Kentucky Bridge, Maryland Light Rail Projects Among Contentious Transportation Projects for 2015
The continuing evolution of public-private partnerships (P3s) and tolling was another of the issues on my recent Top 5 Transportation Issues for 2015. There have already been a variety of developments this year on some key stories concerning both, including a debate in Kentucky over how to finance a new bridge over the Ohio River, efforts to convince the new Governor of Maryland of the benefits of two light rail P3 projects and a new infrastructure financing tool to encourage private investment proposed by President Obama. Here are a few updates from around the country and links where you can read more.
Updates on Public-Private Partnerships & Tolling
- Colorado: Progressive Railroading this month looks at the now decade-long, multibillion-dollar transit expansion project in Denver. Officials from the Regional Transportation District of Denver (RTD) make the case for the P3 elements that made the project possible. It includes 122 miles of new light rail and commuter rail lines, 57 new stations and a redeveloped Union Station. … A study by the Reason Foundation says the Denver metro area’s traffic congestion could be solved by adding at least $11 billion in new toll lanes on portions of every major interstate and federal highway, The Denver Post reported. The overall cost of the Reason plan is $52 billion, compared to the $133 billion estimate for a plan by the Denver Regional Council of Governments. Meanwhile, Aurora Mayor Steve Hogan said recently he doesn’t see any way other than tolls to pay for the upkeep of roads and bridges around metro Denver, The Denver Business Journal reported. “Get ready to pay tolls,” Hogan said at a recent event. “You may not like it, but it’s going to happen.”
- Kentucky: State Rep. Leslie Combs is expected to once again file legislation this year that would give Kentucky the ability to enter into public-private partnerships, The Courier-Journal reported. The bill passed last year but Gov. Steve Beshear was forced to veto it because an amendment was added to prohibit such a partnership—and the tolls that would likely go with it—to build a new Brent Spence Bridge linking Covington and Cincinnati. In his State of the Commonwealth speech this month Beshear called on lawmakers to pass a bill to “make it clear that we are able and eager to partner with private businesses to procure, build or finance capital projects or services. … We cannot let the opposition of a few people on a single project hold us back from making progress around the state. Nor can we close the door on tolls as a partial solution to a major infrastructure need.” The Cincinnati Enquirer reported that the leading Kentucky Republican gubernatorial ticket, Agriculture Commissioner James Comer and state Sen. Chris McDaniel, said earlier this month that if elected they would take a second look at the Brent Spence project, examining potential new sites for a bridge, considering truck bans and a possible tunnel. They would also look to ask Ohio to pay more on the $2.6 billion project, they said. Elsewhere the Enquirer reported on the mixed reaction the possible review has received so far. And there is this late update in an exclusive from the Cincinnati Business Courier: Beshear and Ohio Gov. John Kasich are expected to announce today (1/28/15) that they are looking at how to cut costs on the project, push for a toll as close to $1 as possible and split the cost of the bridge 50/50. The two states have reportedly been in talks for months on the new agreement. Both governors are said to want a financing plan in place by the end of this year. Beshear has said each month of delay adds $7 million to the project. I wrote about the Brent Spence tolling debate in a recent article for the Kentucky business magazine The Lane Report. … Meanwhile, the Ohio River Bridges Project in the Louisville area is expected to have a new toll systems provider under contract later this spring, The Courier-Journal reported. The bi-state board overseeing the project was forced to restart the process three months ago when they discovered an undisclosed conflict of interest with the provider that was originally chosen.
