ORAL ARGUMENT NOT YET SCHEDULED No. 17-5132, 17-5161, 17-5174, and 17-5175 (Consolidated) UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT JOHN M. FITZGERALD, ET AL., Plaintiffs-Appellees/Cross-Appellants, v. FEDERAL TRANSIT ADMINISTRATION, ET AL., Defendants-Appellants/Cross-Appellees, STATE OF MARYLAND, Intervenor Defendant-Appellant/Cross-Appellee. On Appeal from the United States District Court for the District of Columbia Case No. 1:14-cv-01471 (Hon. Richard J. Leon) AMICUS CURIAE BRIEF OF AMERICAN ROAD & TRANSPORTATION BUILDERS ASSOCIATION IN SUPPORT OF DEFENDANTS- APPELLANTS FOR REVERSAL OF DISTRICT COURT James M. Auslander (counsel of record) Nick Goldstein, Esq. Gus B. Bauman American Road & Transportation BEVERIDGE AND DIAMOND, P.C. Builders Association 1350 I Street, N.W., Suite 700 250 E Street, S.W., Suite 900 Washington, DC 20005-3311 Washington, DC 20024 (202) 789-6009 (202) 683-1005 [email protected][email protected][email protected]Attorneys for Amicus Curiae American Road & Transportation Builders Association Dated: August 23, 2017 USCA Case #17-5132 Document #1689991 Filed: 08/23/2017 Page 1 of 26 (Page 1 of Total)
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ORAL ARGUMENT NOT YET SCHEDULED
No. 17-5132, 17-5161, 17-5174, and 17-5175 (Consolidated)
UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
JOHN M. FITZGERALD, ET AL.,
Plaintiffs-Appellees/Cross-Appellants,
v.
FEDERAL TRANSIT ADMINISTRATION, ET AL.,
Defendants-Appellants/Cross-Appellees,
STATE OF MARYLAND,
Intervenor Defendant-Appellant/Cross-Appellee.
On Appeal from the United States District Court
for the District of Columbia
Case No. 1:14-cv-01471 (Hon. Richard J. Leon)
AMICUS CURIAE BRIEF OF AMERICAN ROAD & TRANSPORTATION
BUILDERS ASSOCIATION IN SUPPORT OF DEFENDANTS-
APPELLANTS FOR REVERSAL OF DISTRICT COURT
James M. Auslander (counsel of record) Nick Goldstein, Esq.
Gus B. Bauman American Road & Transportation
BEVERIDGE AND DIAMOND, P.C. Builders Association
1350 I Street, N.W., Suite 700 250 E Street, S.W., Suite 900
13 Hemanta Doloi, Understanding Impacts of Time and Cost Related Construction
Risks on Operational Performance of PPP Projects, Int’l Journal of Strategic Prop.
Mgmt., vol. 16, no. 3, Sept. 2012, at 316, 325 (analyzing and weighting relative
risk factors on cost of P3 projects in Australia) (excerpts attached in Addendum).
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transformative transportation projects – whether through a P3 process or otherwise
– when the nation’s need for these long-planned projects is urgent. The lower
court’s opinions ordering an SEIS and vacating the Record of Decision are
incompatible both with the law and with the continued strength of P3s as a viable
alternative in the delivery of transportation improvement projects.
CONCLUSION
The public and private parties engaged in Maryland’s Purple Line have
expended many years, millions of dollars, and enormous energy into a legislated
P3 that serves as a model for financing, building, and operating future transit
projects nationwide. The desperately needed Purple Line is being challenged by a
parochial few in Chevy Chase, the location of just one of the Purple Line’s 21
stations knitting together communities along 16 miles between Bethesda and New
Carrollton. That obstruction and delay have been sustained by lower court rulings
that completely misconstrue NEPA’s fundamental purpose and requirements. For
the reasons set forth herein, ARTBA submits that the district court’s order of
partial summary judgment for Plaintiffs-Appellees should be reversed.
