GAO Report Critiques FTA’s Failure to Implement MAP-21 and FAST Act Mandates

A new Government Accounting Office report says the Federal Transit Administration has failed to meet three statutory requirements (two from MAP-21 and one from the FAST Act) related to the Capital Investments Grant program, the primary source of federal funding for commuter, light rail, subway, ferry and bus rapid transit projects.  FTA says it has no plans to do so.

GAO says FTA has not issued regulations for rating Core Capacity Improvement projects; established a grant program for simultaneous development of multiple transit projects; or implemented a pilot program for fast-track transit project approval.

These are not trivial matters.  Core Capacity Improvement projects are investments in existing commuter, light rail, subway, ferry and BRT systems designed to increase corridor capacity, so a rating system could ensure that the best projects get funding.  A grant program for simultaneous development of multiple transit projects (aka, a “program of interrelated projects”) could help transit systems in fast-growing cities deliver multiple, complementary projects more efficiently.  Implementation of a pilot program for fast-track transit project approval, a FAST Act mandate, would facilitate faster clearance and funding of capital grants.

FTA told GAO they had no immediate plans to advance any of these requirements, in part because the Trump Administration has proposed to phase out the Capital Investments grant program. GAO notes that the FY2018 omnibus spending bill appropriated $2.6 billion and “required FTA to continue to administer the program in accordance with the procedural and substantive requirements specified in statute.” This, by the way, is as pointed as GAO gets.

Even recognizing the other important work of the agency, I am surprised FTA is not moving to implement these statutory requirements.  FTA might be missing an opportunity to make the Capital Investments Grant program better, stronger and faster, which would do a lot to ensure the program’s survival.

New Federal Transit Administration Rule Seeks to Remove Barriers to P3s

In an effort to promote project flexibility, funding innovation, efficiencies and timely implementation, this week the Federal Transit Administration (FTA) released its final rule regarding P3s (and other private involvement) in public transportation projects.

The “primary goal” of FTA’s “Private Investment Project Procedures” (or “PIPP”), new 49 C.F.R. Part 650, is to “identify and address” FTA requirements that are “impediments to the greater use of public-private partnerships and private investment in public transportation capital projects, while protecting the public interest and any public investment in such projects.”  This new FTA rule was promulgated under authority granted under 2012’s MAP-21 Act.[1]

MAP-21 directed the U.S. Secretary of Transportation to develop policies that promote public understanding of the role of private investment in public transportation and to coordinate private sector participation in delivery of public transportation services.  The mandate was then, among other things, to identify and address impediments to “greater use” of P3 delivery and “private investment in public transportation projects.”[2]

FTA elected a strategy to set out special procedures outlined in the PIPP by which project sponsors may petition for modification to some federal, non-statutory requirements that pose the impediments described just above, not unlike the Federal Highway Administration’s strategy via SEP-15 authority.  Put another way, FTA wants to encourage modifications to these federal requirements that will “accelerate the project development process, attract private investment and lead to increased project management flexibility, more innovation, improved efficiency, and/or new revenue streams.”[3]  FTA is not trying to change the rules themselves.  Rather, it is using a flexibility strategy that lends itself to project-specific sensitivity.

Sponsors may not, however, seek to modify or waive NEPA requirements or statutory requirements, as this is outside FTA’s statutory authority under MAP-21.[4]

PIPP pertains only to public transportation projects that intend to involve private sector investment or developers – essentially P3 public transportation in specific forms.  PIPP defines P3 broadly as “a contractual agreement formed between a public agency and a private sector entity that is characterized by private sector investment and risk-sharing in the delivery, financing and operation of a project.”[5]  PIPP outlines an application process and the factors with respect to any eligible project[6] that the sponsor must demonstrate to FTA in order for FTA to consider waiving or modifying its non-statutory, non-NEPA requirement.[7]  The factors[8] are essentially whether the waiver or modification:

  • Would remove an impediment or “discouragement” to use of P3 (joint development or private sector investment);
  • Would encourage use of P3 (joint development or private sector investment);
  • Likely private sector investment or risk transfer “warrants” modification/waiver; and
  • Still protects the public interest and public investment in the project.

