Jobs Want to Go Where the Railroads Are

On April 24, 2013, Norfolk Southern (“NS”) CEO Wick Moorman spoke before the US House of Representatives Transportation Infrastructure Committee’s Special Panel on 21st Century Freight Transportation about the need to focus on long-term investments in railroad infrastructure.  The NS CEO stated that “In the past decade Norfolk Southern helped locate 1,021 new and expanded facilities along Norfolk Southern rail lines, representing $28.7 billion in customer investment and generating more than 48,000 jobs. That’s just one railroad. What an incredible incentive to support railroads everywhere.”

Moorman stated that privately-owned railroads serve as both “a barometer of the economy” as well as “an essential element in solving the country’s freight transportation problem.” Moorman called for specific action from the federal government to aid private railroads in their indispensible function. First, the government must support and not hinder private railroad’s ability to invest and gain returns on investment in their own infrastructure.  Second, the government must put the economy on sound footing. Third, the government must find sensible ways to allow private sector and partners invest in railroad projects. 

Moorman’s full comments may be found at the Norfolk Southern website (PDF).

FHWA Holds P3 Model Contract "Listening Sessions" and Beta-tests "P-3 VALUE Toolkit"

As part of its effort to meet MAP-21’s legislative requirement to develop “standard public-private partnership transaction model contracts for the most popular types of public-private partnerships,” the Federal Highway Administration held a “listening session” with representatives from the transportation industry at the U.S. Department of Transportation in Washington D.C. on January 16.  Representatives from state departments of transportation, general contractors, trade associations, legal advisors and others were in attendance, and solicited to provide FHWA with the P3 community’s view of what the model contracts should be. 

In her introductory remarks, the Hon. Beth Osborne, Deputy Assistant Secretary of Transportation for Policy, saw the effort as “compiling best practices” of the P3 community, but one for which FHWA did not have “pre-conceived notions.”  FHWA and USDOT representatives spent the better part of four hours hearing out the industry’s hopes for, expectations about and cautionary recommendations regarding FHWA’s final product.  The resounding theme of the audience comments was that “every P3 is different,” FHWA’s effort should tilt toward educating public sponsors as to the project-specific risk-sharing and “value-for-money” considerations that makes a P3 an effective delivery tool, and FHWA should refrain from prescribing risk allocations or other contract terms.

In a companion effort, FHWA is also beta-testing an interactive model, which intends both to help educate public sponsors in alternative procurement strategies (like the public-private partnership (“P3”)) “apples to apples” comparison with conventional procurements).  The “P3-VALUE Toolkit” collects project sponsors’ (and their consultants’) project-specific risks, quantifies their value, and, with other financing assumptions and project-specific parameters considered, produces a snapshot of the value-for-money that a P3 strategy may or may not present for that project.  FHWA held an initial roll-out “webinar” of the draft toolkit on January 10, with a follow-up webinar session on January 24.

FHWA has set up a docket, Federal Register No. FHWA-2012-0126, to collect industry comments by May 31, to keep pace with the rigorous requirement of MAP-21 to produce and promulgate model contracts by December 31, 2013.

Fred Kessler co-authored this entry.

Design-Build Transportation Projects Face Roadblocks in California

Over the past 10 years, California lawmakers have made tremendous strides in providing express design-build procurement authority to pubic agencies in the state. This authority, however, has not been applied evenly across all project types or agencies.

As matters stand in 2011, much broader design-build authority exists for public buildings or “vertical” projects than for transportation or “horizontal” projects.  Within the realm of horizontal projects, projects on the state highway system are subject to a number of constraints that do not apply to other types of projects.  And the express authority provided to a limited number of agencies under California’s Design-Build Demonstration Program and Design-Build Transit law is temporary and set to expire within the next decade.  In general, most public agencies still face an uphill battle if they wish to use design-build for transportation projects.

To reap the full benefits of design-build, the California Legislature would be well-advised to adopt permanent, general legislation that allows public agencies to use design-build on a wider range of projects, leaving the details of the procurement to be determined by the agencies as appropriate for their needs. 

See Nossaman’s article "California Public Contracting Laws: Design Build Authority for Transportation Projects" for more information on California’s most recently enacted transportation-specific design-build laws and on options available to public agencies who do not have express design-build authority but may nonetheless wish to combine design and construction services under a single contract for a transportation project.

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.

Transportation For America's Review of Deficient Bridges

We all know that our infrastructure is aging.  Considering how hot the issue of transportation funding (or lack thereof) has become, it is almost impossible not to see or hear something on this topic daily.  That being said, Transportation for America has provided a new way for us to fixate on the state of disrepair of our nation’s bridges – an interactive map. 

The map is color-coded and uses green to mark states that are more-or-less maintaining their bridges.  A special hats off to Florida and Nevada, which rank 50th and 51st respectively in the list of disrepair.  In contrast, the map uses a deep, ominous red – something akin to a scarlet letter - to mark states whose transportation dollars just aren’t going far enough.  Pennsylvania and Oklahoma get the dubious honor of being coded red, with 26.5% and 22.0% of their bridges being deficient respectively.

