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

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.

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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.

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On December 27, 2012, the Indiana Finance Authority (“IFA”) achieved commercial close of the East End Crossing project in southern Indiana, part of the broader Louisville-Southern Indiana Ohio River Bridges Project.  WVB East End Partners, LLC (“WVB”), is the private counterparty for the East End Crossing project under an availability payment concession, a first for Walsh and VINCI in an equity role in the US P3 market.  The parties reached agreement and executed the public-private agreement before the end of the year as scheduled, capping an extraordinary procurement on an expedited pace, throughout which IFA met each and every interim schedule deadline, making IFA’s East End Crossing procurement among the fastest “P3” procurements in the United States.  Financial close is scheduled for the end of March, 2013. 

WVB East End Partners, LLC is a joint venture consortium of affiliates of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH.  WVB has contracted with the joint venture of Walsh Construction Company and VINCI Construction Grand Projets to design and build the project with Jacobs Engineering Group, Inc. as the project’s lead designer.  Walsh Construction Company was also selected by the Kentucky Transportation Cabinet as the apparent best value bidder for the $900 million Downtown Crossing, Kentucky’s part of the overall Ohio River Bridges Project. 

IFA issued its Request for Qualifications March 9, 2012 shortly after Indianapolis played host to the 2012 Super Bowl, and shortlisted four of six bidder teams on April 20.  All four shortlisted teams submitted conforming proposals on October 26, and WVB was preliminarily selected by IFA on November 16.  With today’s commercial close, IFA successfully conducted a procurement from shortlisting to contract execution in less than nine months.

Barney Allison co-authored this entry.

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The 20th annual conference of The Canadian Council of Public-Private Partnerships (CCPPP) was held in Toronto on November 26-27, 2012.  Drawing industry leaders from within and outside of Canada, the conference this year reflected the maturity of the Canadian market and the interest of P3 players looking beyond its borders for future opportunities, particularly participating in the growing U.S. P3 market. 

One of the keynote speakers was Michigan Governor Rick Snyder, who championed the proposed $3.5 billion Detroit-Windsor bridge and expressed appreciation for Canada’s leadership on the proposed project and in the P3 sector generally.  With the Canadian government indicating that it will take the lead in procuring and financing the project, Governor Snyder stated that he hopes to see the project come to market within the next couple of years.

A well-attended session discussed recently closed US P3 projects:  California’s Presidio Parkway Project (awarded to a Hochtief consortium in 2011); Florida’s I-595 Project (awarded to an ACS consortium in 2009); and Denver’s Eagle Project (awarded to a Fluor consortium in 2010).  The panelists discussed the complexity of bringing these projects to financial close and US-specific issues.

Many attendees felt that, while the Canadian P3 market continues to generate a steady pipeline of P3 projects, the US infrastructure market is well-poised to attract many of the seasoned Canadian P3 players.  SNC-Lavalin, an experienced Canadian P3 developer, was recently shortlisted and submitted a bid on the East End Crossing Project.  Other seasoned Canadian P3 participants, such as Bilfinger Berger and Hochtief, were also members of shortlisted consortia for the project, and the Presidio Parkway Project was awarded to Hochtief.  Canadian P3 players have also expressed interest in potential upcoming P3 projects such as Los Angeles County Metropolitan Transportation Authority’s Accelerated Regional Transportation Improvements Project and the Travis Country Courthouse project in Texas. 

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On November 16, 2012, the Indiana Finance Authority (“IFA”) selected WVB East End Partners (“WVB”) as the “Preferred Proposer” for IFA’s East End Crossing project in southern Indiana.  WVB East End Partners is a joint venture consortium of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH, partnering with Walsh Construction Company and VINCI Construction Grand Projets as the builders, with Jacobs Engineering Group, Inc. as the designer, and with others.  VINCI Concessions S.A.S. will be performing the operations and maintenance of the East End Crossing for the thirty-five year term.

The East End Crossing is one component of a larger, bi-state project that has been in the planning and development stage for almost ten years.  The Louisville-Southern Indiana Ohio River Bridges Project (or “ORB”) spans the Ohio River in two places, and Indiana and its neighbor to the south, the Commonwealth of Kentucky, split the project in half.  Thus, the ORB is a tale of two bridges, each state responsible for one, but working cooperatively to achieve completion of both.

“One Project; Two Procurements”

On March 5, 2012, Indiana Governor Mitch Daniels and Kentucky Governor Steve Beshear met and decided on a “one project, two procurements” strategy.  Indiana was to handle the East End Crossing (a bridge, tunnel and associate roadway project eight miles east of the present Kennedy Bridge between Louisville and Southern Indiana).  Kentucky was to handle the Downtown Crossing (refurbishment of the Kennedy Bridge, addition of a second span, and associated roadway improvements).  Each would share 50/50 in the gross toll revenues generated by the two projects; toll revenues would be collected by a single toll systems operator for each project. 