Project sponsors retain post-waiver/modification reporting responsibilities.  Central to the application is “evidence of committed financing,” including private sector investment, but FTA seeks further comment as to whether this is feasible at the time of the application – a chicken-and-egg issue.  Public comment to the final rule is invited, so further changes to PIPP may be forthcoming.

PIPP is largely unchanged from the July 31, 2017 proposed rulemaking.  PIPP outlines substantive changes, largely relating to project identification in long-term planning and other administrative matters regarding applications.

FTA’s move here fulfills the MAP-21 requirements but also is consistent with the Executive Branch’s “roadmap” for infrastructure, released in February, itself a principled extension and proposed implementation of MAP-21’s subsequent transportation bill, 2015’s “Fixing America’s Surface Transportation (FAST) Act.”[9]  Specifically, the PIPP supports the proposal’s key principle that project sponsors are to prioritize projects and make investment decisions. The natural extension through PIPP is to identify, and propose to remove, impediments to private investment via P3.

[1] Nossaman’s 2012 blog and more information on the then-remaining challenges to P3s that MAP-21 retained can be found here.

[2] P.L. 112-141 § 20013(b); see 49 U.S.C. § 5315.

[3] FTA-drafted Executive Summary of PIPP.

[4] 49 C.F.R. § 650.13

[5] 49 C.F.R. § 650.5

[6] Defined at 49 C.F.R. § 650.5 as “any surface transportation capital project that is subject to 49 U.S.C. ch. 53 [public transportation projects] and that will be implemented as a public-private partnership, a joint development, or with other private sector investment.”  See 49 C.F.R. § 650.5 for other relevant definitions.

[7] See 49 C.F.R. § 650, Subparts B and D.

[8] 49 C.F.R. § 650.11(b)(1) to (4).

[9] https://www.infrainsightblog.com/2018/02/articles/news/white-house-releases-roadmap-for-nations-infrastructure-congress-takes-the-wheel/

FRA Releases Latest Railroad Progress Report as PTC Deadline Looms

As the December 31, 2018 deadline approaches for freight, passenger, and commuter railroads to implement Positive Train Control (“PTC”), the Federal Railroad Administration (“FRA”) is reporting on the progress of individual railroads in complying with the mandate.

In 2008, Congress passed the Rail Safety Improvement Act and mandated that certain railroads carrying passengers or hazardous materials are required to install PTC.  The FRA describes PTC as a “communication-based/processor-based train control technology” designed to prevent “train-to-train collisions, overspeed derailments, incursions into established work zone limits, and the movement of a train through a main line switch in the wrong position.”

Congress initially established December 31, 2015 as the deadline for railroads to implement PTC, but later extended the deadline to December 31, 2018.[1]  Railroads may receive an additional extension of time to comply if the following statutorily mandated criteria are satisfied: all PTC hardware is installed, all necessary spectrum is acquired, all relevant personnel are trained, a revised PTC Implementation Plan is submitted to FRA, and the railroad has made sufficient progress on Revenue Service Demonstration.[2]

The FRA report of railroad PTC progress is collected from the railroads Quarterly PTC Progress Reports and FRA’s latest data is current up to the first quarter of 2018.  In this latest update, the FRA is reporting:

  • Railroad Progress Towards Meeting Statutory Criteria for an Alternative Schedule (i.e., extension)
  • Latest PTC Implementation Status By Railroad
  • PTC Implementation Status By Freight and Passenger Rail

This latest railroad status report is located on FRA’s Positive Train Control website.

[1] Positive Train Control Enforcement and Implementation Act of 2015, Pub. L. 114-73, § 1302, 129 Stat.  568, 576 (2015).
[2] 49 U.S.C. 20157 (a)(3)(B).

Senator Highlights Concerns Regarding Freight Train Interference of Amtrak Passenger Trains

The U.S. Senate Committee on Commerce, Science, & Transportation (“Commerce Committee”) recently held a nomination hearing to fill two vacancies on the Surface Transportation Board (“STB”), the economic regulator of railroads.  The nomination hearing of Patrick Fuchs and Michelle Schultz provided Senators with a venue to vent concerns related to the U.S. rail system.  In particular, Senator Wicker (R-MS) voiced concern over freight train interference of Amtrak passenger trains.