Once you have taken a look at how the states stack up against each other, you may want to click on the “Near You” button above the map.  This allows you to insert any address and locate deficient bridges within a 10-mile radius.  Depending on where you look, this can be relatively shocking.

Whether you are looking at the interactive map or using the “Near You” function, you should note that if you scroll down Transportation for America has provided a more detailed chart showing the percent of bridge traffic going over deficient bridges.  This twist on the information can be quite interesting.  For example, though California is only in 18th place on the overall list of deficient bridges, the chart shows that California has the 3rd highest rate of total bridge traffic going over deficient bridges (indicating that California’s deficient bridges are in high demand).

First Runner-Up in Latest Round of High-Speed Rail Funding - The Midwest

As discussed in yesterday's post on California, three big winners have emerged from the U.S. Department of Transportation’s announcement of $2 billion in federal funds to 15 states for 22 different high-speed and intercity passenger rail projects.  The second biggest winner of this funding round is the Midwest region.

Illinois received $186 million for upgrades and improvements to the Chicago – St. Louis corridor between Dwight and Joliet, Ill., to allow trains to operate at 110 mph (from 79 mph) and increase operational flexibility and reliability.  Also on the Chicago – St. Louis corridor, Missouri received $13.5 million for design work on a new span to replace the circa-1890 Merchant’s Bridge over the Mississippi River.

Michigan received $196 million for track rehabilitation and positive train control implementation along the Chicago – Detroit corridor between Kalamazoo and Dearborn, which will allow trains to travel at 110 mph for 235 miles.  Michigan also received $2.8 million for preliminary engineering and environmental work on a new high-speed rail station in Ann Arbor, Mich.

Michigan Gov. Rick Snyder welcomed the news, stating that an “investment of this magnitude can spur economic development in our communities with rail stations, and provide access to a 21st century rail system that will help Michigan citizens compete in a global economy.”

In addition to the funds for track work, Illinois, Indiana, Iowa, Michigan and Missouri received $268 million for the purchase of 48 passenger rail cars and seven locomotives for eight separate intercity rail corridors.  The new bi-level cars replace aging and obsolete Amtrak equipment and can travel at speeds up to 125 mph.

All told, yesterday Midwestern states received approximately $657 million of the $2 billion in federal funds redistributed from the canceled Florida high-speed rail project.

"This is a big deal," said Transportation Secretary Ray LaHood. "America's ready for high-speed rail. Nothing can stand in the way of it. We're going to create a huge economic corridor between Chicago and Detroit and beyond."

The federally-designated Chicago Hub Network envisions mostly incremental upgrades to increase speeds of existing passenger rail service on a variety of rail lines radiating from Chicago, including service to St. Louis, Detroit, Milwaukee, Indianapolis, Des Moines, Cleveland, and Minneapolis.  While newly installed governors in Wisconsin and Ohio have rejected federal funds over concerns about operating subsidies and cost overruns, states like Illinois and Michigan have welcomed the passenger rail funding.  Total federal funds now awarded to Midwestern states for high-speed and intercity passenger rail include nearly $1.5 billion for Illinois, $400 million for Michigan, $230 million for Iowa, and $71 million for Indiana.

Kevin M. Sheys also contributed to this post.
 

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.

Railroad Infrastructure Veteran Kevin Sheys Joins Nossaman as Partner

Kevin M. Sheys joins Nossaman's Infrastructure Practice Group as a partner.  He brings expertise in all areas of railroad transportation, including all aspects of the rail industry, both freight and passenger.  His extensive experience includes successfully representing government entities in railroad construction and relocation projects, advising states and transportation agencies in publicly-funded passenger rail service expansions and infrastructure projects, assisting buyers and sellers in rail line transactions, and counseling clients on a wide range of rail regulatory issues.

Kevin has represented a wide variety of railroad-related entities including:

  • Commuter railroads
  • State sponsors of intercity passenger service
  • Short line and regional freight railroads
  • Public transit agencies
  • Transportation industry contractors and equipment suppliers
  • Ports and other industrial and transportation facility operators

Kevin will be based in the Nossaman's Washington, DC office and work nationally.  He
can be reached at 202.887.1420 or ksheys@nossaman.com.

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.

California High-Speed Rail Authority Seeks Regional Director

Indicative of the progress and forward momentum of the project, the California High-Speed Rail Authority is hiring.  The executive management team is expanding as the project makes advancements such as the recent award of $2.25 billion in federal grants.  With newly appointed CEO Roelof Van Ark at the helm, the Authority is seeking a Regional Director for Southern California to add to the team.

As described in the full position dossier (PDF), “The Regional Director is responsible for ensuring the high-speed train project in Southern California continues forward on the planned schedule and budget by developing and maintaining relationships with local residents, policy makers and Authority consultants and by building strategies for communicating with local advocates to foster their continued involvement and support.”

The voter approved 800-mile-long high-speed train system will connect California’s major cities between San Diego, San Francisco, and Sacramento and it will be the first of its kind in the nation.

Interested parties should contact Stuart Satow of CPS Executive Search at 916.263.1401 or resumes@cps.ca.gov.