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Dated: August 23, 2017 Respectfully submitted,
/s/ James M. Auslander
James M. Auslander
Gus B. Bauman
BEVERIDGE & DIAMOND, P.C.
Attorneys for Amicus Curiae ARTBA
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CERTIFICATE OF COMPLIANCE OF BRIEF
I certify, pursuant to Fed. R. App. P. Rule 29(a)(4), that the foregoing brief
amicus curiae brief, complies with the type-volume limitation of Fed. R. App. P.
Rule 32(a)(7)(B) because, excluding the parts of the document exempted by Fed.
R. App. P. 32(f) and Circuit Rule 32(e)(1), this document contains 2,776 words, as
computed by Microsoft Word. This document complies with the typeface
requirements of Fed. R. App. P. 32(a)(5) and the type-style requirements of Fed. R.
App. P. 32(a)(6) because this document has been prepared in a proportionally
spaced typeface of Times New Roman, 14 points.
Dated: August 23, 2017 /s/ James M. Auslander
James M. Auslander
BEVERIDGE & DIAMOND, P.C.
Attorney for Amicus Curiae ARTBA
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CERTIFICATE OF SERVICE
I hereby certify that, on this 23rd day of August, 2017, the foregoing Amicus
Curiae Brief of American Road & Transportation Builders Association was served
(1) electronically through the Court’s CM/ECF system with the Court and all
registered counsel, and (2) hardcopy via hand delivery (original and eight copies)
with the Court.
Dated: August 23, 2017 /s/ James M. Auslander
James M. Auslander
BEVERIDGE & DIAMOND, P.C.
Attorney for Amicus Curiae ARTBA
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USCA Form 44March 2017 (REVISED)
v.
ENTRY OF APPEARANCE
Party Information(List each represented party individually - Use an additional blank sheet as necessary)
The Clerk shall enter my appearance as
Counsel Information
Notes: This form must be submitted by a member of the Bar of the U.S. Court of Appeals for the D.C. Circuit.Names of non-member attorneys listed above will not be entered on the court's docket. Applications foradmission are available on the court's web site at http://www.cadc.uscourts.gov/.
United States Code AnnotatedTitle 42. The Public Health and Welfare
Chapter 55. National Environmental Policy (Refs & Annos)Subchapter I. Policies and Goals (Refs & Annos)
42 U.S.C.A. § 4332
§ 4332. Cooperation of agencies; reports; availability of information;recommendations; international and national coordination of efforts
Currentness
The Congress authorizes and directs that, to the fullest extent possible: (1) the policies, regulations, and public laws ofthe United States shall be interpreted and administered in accordance with the policies set forth in this chapter, and (2)all agencies of the Federal Government shall--
(A) utilize a systematic, interdisciplinary approach which will insure the integrated use of the natural and socialsciences and the environmental design arts in planning and in decisionmaking which may have an impact on man'senvironment;
(B) identify and develop methods and procedures, in consultation with the Council on Environmental Qualityestablished by subchapter II of this chapter, which will insure that presently unquantified environmental amenities andvalues may be given appropriate consideration in decisionmaking along with economic and technical considerations;
(C) include in every recommendation or report on proposals for legislation and other major Federal actionssignificantly affecting the quality of the human environment, a detailed statement by the responsible official on--
(i) the environmental impact of the proposed action,
(ii) any adverse environmental effects which cannot be avoided should the proposal be implemented,
(iii) alternatives to the proposed action,
(iv) the relationship between local short-term uses of man's environment and the maintenance and enhancement oflong-term productivity, and
(v) any irreversible and irretrievable commitments of resources which would be involved in the proposed actionshould it be implemented.