Congress created Amtrak in 1970 to relieve freight railroads of their responsibility to provide intercity passenger rail service.  In exchange, Congress required the freight railroads to permit Amtrak to have access to their rail lines.[1]  In 1973, Congress codified the requirement to give Amtrak trains “preference” over freight trains.  Under federal law, “Amtrak has preference over freight transportation in using a rail line, junction, or crossing.”[2]

In the Commerce Committee hearing, Senator Wicker prefaced his questions to the nominees with a monologue about Amtrak’s right to proceed ahead of freight traffic when Amtrak and a freight train converge at the same time.  Senator Wicker explained that under the current legislative framework, “Amtrak has preference over freight transportation in using a rail line.”  But, he  expressed concern that the law is not stringently followed – “in reality freight railroads have consistently denied such preference to Amtrak, in fact only 47% of long distance [passenger] trains were on-time at stations in FY 2017 and this is largely attributable to freight’s refusing to provide preference to passenger rail.”

See Senator Wicker’s statement here: (skip to 1:14:20 – 1:15:16)

At this time, preference can only be enforced through U.S. Department of Justice action.[3]  The STB’s authority to hear on-time performance complaints relating to preference is in question after a decision at the 8th Circuit and a series of decisions in the D.C. Circuit.[4]  Amtrak has asked Congress to provide it with a private right of action to enforce its statutory preference rights.[5]

[1] Rail Passenger Service Act of 1970, P.L. 91-518, 84 Stat. 1334 – 35 (Oct. 30, 1970).
[2] Amtrak Improvement Act of 1973, P.L. 93-146, 87 Stat. 552 (Nov. 3, 1973).
[3] 49 U.S.C. § 24103.
[4] See Union Pac. R.R. Co. v. Surface Transp. Bd., 863 F.3d 816 (8th Cir. Feb. 8, 2017); Assoc. of American R.R. v. Dept. of Transp., et al., No. 11-1499 (JEB) (D.D.C. Mar. 23, 2017)
[5] Rail Safety and Infrastructure-Stakeholder Perspectives: Hearing Before Comm. of Approp. Subcomm. on Transp., Housing, and Urban Development, and Related Agencies, 115 Cong. (2018)(testimony of Stephen Gardner, Executive VP & CCO, Amtrak). Available here.

Commercial Close Achieved for the Automated People Mover (APM) Project at LAX

The Automated People Mover (APM) train system project at Los Angeles International Airport (LAX) reached a remarkable milestone this week with Los Angeles City Council’s unanimous approval of a $4.9 billion agreement with  LAX Integrated Express Solutions (LINXS).

With City Council’s approval in hand, the City, acting through the Los Angeles World Airports (LAWA) Board of Airport Commissioners (BOAC), and LINXS reached commercial close on April 11th, signing the project agreement. LINXS will now proceed to obtain private financing for the project, and financial close is expected in mid-June.

Courtesy of LAWA

The agreement provides that LINXS (Developer) will design, build and partially finance the APM system, and then operate and maintain the APM system over a 25 year period.  LAWA will make milestone payments to LINXS during construction. Once the APM system is available for passenger service, LAWA will make “availability payments” to LINXS, which may be adjusted downward if the APM system does not meet specified availability and performance requirements.  LAWA’s APM is the first APM system to be procured through an availability payment P3 delivery model.

LINXS is the proposer that LAWA selected in January 2018 through LAWA’s comprehensive APM procurement process.  LINXS is comprised of ACS Infrastructure Development, Balfour Beatty, Bombardier Transportation, Fluor and HOCHTIEF PPP Solutions.

The APM system will include six stations and up to 9 electric powered trains, each with four cars, in simultaneous operation.  The APM trains will travel on an elevated 2.25-mile long guideway, easing access into and out of the second largest airport in the United States (LAX) and connecting travelers to LA Metro’s Crenshaw Light Rail Line, intermodal transportation facilities and a consolidated rental car center.

