandum and letter.

Thanks to Frank Liu for his assistance with this entry.

TIFIA Program Office Releases Updated Program Guidance and Templates

In other TIFIA news . . .  

Yesterday, the TIFIA Program Office released updated TIFIA program guidance and loan document templates that purport to reflect the July 6, 2012 enactment of MAP-21.  Among other revisions, the TIFIA Program Guide has been updated to reflect MAP-21’s endorsement of a rolling application process and the imposition of specific statutory deadlines on processing applications.

While the updated TIFIA guidance documents offer welcome support to current and prospective TIFIA applicants, there appears to be at least some additional work to be done to update the materials to properly reflect MAP-21 enhancements.  For example, the updated TIFIA Loan Term Sheet and TIFIA Loan Agreement sample templates continue to reflect a maximum 33% loan amount ceiling - a limit that Congress raised in MAP-21 in order to authorize TIFIA loan amounts of up to 49% of eligible project costs.

The updated Program Guide and templates can be found on the TIFIA website.

The TIFIA Letter of Interest and Application forms remain open for review and public comment until August 5, 2013.

TIFIA Joint Program Office to Move?

In addition to taking testimony from public agency project sponsors and industry leaders during the July 24, 2013 oversight hearing on TIFIA conducted by the Senate Committee on Environment and Public Works, the Committee heard from the Secretary of Transportation, Anthony Foxx, regarding the U.S. Department of Transportation’s (“USDOT”) implementation of the TIFIA Program since the July 6, 2012 enactment of MAP-21. 

While touting the overall success of the TIFIA program and detailing USDOT’s efforts to move projects through the TIFIA pipeline, Secretary Foxx also announced preliminary plans to move the TIFIA Joint Program Office from its current home under the Federal Highway Administration to the Office of the Secretary.  Citing a need to create a “more streamlined management approach” to address increasingly large and complex loan requests, Secretary Foxx indicated his belief that such a move would allow for more effective implementation of the TIFIA program.  It remains to be seen whether this change will occur and, if it does, whether it will expedite the TIFIA process and approval time.

Click here for Secretary Foxx’s full testimony.
 

Senate Committee on Environment and Public Works Holds Oversight Hearing on TIFIA, Nossaman Partner Testifies

Showing concern for the TIFIA JPO’s slow pace of credit approvals for major US transportation, on July 24, 2013, the Senate Committee on Environment and Public Works conducted an oversight hearing on the implementation of the TIFIA Program following MAP 21’s expansion of the program almost a year ago.  We are aware of only one project that has received credit approval in that time frame.

Geoff Yarema, a partner in the Infrastructure Practice Group and a member of the National Surface Transportation Infrastructure Financing Commission, provided testimony today at the hearing.

In his testimony, Geoff pointed to the importance of the TIFIA program in supporting large scale infrastructure projects by allowing applicants to leverage fewer federal dollars to maximize local, state and private funds.  The passage of MAP-21, he said has greatly enhanced the availability of TIFIA loans from approximately $122 million a year to $750 million in FY 2013 and $1 billion in FY 2014.  States and regional governments have been increasingly looking to the TIFIA program as a key component of their transportation funding and financing plans.  

However, Geoff noted that the U.S. Department of Transportation (“USDOT”) faces certain challenges that need to be resolved to accelerate TIFIA’s approval process: (a) streamlining the pre-application process, (b) enhancing bidding competition with earlier TIFIA commitments to public sponsors, (c) accelerating financial closing, (d) preserving TIFIA’s value proposition to maintain flexible loan terms, (e) enhancing transparency, (f) processing higher quality credits more quickly and efficiently, and (g) implementing the authorization of loans up to 49% of eligible project costs, as approved by MAP-21.

James Bass, CFO of the Texas Department of Transportation, D.J. Gribbin of Macquarie Capital, Arthur Leahy, CEO of Los Angeles County Metropolitan Transportation Authority and James Roberts, President and CEO of Granite Construction Incorporated also provided their testimony to the committee.

Click here for Geoff's full testimony or click here to watch video of the full Committee hearing.

Update: Geoff Yarema provided supplemental testimony to the Committee in response to follow-up questions posed by Senators Boxer and Vitter.