What followed the March 5 memorandum of understanding was an historic bi-state development agreement that fleshed out how this understanding would turn into the ORB.  The “bi-state” mapped out parallel, separately handled procurements of each state’s part of the ORB and the involvement of each state in the other’s procurement.  The bi-state agreement also established an approach to ownership of the right of way for each project so as to enable each state to allow its contractor to perform work in the other state.

Kentucky elected a conventional design-build contract procurement, with the Commonwealth handling the financing of its project.  Indiana pursued an innovative availability payment public-private partnership, leaving the financing to the winning proposer.  Each state was offered the right to review and approve the technical plans and specifications for the portion of each project to be built and operated in that state.

Eight short months later, Kentucky held a public bid opening, selecting Walsh Construction Company as its apparent best value bidder.  Less than twenty-four hours later, Indiana, through IFA and in very close coordination with the Indiana Department of Transportation (“INDOT”), announced WVB as its preferred proposer and anticipated counterparty in a public-private partnership.  Walsh Construction Company is part of WVB, and through two, separated and distinct procurements, will be involved in the entire ORB.

The “one project, two states” approach aligned both states in a collective effort to address a growing need for additional cross-river transportation in the greater Louisville-Southern Indiana region, which is presently hampered by significant traffic congestion on the existing Kennedy Bridge and within its interchange and connecting roadways.  And now, one major infrastructure project will be the product of two innovative solutions.

About the ORB

The ORB is a construction, reconstruction, and rehabilitation project to address demand for remedying inadequate and inefficient cross-river mobility for existing, planned and expected population growth in downtown Louisville and Southern Indiana counties. 

When completed, the ORB will improve connecting roadways and provide two new toll bridges across the Ohio River.  Kentucky’s Downtown Crossing will deliver the new “Downtown Bridge” –  carrying I-65, upstream on the Ohio River from the existing Kennedy Bridge.  The East End Crossing builds a new bridge connecting I-265/KY 841 (the “Gene Snyder Freeway”) with S.R. 265 (the “Lee Hamilton Highway”) in Indiana.  The ORB also features several multi-modal improvements to increase transportation choices for area residents, including enhanced bus service and pedestrian and bicycle trails and pathways.

Indiana and Kentucky plan to see both bridges open as early as late Fall, 2016.

John Smolen co-authored this entry.
 

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On November 16, 2012, the board of the Indiana Finance Authority (“IFA”), with Governor Daniels in attendance, based on the recommendation of Kendra York, IFA’s Public Finance Director, approved the preliminary selection of WVB East End Partners as the preferred proposer for the East End Crossing project, Indiana’s second foray into public-private partnerships as a solution to infrastructure planning for the State.  The East End Crossing is Indiana’s part of the Louisville-Southern Indiana Ohio River Bridges Project (the “ORB Project”).  WVB East End Partners is a joint venture consortium of Walsh Investors, LLC, VINCI Concessions S.A.S. and Bilfinger Berger PI International Holding GmbH.  The WVB East End Partners consortium proposes to contract with Walsh Construction Company and VINCI Construction Grand Projets as the builders, with Jacobs Engineering Group, Inc. as the lead designer.  VINCI Concessions S.A.S. will be performing the operations and maintenance of the East End Crossing for the thirty-five year operating term.  Ms. York made the announcement at the historic Indiana Repertory Theater in downtown Indianapolis.  Governor Daniels applauded the efforts of the proposer teams, emphasizing the success of several recent Indiana infrastructure projects, benefits of this project to the citizens of the State of Indiana and the Commonwealth of Kentucky. 

In early March 2012, Governor Daniels and Kentucky Governor Steve Beshear signed a memorandum of understanding regarding the roles and responsibilities of each state in the “Ohio River Bridges Project,” of which the East End Crossing is one part.  A week later, IFA issued a request for qualifications to develop, build, finance, operate, and maintain the East End Crossing under an availability payment concession structure.  From release of the “RFQ” to the short-listing of four bidders, to submission of proposals by all four bidders, the procurement proceeded at a record pace of less than eight months.  Governor Daniels specifically cited the rapid pace, resulting in a preferred proposer who offered a bid both under budget and ahead of schedule, as a success for public procurements and public-private partnerships. 

The WVB consortium proposed maximum availability payments for the term of $32.9 million (2012 dollars) per year.  Their proposal offered a construction price of $764 million, with planned substantial completion of the project by Halloween, 2016 – almost nine months prior to the date that the Indiana Department of Transportation had specified.  IFA plans to execute the public-private (“P3”) agreement in mid-to-late December.  Financial closing for the consortium is anticipated in late March, 2013. 

Stay tuned for more about the success of this bi-state cooperative effort.

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