Northern Lights Express Proposed Passenger Rail Service Receives Federal Environmental Approval

Courtesy of the Minnesota Department of Transportation

The Northern Lights Express intercity rail proposal, connecting Minneapolis and Duluth, Minnesota with a stop in Superior, Wisconsin, advanced forward following a Finding of No Significant Impact (“FONSI”) from the Federal Railroad Administration (“FRA”).  The FRA’s decision found that the proposed rail project would not have any significant environmental impacts and allows the project to advance beyond the environmental phase.

Project proponents envision a rail service connecting six stations operating across existing BNSF Railway track.  The Northern Lights Express trains would travel at 90 miles per hour over 152 miles.  The new rail service would operate four round trips per day.  The majority of the track is in Minnesota, but 23 miles will cross Wisconsin.

The project would require construction of 42 miles of mainline and sidings to permit the Northern Lights Express passenger trains to share the corridor with BNSF Railway’s freight trains.  In order to accommodate higher passenger train speeds, the project requires rehabilitating the existing rail line, which will require new turnouts, crossovers, and improving the ballast.

The FRA, acting as the lead federal agency, provided $5 million in grant funding and the Minnesota DOT provided $3 million for the environmental analysis, preliminary engineering, service development, and financial management plan.   Although, FRA’s issuance of a FONSI is a significant step forward for the project, funding for the final design and construction has so far not been identified.

Contract Awarded for GO Transit Improvements in Scarborough and Unionville

Infrastructure Ontario and Metrolinx have awarded a fixed-price design-build-finance $245.5 million contract to upgrade Agincourt, Milliken, and Unionville GO stations on the Stouffville GO corridor.  The winning bidder, EllisDon Transit Infrastructure (EDTI), will deliver the project using Infrastructure Ontario’s Alternative Financing and Procurement model.  EllisDon constituents will provide financing and construction while WSP / MMM Group will be in charge of the design.  The project includes upgrades to tracks, platforms with canopies, new pedestrian connections, and new amenities at the three stations.

The scope of work also includes a new grade separation with a railway overpass bridge at Steeles Avenue.  Design work is expected to begin this month, with construction beginning in September 2018 and substantial completion planned for December 2020.

                                      The Stouffville Corridor Stations Improvement project is part of the larger GO Regional Express Rail (RER) program, one of the largest transit infrastructure investments in North America.  The Province of Ontario is investing $21.3 billion to transform the GO Transit Network from a commuter transit system to a regional rapid transit system, with electrified service on core segments, across the Greater Toronto and Hamilton Area over the next decade.  The number of weekly trips across the entire GO rail network is projected to grow from 1,500 to 6,000 by 2024-2025.

White House Releases Roadmap for Nation’s Infrastructure; Congress Takes the Wheel

The White House released its long-awaited infrastructure proposal to Congress this morning, along with the President’s fiscal year 2019 budget proposal. While elements have been hinted at and leaked before, the 55-page document released today provides significant new details. Though the Administration began to advance discrete priorities by executive action this past year, this broad proposal will require legislation. The Administration has opted to leave to Congress the drafting of the bill, just as it did with tax reform.

The White House proposal includes:

  • Creation of new federal infrastructure programs that (1) incentivize project sponsors to secure new revenue and deliver projects more efficiently, (2) provide funds for innovative and transformative projects, (3) encourage investment in rural communities, and (4) increase the capacity of federal loan programs.
  • Providing more control to state and local project sponsors to prioritize projects and make investment decisions.
  • Elimination of the transportation and state volume caps on Private Activity Bonds and expansion of eligible asset classes.
  • Expansion of TIFIA eligibility to include airports and maritime and inland ports.
  • Removal of federal tolling limitations on the Interstate System.
  • Conditioning federal transit funds for major capital projects on the use of value capture financing.
  • Reducing the federal environmental review and permitting timeline for infrastructure projects to two years.
  • Expansion of federal workforce training programs.