Prior to making any detailed statement, the responsible Federal official shall consult with and obtain the commentsof any Federal agency which has jurisdiction by law or special expertise with respect to any environmental impactinvolved. Copies of such statement and the comments and views of the appropriate Federal, State, and local agencies,
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which are authorized to develop and enforce environmental standards, shall be made available to the President, theCouncil on Environmental Quality and to the public as provided by section 552 of Title 5, and shall accompany theproposal through the existing agency review processes;
(D) Any detailed statement required under subparagraph (C) after January 1, 1970, for any major Federal actionfunded under a program of grants to States shall not be deemed to be legally insufficient solely by reason of havingbeen prepared by a State agency or official, if:
(i) the State agency or official has statewide jurisdiction and has the responsibility for such action,
(ii) the responsible Federal official furnishes guidance and participates in such preparation,
(iii) the responsible Federal official independently evaluates such statement prior to its approval and adoption, and
(iv) after January 1, 1976, the responsible Federal official provides early notification to, and solicits the views of,any other State or any Federal land management entity of any action or any alternative thereto which may havesignificant impacts upon such State or affected Federal land management entity and, if there is any disagreementon such impacts, prepares a written assessment of such impacts and views for incorporation into such detailedstatement.
The procedures in this subparagraph shall not relieve the Federal official of his responsibilities for the scope,objectivity, and content of the entire statement or of any other responsibility under this chapter; and further, thissubparagraph does not affect the legal sufficiency of statements prepared by State agencies with less than statewide
jurisdiction. 1
(E) study, develop, and describe appropriate alternatives to recommended courses of action in any proposal whichinvolves unresolved conflicts concerning alternative uses of available resources;
(F) recognize the worldwide and long-range character of environmental problems and, where consistent with theforeign policy of the United States, lend appropriate support to initiatives, resolutions, and programs designedto maximize international cooperation in anticipating and preventing a decline in the quality of mankind's worldenvironment;
(G) make available to States, counties, municipalities, institutions, and individuals, advice and information useful inrestoring, maintaining, and enhancing the quality of the environment;
(H) initiate and utilize ecological information in the planning and development of resource-oriented projects; and
(I) assist the Council on Environmental Quality established by subchapter II of this chapter.
CREDIT(S)(Pub.L. 91-190, Title I, § 102, Jan. 1, 1970, 83 Stat. 853; Pub.L. 94-83, Aug. 9, 1975, 89 Stat. 424.)
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(a) A draft EIS, final EIS, or supplemental EIS may be supplemented at any time. An EIS shall be supplemented wheneverthe Administration determines that:
(1) Changes to the proposed action would result in significant environmental impacts that were not evaluated inthe EIS; or
(2) New information or circumstances relevant to environmental concerns and bearing on the proposed action orits impacts would result in significant environmental impacts not evaluated in the EIS.
(b) However, a supplemental EIS will not be necessary where:
(1) The changes to the proposed action, new information, or new circumstances result in a lessening of adverseenvironmental impacts evaluated in the EIS without causing other environmental impacts that are significant andwere not evaluated in the EIS; or
(2) The Administration decides to approve an alternative fully evaluated in an approved final EIS but not identifiedas the preferred alternative. In such a case, a revised ROD shall be prepared and circulated in accordance with §771.127(b).
(c) Where the Administration is uncertain of the significance of the new impacts, the applicant will develop appropriateenvironmental studies or, if the Administration deems appropriate, an EA to assess the impacts of the changes, newinformation, or new circumstances. If, based upon the studies, the Administration determines that a supplemental EISis not necessary, the Administration shall so indicate in the project file.
(d) A supplement is to be developed using the same process and format (i.e., draft EIS, final EIS, and ROD) as an originalEIS, except that scoping is not required.
(e) A supplemental draft EIS may be necessary for major new fixed guideway capital projects proposed for FTA fundingif there is a substantial change in the level of detail on project impacts during project planning and development. The
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supplement will address site-specific impacts and refined cost estimates that have been developed since the original draftEIS.