Update Regarding Buy America and Utility Relocations

As we have previously reported,  the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) recently adopted policies requiring Buy America compliance for utility relocations for federally funded transportation projects in cases where the utility performs relocation work.  On June 28, 2013, the American Association of State Highway and Transportation Officials (AASHTO), American Public Transportation Association (APTA), streetcar project sponsors, and associations representing electric, gas and broadband utilities sent a joint letter to the United States Department of Transportation (USDOT) asking for certain accommodations in implementation of the new policy.  The letter, addressed to Transportation Secretary Ray LaHood and Secretary-Designate Anthony Foxx, asks USDOT to clarify how the requirements will be applied, requests a transition period before Buy America requirements are applied to materials supplied by utility owners, and asks for USDOT to consider issuance of waivers for specialized utility products that may not be available from US manufacturers.  The letter also notes the importance of consistency in applying the Buy America requirements throughout the country, and cites a need for training and education of utility owners, suppliers and manufacturers.

The full letter can be found on APTA’s website.

On a related topic, FHWA has received a request for a waiver of Buy America requirements for various components related to the relocation of Pacific Gas and Electric's natural gas service facilities for a California project.  FHWA has requested comments regarding the waiver request.  View the request on FHWA's website.

Thanks to Frank Liu for his assistance with this entry.

FHWA's Expanded Application of Buy America to Utility Relocations Causes Consternation, Delays

As we have previously reported, the Federal Highway Administration (FHWA) has issued guidance holding that "Buy America applies to any utility work that is accomplished as a result of a Federal-aid highway project", unless the utility work cannot legally be reimbursed by the State.  This conclusion is based on an amendment to Buy America found in Section 1518 of MAP-21, which requires the application of Buy America to all contracts eligible for assistance within the scope of a project (as defined by the NEPA document), if at least one contract for the project is funded with Federal-aid highway funds.  The rule applies even if no federal funds are used to reimburse the utility work.

The relatively sudden application of Buy America to utility work that was not previously subject to its requirements has had serious consequences.  Utilities in many states are refusing to sign agreements that incorporate the Buy America requirements, which threatens to delay and increase costs for many projects.  Reasons advanced for this refusal vary, but many appear to be based on practical concerns; for example, a utility states that it does not have any experience in complying with Buy America, its current procurement processes do not yield the information necessary to confirm compliance, or it is not certain that it will be able to procure quality Buy America-compliant materials.

For a project sponsor, the consequences of noncompliance with Buy America could be dire.  According to FHWA (as stated on FHWA's MAP-21 website), failure to incorporate Buy America provisions where required ". . . would render all contracts within the scope of the NEPA document ineligible for Federal-aid highway funds." 

State DOTs, other project sponsors and related groups have expressed the need for guidance and practical assistance from FHWA in the application of this new law.  For example, in a February 12, 2013 letter to outgoing Transportation Secretary Ray LaHood, the American Public Works Association (APWA) and the National Association of County Engineers (NACE) requested guidance and future rule making to the effect that "Buy America requirements are not applied to contracts or work under an agreement with a utility that is not funded by title 23 programs".  Others have suggested a grace period for implementation of the new rules.  Discussion at a recent meeting of the AASHTO Subcommittee on Right of Way, Utilities, and Outdoor Advertising Control found that notwithstanding the guidance posted on FHWA's website, so far the new rules are not being interpreted or applied uniformly throughout the country. 

We understand that FHWA anticipates issuing a Notice of Proposed Rule Making for regulations dealing with these Buy America compliance issues sometime in 2013.  We urge FHWA to act quickly in developing its proposed regulations, and to pursue whatever other measures are necessary to resolve this impasse as soon as possible.
 

EPA Proposed Rule Withdraws Construction Stormwater Pollutant Numeric Limits

In a proposed rule to be published today, April 1, 2013, in the Federal Register, the United States Environmental Protection Agency will withdraw the numeric effluent limits for construction stormwater turbidity that the agency previously had proposed in 2009.  EPA is now proposing a rule that specifies minimum Best Management Practices (BMPs) as effluent limitations for purposes of controlling  pollutants in construction site stormwater runoff.  In general,  the rule concludes that BMP-based effluent limits constitute both a technically feasible and a cost effective way to regulate construction site stormwater pollutants.