- Maryland: As I noted in a blog post earlier this week, two multi-billion dollar light rail P3 projects in the state appear to have dodged a bullet in Gov. Larry Hogan’s proposed spending plan but the Purple Line project in the DC suburbs and Red Line project in Baltimore may not be out of the woods yet. Bethesda magazine reported recently that some are warning the governor that a cancellation of the Purple Line project could harm the chances for future public-private partnerships in the state or at least drive up the costs and risk the state would have to bear in future deals. The American Road and Transportation Builders Association has written to the governor with their concerns, the magazine reported. Members of the Maryland Congressional delegation also made their views known in another letter to the governor, The Daily Record noted. “We know you share our commitment to strengthening Maryland’s economy and ensuring that the people of Maryland have access to infrastructure they need to excel in their lives, and we believe construction of the Red and Purple lines is central to achieving these priorities,” the lawmakers wrote. Also defending the Red Line project was outgoing Maryland Transportation Secretary James T. Smith Jr., who penned an op-ed for The Baltimore Sun earlier this month. “The Red Line is a once-in-a-lifetime opportunity that will generate thousands of jobs, spur economic development throughout the Baltimore Metropolitan Region and create an integrated transit system that will better connect people to jobs, schools, businesses and Baltimore’s ever-growing entertainment venues,” Smith wrote. “Above and beyond these reasons, the public financing for the $2.9 billion project is in place, and with planning and engineering nearly complete, construction is ready to start next year.” Elsewhere The Sun reported that Red Line supporters are emphasizing the support of a coalition of Baltimore businesses to try to bring Hogan around. … The final planned section of the Inter County Connector, a toll road that connects Montgomery and Prince George’s counties, opened last month. Despite relatively low traffic counts on the facility, transportation experts Alan Pisarski and Peter Samuel make the case in a recent Washington Post op-ed for extending the expressway even further to provide a less congested route between Maryland and Virginia.
- Missouri: The Missouri Department of Transportation recently delivered a report to Gov. Jay Nixon with options for tolling east-west Interstate 70 including a “low-end” plan estimated to cost $2 billion and a “high-end” plan with truck-only lanes which could cost twice that, the AASHTO Journal reported. … In his January Surface Transportation Innovations newsletter, Reason Foundation tolling expert Robert Poole writes about how toll-financed interstate reconstruction appears to be gaining traction in both Missouri and Connecticut this year.
- Ohio: The Ohio Department of Transportation’s first public-private partnership is an availability payments deal to build the $429 million Portsmouth Bypass in Scioto County. The Columbus Dispatch had a recent piece on why the long-discussed project is finally getting off the ground and how the P3 aspect of it will work.
- Virginia: Gov. Terry McAuliffe said earlier this month that he’s done all he can to lower tolls on the Midtown and Downtown tunnels in the Hampton Roads area, The Virginian Pilot reported. The tolls were instituted as part of a public-private partnership deal entered into under McAuliffe’s predecessor, former Gov. Bob McDonnell. McAuliffe remains critical of the deal calling it “one of the worst deals I’ve ever seen negotiated” but he also added this: “We’ve got to honor our commitments. We’ve signed agreements, and we now have to move forward and make the best situation with what we have.” In a blog post earlier this week I wrote about proposed legislation supported by McAuliffe and others that would change the way the state vets future P3 transportation projects.
- QPIBs: The Obama administration earlier this month proposed the creation of a new kind of municipal bond that could help encourage more private involvement in public infrastructure projects. If approved by Congress, the Qualified Public Infrastructure Bond (QPIB) program would expand the scope of the existing Private Activity Bonds (PABs) program to include financing for airports, transit, solid waste disposal, sewer and water as well as other types of surface transportation projects currently not allowed under PABs. There is more on the proposed financing tool from The New York Times, Governing, the Reason Foundation, the AASHTO Journal and Building America’s Future.
- Model Language: The Federal Highway Administration this month published the last of its educational materials for states and road planners on public-private partnerships. The second and final batch of materials in its model P3 toll concessions contract guide is available online for public comment.
- Hybrid Approach?: Nossaman’s Barney Allison blogged about a discussion that took place at this month’s Transportation Research Board annual meeting on whether there would be a way to craft a P3 contract to be a hybrid between a toll concession and an availability payment model. Allison writes that “the discussion evolved into whether there is a feasible way of creating a hybrid P3 contract where some portion of the private developer’s payments would be subject to demand and revenue risk. This hybrid approach has been used on a limited basis in other countries.” But Allison notes that the challenges of putting together such a transaction in this country are daunting. Among the questions to be answered: “What portion of the payments should be subject to risk? How do you structure the deduction regime? How much construction and project (operations and maintenance) risk could be shifted to the private sector? How would user fees be set? What would be the impact on financing costs and equity requirements?”