(f) In some cases, a supplemental EIS may be required to address issues of limited scope, such as the extent of proposedmitigation or the evaluation of location or design variations for a limited portion of the overall project. Where this is thecase, the preparation of a supplemental EIS shall not necessarily:
(1) Prevent the granting of new approvals;
(2) Require the withdrawal of previous approvals; or
(3) Require the suspension of project activities; for any activity not directly affected by the supplement. If the changesin question are of such magnitude to require a reassessment of the entire action, or more than a limited portionof the overall action, the Administration shall suspend any activities which would have an adverse environmentalimpact or limit the choice of reasonable alternatives, until the supplemental EIS is completed.
Credits[70 FR 24470, May 9, 2005; 74 FR 12530, March 24, 2009]
Code of Federal RegulationsTitle 40. Protection of Environment
Chapter V. Council on Environmental QualityPart 1502. Environmental Impact Statement (Refs & Annos)
40 C.F.R. § 1502.9
§ 1502.9 Draft, final, and supplemental statements.
Currentness
Except for proposals for legislation as provided in § 1506.8 environmental impact statements shall be prepared in twostages and may be supplemented.
(a) Draft environmental impact statements shall be prepared in accordance with the scope decided upon in the scopingprocess. The lead agency shall work with the cooperating agencies and shall obtain comments as required in part 1503of this chapter. The draft statement must fulfill and satisfy to the fullest extent possible the requirements established forfinal statements in section 102(2)(C) of the Act. If a draft statement is so inadequate as to preclude meaningful analysis,the agency shall prepare and circulate a revised draft of the appropriate portion. The agency shall make every effort todisclose and discuss at appropriate points in the draft statement all major points of view on the environmental impactsof the alternatives including the proposed action.
(b) Final environmental impact statements shall respond to comments as required in part 1503 of this chapter. Theagency shall discuss at appropriate points in the final statement any responsible opposing view which was not adequatelydiscussed in the draft statement and shall indicate the agency's response to the issues raised.
(c) Agencies:
(1) Shall prepare supplements to either draft or final environmental impact statements if:
(i) The agency makes substantial changes in the proposed action that are relevant to environmental concerns; or
(ii) There are significant new circumstances or information relevant to environmental concerns and bearing on theproposed action or its impacts.
(2) May also prepare supplements when the agency determines that the purposes of the Act will be furthered bydoing so.
(3) Shall adopt procedures for introducing a supplement into its formal administrative record, if such a record exists.
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(4) Shall prepare, circulate, and file a supplement to a statement in the same fashion (exclusive of scoping) as a draftand final statement unless alternative procedures are approved by the Council.
AUTHORITY: NEPA, the Environmental Quality Improvement Act of 1970, as amended (42 U.S.C. 4371 et seq.),Sec. 309 of the Clean Air Act, as amended (42 U.S.C. 7609), and Executive Order 11514 (Mar. 5, 1970, as amended byExecutive Order 11991, May 24, 1977).
AUTHORITY: NEPA, the Environmental Quality Improvement Act of 1970, as amended (42 U.S.C. 4371 et seq.),sec. 309 of the Clean Air Act, as amended (42 U.S.C. 7609), and Executive Order 11514 (Mar. 5, 1970, as amended byExecutive Order 11991, May 24, 1977).
Code of Federal RegulationsTitle 40. Protection of Environment
Chapter V. Council on Environmental QualityPart 1508. Terminology and Index (Refs & Annos)
40 C.F.R. § 1508.14
§ 1508.14 Human environment.
Currentness
Human environment shall be interpreted comprehensively to include the natural and physical environment and therelationship of people with that environment. (See the definition of “effects” (§ 1508.8).) This means that economic orsocial effects are not intended by themselves to require preparation of an environmental impact statement. When anenvironmental impact statement is prepared and economic or social and natural or physical environmental effects areinterrelated, then the environmental impact statement will discuss all of these effects on the human environment.