This development will not eliminate stormwater monitoring or the construction stormwater numeric action levels set forth in the Construction Stormwater General NPDES Permits that govern construction sites in certain states that have assumed administration and enforcement of the federal Clean Water Act NPDES permitting program, such as California and Washington.  But this development will assure more cost effective regulatory compliance for construction sites in states, such as Texas, that are still subject to stormwater regulation by EPA because those states have not yet been granted delegation of federal Clean Water Act permitting authority.  This development also indicates that EPA has determined that the technical hurdles for controlling and treating pollutants in stormwater and the extremely high costs of stormwater compliance with numeric limits for pollutants like sediment make BMPs, and not numeric limits, the appropriate approach to controlling stormwater pollutants to the "maximum extent practicable" as required by the federal Clean Water Act.   In light of this proposed rule, it appears that EPA will not be proposing to raise the already extremely high bar set by California's State Water Resources Control Board and Washington's Department of Ecology when those agencies adopted their statewide Construction Stormwater General NPDES Permits.

Federal Report Endorses P3 Infrastructure Financing for Transit-Oriented Development

The U.S. Environmental Protection Agency (“EPA”) has issued a report that details funding mechanisms and development strategies that communities can use to provide innovative financing options for transit-oriented development (“TOD”). 

The report affirms the need for local and state transportation agencies to continue to think beyond traditional funding, procurement and contracting approaches to satisfy their burgeoning infrastructure needs. 

Detailed in the report is an explanation of innovative financing mechanisms, which should be required reading for those interested in innovative P3 financing and transit development. 

These include:

  • Direct fees: user or utility fees and congestion pricing;
  • Debt tools: private debt, bond financing and federal and state infrastructure debt mechanisms;
  • Credit assistance: state and federal credit assistance tools, such as TIFIA;
  • Equity: public-private partnerships and infrastructure investment funds;
  • Value capture: developer fees and exactions, special district and tax increment financing and joint development;
  • Grants and other philanthropic sources: federal transportation and community and economic development grants and foundation grants and investments; and
  • Emerging tools: structured funds, land banks, redfields to greenfields, and a national infrastructure bank. 

Four innovative models should also be considered when developing financing plans for TOD infrastructure, according to the report:

1. Anchor institution partnerships: partnering with nonprofit or private entities (such as universities, hospitals and corporations) that have a strong nexus with their location because of real estate holdings, capital investment, history or mission;

2. Corridor-level parking management: setting parking prices and managing parking demand across a transit corridor or system for parking structures and off-street spaces;

3. Land banking: land assembly and acquisition that makes it easier and more affordable to acquire right-of-way for TOD infrastructure; and

4. District energy systems: reducing energy use, encouraging renewable energy and facilitating compact development.

In addition to the clear benefit of providing local or state agencies with multiple funding sources and the ‘life cycle’ benefits from grouping projects together, the report also speaks to ‘softer’ community benefits.  It notes that the use of integrated transportation and land use planning expands transportation choices and can reduce transportation costs, giving more freedom and mobility to low-income individuals, senior citizens, disabled persons and others who cannot or choose not to drive a car.  Further, TOD development can help improve air quality and reduce greenhouse gasses. 

The full text of the report is available on the EPA website.

FHWA and FTA Issue Guidance on MAP-21 to Streamline Environmental Process

On January 14, 2013, the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) issued guidance on Section 1319 of the Moving Ahead for Progress in the 21st Century Act (MAP-21), Pub. L. 112-141, July 6, 2012.  MAP-21 is a measure that reauthorizes transportation funding through the end of 2014, and is the product of a robust effort by transportation advocates to streamline the lengthy, complex, and cumbersome federal environmental process.  As we reported here, MAP-21 includes several meaningful reforms that could expedite the National Environmental Policy Act (NEPA) process, thereby accelerating project delivery. 