An official summary of the proposal can be found here. The White House infrastructure proposal requests that Congress allocate $200 billion in new federal spending over the next ten years, estimating that will generate an additional $1.5 trillion in total infrastructure investment through state and local revenue measures such as those recently passed in Los Angeles, Austin, Seattle, and Wyoming.

While the White House does not specify how Congress should fund or offset the $200 billion in additional infrastructure spending, its accompanying 2019 budget proposal will generate significant controversy regarding transportation, recommending a significant reduction in federal spending for Amtrak and transit capital projects and proposing that outlays from the Highway Trust Fund be aligned with receipts (which, according to the latest Congressional Budget Office estimate, would begin to result in reduced outlays for existing programs beginning in 2021).

Will this prove to be a negotiating position, encouraging Congress to offer up alternative sources of funding to avoid these draconian cuts? Indeed, a senior White House official noted recently that $200 billion in additional federal spending is the minimum and that the final number may well rise significantly once Congress begins its consideration of the infrastructure proposal.

A key indicator for the infrastructure proposal’s success on Capitol Hill will be whether congressional negotiators start from the premise that any new infrastructure legislation must supplement, and not replace, existing federal spending. There is a fear that if this proposal replaces existing programs, it would actually be a policy regression, devolving responsibility for critical infrastructure development to the states, instead of asserting the importance of the federal role in partnering with state and local project sponsors.

The bottom line is that governments at all levels—federal, state, and local—are not spending enough to keep up with the nation’s infrastructure backlog, let alone modernize the physical backbone of our economy. Given the scarcity of infrastructure funds, any new infrastructure initiative must supplement existing programs instead of cutting or replacing them. Therefore, using new federal infrastructure funding as a carrot to incentivize increased investment at the state and local levels is a realistic policy goal.

This is not a new idea. Congress included in the Fixing America’s Surface Transportation (FAST) Act seed money to leverage non-federal dollars for projects of national or regional significance. The Administration’s funding notice for the FAST Act program essentially serves as a pilot program for the incentive concept included in today’s proposal.

In taking these ideas from concept to reality, the House will be led by Transportation and Infrastructure Committee Chairman Bill Shuster. The retiring Shuster will be unbound by reelection pressures and has a track record of working effectively across party lines. In the Senate, multiple committees with overlapping jurisdictions will likely be involved, including the Commerce Committee, led by Republican Conference Chairman John Thune, the Environment and Public Works Committee, led by Republican Policy Committee Chairman John Barrasso, and the Banking and Finance Committees.

By all accounts, Congress intends to tackle the Herculean task of sustainably resolving the Highway Trust Fund’s systemic insolvency. Not tackled purposefully in over twenty-five years, Chairman Shuster has made this a priority, and Transportation and Infrastructure Committee Ranking Member Peter DeFazio has long been a champion for additional revenue and laid out a number of potential options in a recent white paper distributed at the House Democratic Retreat.

The mere fact that so much political attention is now focused on infrastructure investment—from both parties, in both Chambers, and from the Administration—makes this a rare moment in time. Proposing a massive infrastructure investment outside of the normal transportation authorization process allows policymakers the luxury of thinking about what long-term federal infrastructure policy ought to be, absent the constraints of existing program implementation. For this reason, the White House infrastructure proposal represents an historic opportunity to bring the nation’s infrastructure into the twenty-first century. It is essential that all stakeholders seize this opportunity for shaping a bipartisan initiative that will incentivize permanent paradigm shifts and lasting positive outcomes.

We will be posting additional analysis and updates in the coming weeks, so stay tuned!

 

A Path to Federal P3s for Infrastructure? ABA Subcommittee Suggests Changes to OMB Budgetary Scoring

Much has been said already about President Trump’s call to “rebuild our crumbling infrastructure,” in his first State of the Union address. The President asked Congress to advance a $1.5 trillion infrastructure plan that, in part, should be “leveraged by partnering with state and local governments and, where appropriate, tapping into private sector investment.”