Section 1319 attempts to expedite project delivery by providing a process by which agencies will begin to consolidate their NEPA documents.  Specifically, Section 1319 authorizes (1) the use of errata sheets attached to a draft EIS (DEIS) in lieu of the traditional final EIS (FEIS), and (2) the use of a combined FEIS and Record of Decision (ROD).  While the guidance provides details for transportation agencies regarding how to prepare and process these consolidated documents, it indicates that these devices are not likely to be applicable to controversial projects or where there are unresolved inter-agency disagreements. 

Use of Errata Sheets in Lieu of FEIS.  Pursuant to Section 1319(a), agencies may attach errata sheets to a draft EIS, in lieu of preparing a traditional FEIS.  The guidance indicates that errata sheets should only be used if the lead agency has modified the DEIS “in response to comments that are minor and are confined to factual corrections or explanations of why the comments do not warrant additional agency response.”  The errata sheets should also include the information required in a FEIS, as set forth in applicable regulations. 

Use of a Combined FEIS and ROD.  Section 1319(b) directs agencies to prepare a combined FEIS and ROD “to the maximum extent practicable.”  The guidance indicates that a combined FEIS/ROD should not be prepared if the FEIS makes substantial changes to the proposed action that are relevant to environmental or safety concerns, or there are significant new circumstances or information relevant to environmental concerns that impact the proposed action.  The guidance includes factors that an agency should consider when deciding whether a joint FEIS/ROD is appropriate, including whether the proposed action involves a substantial degree of controversy or whether there are unresolved inter-agency disagreements regarding the proposed action.  Any combined FEIS/ROD should also meet the requirements of applicable regulations. 

Prior to MAP-21, NEPA regulations prohibited agencies from approving a ROD any sooner than 30 days after the notice of availability of an FEIS.  Combining these processes, as well as encouraging the use of errata sheets to prepare an FEIS, may streamline and expedite the environmental review process for some projects.  The guidance suggests, however, that the use of these streamlining devices may not be appropriate for controversial projects or where there are unresolved inter-agency disagreements. 

The Section 1319 guidance was issued on an interim basis.  At a later date, FHWA and FTA will conduct a formal rulemaking to propose revisions to the FHWA/FTA NEPA regulations (23 C.F.R. Part 771) to reflect the changes made as a result of MAP-21.

Confidentiality Issues in Government Contracting: Promoting Open Government and Fair Competition

State public records acts and the federal Freedom of Information Act (FOIA) were enacted to prevent favoritism and corruption, but have had unintended consequences on competition for public projects.  As discussed in a recent article, requests for information have become a vehicle for contractors to obtain valuable information about their competitors that might not otherwise be available. 

In addition, requirements to disclose information about a project to the public, including information about proposals received, whether compelled by law, political pressure, or otherwise, pose challenges for agencies running complex procurements.  The desire for greater transparency must be balanced against competing objectives as well as constraints such as federal and state laws limiting disclosure in certain cases, the risk of challenges to the procurement, and the desire to maximize the agency’s negotiating leverage to achieve the best commercial outcome. 

One example is a recent public-private partnership (PPP) procurement that proceeded under enabling legislation requiring the preferred bidder’s “proposal” to be posted to the project website prior to contract execution.  The procuring agency adopted a conservative interpretation of the law and asked the preferred bidder to provide a redacted proposal (including financial and technical submittals), removing only those portions of the proposal that were exempt from disclosure under the public records act.  This information is now available to the bidder’s competitors without any need to submit a formal request.

Another example involves an agency that conducted a PPP procurement under laws requiring public access to all procurement meetings in which official acts are taken.  To avoid premature disclosure of proposal information, evaluation subcommittee members were required to work independently, eliminating the opportunity to use a consensus approach to scoring, and project selection committee members were precluded from learning the proposal scores, or otherwise discussing the proposals, until the public meeting where the proposer was selected.

For some PPP projects, disclosure of information to the public is affected by restrictions associated with federal funding.  Both the Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) impose such restrictions.  The FHWA design-build rule (23 CFR Part 636) requires certain information about proposals to remain confidential until selection is made.  The FTA’s Best Practices Procurement Manual specifically recommends that public agencies keep proposals confidential prior to award, in order to promote more meaningful negotiations and ensure trade secret protection.  The FTA also warns against the practice of “technical leveling” (i.e., providing information to proposers about ideas submitted by others, and then asking for revised proposals) since proposers are unlikely to invest their resources to develop ideas that may be transferred to other firms.

In the face of competing policies and requirements, several agencies have adopted a compromise solution, asking proposers to include executive-level summaries of their proposals and making it clear that the summary is subject to public disclosure.  Others require proposers to provide detailed information about their proposals in a form suitable for posting to the agency website after selection for negotiations, but prior to contract execution.  Agencies facing political pressure to provide greater disclosure might want to look to one of these models, if permitted by applicable law.

Nancy Smith co-authored this entry.

FHWA Clarifies Broad Reach of Buy America Requirements

The Federal Highway Administration (FHWA) released two guidance memoranda in December 2012 relating to Buy America, largely in light of the amendments made by MAP-21.  On December 20, FHWA clarified the Buy America requirements applicable to utility work on Federal-aid projects.  The December 21 memorandum provided additional amplification on FHWA’s position regarding Buy America requirements applicable to manufactured products.

FHWA’s December 20, 2012 Guidance

FHWA was in the process of evaluating the applicability of Buy America requirements to utility work on Federal-aid highway projects when President Obama signed the Moving Ahead for Progress in the 21st Century Act (MAP-21), Pub. L. 112-141, July 6, 2012.  Section 1518 of MAP-21, amending 23 U.S.C. §313, “substantially broadened” the application of Buy America requirements to any contract eligible for Federal highway funding “carried out within the scope of the applicable finding, determination, or decision under the National Environmental Policy Act [NEPA], regardless of the funding source of such contracts if at least one contract for the project is funded with Federal-aid highway funds.”  In a letter to the American Association of State Highway and Transportation Officials (AASHTO), FHWA concludes that, in light of the amendments to 23 U.S.C. §313, “the application of Buy America cannot be narrowed to exclude utility work, even if such utility work is not reimbursed with Federal-aid highway funds.”  The sole case in which Buy America requirements would not apply to utility work is if such utility work cannot legally be reimbursed by the State.

Under the federal-aid highway program, Buy America applies to iron and steel projects used in federal-aid highway project.  Such products must meet the requirements for being American made, unless their use increases the total project cost by at least 25%, suitable American made products are not reasonably available, or it is not in the public interest.  These determinations or waivers are made by FHWA upon application of the state department of transportation.  Exceptions to the Buy America requirement are closely reviewed and have become increasingly difficult to obtain. 

Prior to the enactment of MAP-21, Buy America only applied to contracts actually funded at least in part with federal-aid highway funds.  Since it is typical that the project described in a NEPA document might be constructed with funds from a variety of sources, this substantially expanded the reach of Buy America provisions.  This is particularly true of utility relocation projects, which might be paid for with state funds or even by the utility by itself.  If such work is eligible for federal assistance, whether or not federal funds are used, Buy America applies.

FHWA’s December 21, 2012 Memorandum

FHWA’s current Buy America policy is based on the statutory provisions in the Surface Transportation Assistance Act of 1982, as implemented with a November 25, 1983, final rule.  The 1983 final rule, along with a 1997 clarifying memo, conclude that Buy America does not apply to all manufactured products; Buy America applies only to components made predominately of steel or iron.  FHWA deems a product to be manufactured predominantly of steel or iron if the product consists of at least 90% steel or iron content when it is delivered to the job site for installation. 

While FHWA’s general policy in this regard has not changed, the primary purpose of the December 21 Memorandum is to explain the change in view of FHWA towards waivers of the Buy America requirements.  Upon passage of the American Recovery and Reinvestment Act in 2009 (ARRA), FHWA formed national review teams to analyze the use of ARRA funding and provide recommendations for improvements.  This analysis brought up some questions, such as, does the scope of the 1983 waiver apply to off-the-shelf products?  FHWA states its concern in the memorandum that a broad reading of the statute to include off-the-shelf products “is not cost-effective to administer.”  However, FHWA ultimately concludes that “the scope of the waiver was intended to encompass miscellaneous steel or iron components and subcomponents that are commonly available as off-the-shelf products such as faucets, door hardware, and light bulbs.” 