But not all “crumbling infrastructure” is state and local infrastructure. The federal government’s infrastructure also needs attention (e.g., river locks, some dams and levees, federal buildings, etc.). In late January of this year, a purported summary of President Trump’s infrastructure “funding principles” briefly described two strategies for funding federal infrastructure: a planned executive order allowing for disposal of federal assets and creation of a federal capital financing revolving fund, presumably to help federal agencies finance their improvements.

Notably absent among these “funding principles” is availability of the P3 delivery strategy for federal assets. The likely reason is a remaining federal barrier: the need to change the federal Office of Management and Budget’s (OMB) relevant scorekeeping guidelines when evaluating a large-scale, federal capital project.

Scorekeeping guidelines measure the budget effects of a proposed federal contract relative to the contracting agency’s budget authority. For federal obligations under federal projects involving private capital, OMB Circular A-11 requires that all of any long-term obligation be “scored” in the first fiscal year, rather than in each fiscal year of the obligation. A fundamental, favorable risk allocation under many P3 structures is to contract for design and construction, but also to shift associated capital costs, to a private partner in exchange for the promise of repayments and a return over time. By scoring all such payments in the first year, the federal entity cannot realize this benefit of a P3.

On the same day as the State of the Union address, an American Bar Association committee published a white paper, titled “The Crisis in the Federal Government’s Infrastructure: Additional Approaches to the Current Federal Budgetary Scoring Regime.” The Committee’s paper – a follow on to a white paper originally published in 2008 – was previewed in late November in a discussion about removing federal barriers to infrastructure development, which was held in Washington D.C. among the paper’s authors, President Trump’s Special Assistant for infrastructure, D.J. Gribbin, and several interested government employees, decision- and policy-makers, and private practitioners in the infrastructure space. Both papers describe in detail and then confront the impediment that the Circular A-11 scorekeeping guidelines pose to federal use of P3s, which effectively frustrate use of P3 project delivery to address pressing federal infrastructure needs.

In the 2008 paper, the Committee offered solutions to modify Circular A-11 scorekeeping guidelines to align the federal government with best practices for state and local (and international) infrastructure funding: changing certain scoring criteria, considering lease payments on the basis of their present value, treating sale/leaseback, purchase options or infrastructure projects as “operating leases” (thus removing them from the onerous scoring rule); and offering a menu of risk assessment, valuation and legislative change suggestions that lower projects costs or offer longer-term payment streams outside of the budget cycle.

The 2018 paper adds two suggestions. First, score the federal government’s costs on net present value of cash flows from the government over the life of the transaction, taking into account the private party’s obligations and adjustment for the risk of private party default, similar to its 2008 suggestion. Second, create “safe harbors” for infrastructure projects that allow annual scoring similar to that described above, arguing that existing and long-standing federal contracts that employ energy savings performance contracts (ESPCs) effectively do just that.

The removal of budgetary scoring impediments to consideration of new strategies for federal infrastructure projects – particularly those that have proven successful like P3s – merits consideration. As the President appears to be advocating for a partnership with state and local jurisdictions to solve many infrastructure challenges, the ABA papers offer suggestions to help solve the deficit of investment in federal infrastructure projects.

Port of Long Beach Approves Pier B On-dock Rail Facility, Allowing Faster and Greener Ship to Rail Cargo Movement

On January 22, the Port of Long Beach Board of Harbor Commissioners approved construction of an on-dock rail facility that will allow the faster movement of cargo with lower environmental impacts, port officials said in a press release.

The new Pier B on-dock facility will allow more containers to be placed directly on trains at marine terminals. Currently, the ability to build long trains within the Port is limited due to the lack of adequate yard tracks and the configuration of mainline tracks.

Because no cargo trucks are involved in these moves, the new facility will have environmental benefits. The Final Environment Impact Report for the project estimates that it will “result in an overall reduction of an estimated 158,000 miles of truck traffic daily, or 11,000 fewer truck trips compared to the future No Project Alternative.”

Pacific Harbor Line, the Port’s designated operator has converted its fleet to clean diesel locomotives, which reduce air pollution and save fuel.

The facility will be located southwest of Anaheim Street and Interstate 710.

The next steps on the project are completion of preliminary design and the Board’s consideration of a baseline budget for the project.

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