This reflects a decision by FHWA that even when purchasing or specifying off-the-shelf iron and steel products for use in projects funded with federal aid highway funds, the state or other grantee must require that such products be manufactured in the United States.  The more expansive reading of the statute is policy based and follows the enactment of MAP-21.  It reflects both the Obama Administration’s focus on strengthening Buy America requirements and the broadening of Buy America in the new statute.  Although the MAP-21 amendment does not address the types of products to which Buy America applies, it clearly reflects a desire by Congress to expand the reach of the statute. 

The December 21 Memorandum may be found at the FHWA website

Conclusion

What does this mean for transportation projects?  Previously contractors could get around the Buy America requirements by splitting up contracts into pieces that would or would not be reimbursed by federal funding depending on whether or not the work involved non-compliant materials.  This work-around is no longer available.  FHWA has made clear that a broader reading of the Buy America requirements will now be followed. 

For additional Buy America information please see the FHWA website.

Edward Kussy co-authored this entry.

Governor Perry Names Houghton to Chair Texas Transportation Commission

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.

TxDOT Names New Executive Director

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.”

Our Mature Northern Cousins - Canadian P3 Practice

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.

Buzz for Knik Arm P3 Project at InfraAmericas Conference

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.
 

IBTTA Presents: Rebuilding America's Interstate Highway System

The International Bridge, Tunnel and Turnpike Association (IBTTA) is hosting a free panel on "Rebuilding America's Interstate Highway System" on June 21 from 8-10:30am ET. The program, which will be held at the Information Technology and Innovation Foundation in Washington, DC, will also be broadcast live over the Internet for those who cannot attend in person.
 
The event targets anyone interested in exploring real solutions to the challenge of funding improvements to interstate highways and other major road systems in America including congressional staff, transportation policy professionals and lobbyists, trade and general media.
 
The presenters include:
 
Moderator: Patrick Jones, Executive Director & CEO, IBTTA – International Bridge, Tunnel and Turnpike Association
 
Presentation: Edward Regan, Executive Vice President, Wilbur Smith Associates
 
EXPERT PANEL
 
Randy Brown, Acting Executive Director, Maryland Transportation Authority
 
George Campbell, Secretary, New Hampshire Department of Transportation
 
Mark Foster, Chief Financial Officer, North Carolina Department of Transportation
 
Frank McCartney, Executive Director, Delaware River Joint Toll Bridge Commission; President, IBTTA – International Bridge, Tunnel and Turnpike Association
 
 
Gregory Whirley, Commissioner, Virginia Department of Transportation
 
 
Register here to attend the event in person (space is limited), or sign up to participate in the live webcast streamed directly through your computer.

Reason Foundation Seeks Transportation Policy Analyst

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.

AASHTO Conference Report on Highway Funding and Finance Released

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

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

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

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

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

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

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

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

 

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

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

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

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

Joint Statement Advises Congress on Ways to Improve Federal Surface Transportation Program

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.

AASHTO Proposes a National Motor Fuels Sales Tax to Replace the Gas Tax

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.

TIGER II Grantees Announced, LA Metro Sole TIFIA Recipient

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

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

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

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

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

FRA Issues More Details on National Rail Plan

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.

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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Karen J. Hedlund named Chief Counsel of the Federal Railroad Administration

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.

A Rest Stop on the Road to the Future

The National Journal Transportation Expert Blog this week asked whether states should be allowed to commercialize rest stops.  I thought this was a timely question, and responded with the following:
 
The upcoming reauthorization will present an excellent opportunity for Congress to rethink its outdated blanket prohibition on the commercialization of state-owned safety rest stops.
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? 
A more nuanced balancing of interests seems overdue.

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.

 

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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Oberstar's Subcommittee Discusses P3s

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

The Future of Interstate Tolling

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.

Another Hurdle for Infrastructure Projects? The White House Draft Guidelines on Greenhouse Gas Emissions

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.

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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Transportation Funding: VMT Gets a Boost From TRB Report

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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GAO Approves PPP Project Mileage/Traffic Inclusion in Federal Funding Formulae

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

FTA Considering New Safety Oversight for Rail Transit

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.

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.