AUTHORITY: NEPA, the Environmental Quality Improvement Act of 1970, as amended (42 U.S.C. 4371 et seq.),sec. 309 of the Clean Air Act, as amended (42 U.S.C. 7609), and Executive Order 11514 (Mar. 5, 1970, as amended byExecutive Order 11991, May 24, 1977).
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ASSESSING THE COSTS ATTRIBUTED TO PROJECT DELAY DURING PROJECT PRE-CONSTRUCTION STAGES
by
Curtis Beaty, P.E. Associate Research Engineer
Texas A&M Transportation Institute
David Ellis, Ph.D. Research Scientist
Texas A&M Transportation Institute
Brianne Glover Associate Transportation Researcher Texas A&M Transportation Institute
and
Bill Stockton, Ph.D., P.E.
Executive Associate Agency Director Texas A&M Transportation Institute
Report 0-6806-FY15 WR#3 Project 0-6806-TTI
Project Title: TxDOT Administration Research
Performed in cooperation with the Texas Department of Transportation
and the Federal Highway Administration
Published: March 2016
TEXAS A&M TRANSPORTATION INSTITUTE College Station, Texas 77843-3135
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1
EXECUTIVE SUMMARY
All departments of transportation face delays on highway projects. They often have anecdotal accounts of the significant financial impact that the delay of a highway project had on project costs, local businesses, commuters, and other users of the highway. But in many cases hard data on the financial impact are lacking. This project for the Texas Department of Transportation (TxDOT) developed a simple but sound methodology for estimating the cost of delaying most types of highway projects. In 2011, the Texas A&M Transportation Institute (TTI) performed a study examining the cost associated with delays during the construction phase (i.e., post letting) of highway projects. This project considered the cost of delays during the pre-construction phases of project development: planning and scoping, preliminary engineering, final design, and letting.
The project draws on two main resources to produce reliable estimates of impacts:
• Existing data from projects originally scheduled to let between January 2012 and March 2014 and reported in TxDOT’s Design Construction Information System, SiteManager™, and Primavera™.
• Methodologies developed for other applications that can be applied to estimating the cost of project delay.
DELAY DURING PROJECT PHASES
Delay can occur in any phase in the project:
• Planning/scoping phase: Delay can be significant when litigation is initiated. • Development phase: Permitting (environmental, fish and wildlife, railroad, etc.), right-of-
way acquisition, and utility agreements can be significant causes of delay. • Contracting phase: Generally, this phase has less incidence of delay but can still have
issues. • Construction phase: This phase has numerous opportunities for delay and is often the
delay most visible to the public.
Project delay almost always has some costs associated with it, but not all project delay is a waste of time and public money. In some instances, the reason for the delay is to make an improvement in the design or construction of the project that will ultimately deliver better value to the public. At the same time, delays during the pre-construction phases of project development can be introduced due to poor project management activities (e.g., failing to publicly advertise a project’s bid request the required numbers of days before the bidding deadline) that can have minor direct costs but with more significant indirect costs to commuters and businesses.
ESTIMATION MODEL
This project developed a simplified model that incorporates 17 user-controlled variables and produces estimates of the effect of project delay on personal and commercial travel and the cost to the general economy. While the methodology is simple, there is no rule of thumb because
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2
project delay costs depend on several variables, primarily location, traffic, construction costs, travel speeds, fuel prices, construction prices, and the change in prices as influenced by the general economy.
Three projects of varying size were used as examples:
• The small project illustrates delay to a $10.6 million, reconstruction of four-lane roadway project in a rural setting. The project’s 6-month delay produced an additional cost of $570,000, or a cost of $87,000 for every month of delay.
• The medium project illustrates delay to a $28.5 million, widening of a semi-rural highway project. The project’s 2-month delay produced an additional cost of $870,000, or a cost of over $420,000 for every month of delay.
• The large project illustrates delay to an $85.2 million freeway reconstruction in a large metro area. The project’s 3-month delay produced an additional cost of $4 million, or a cost of $1.3 million for every month of delay.
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RoutledgeTaylor &FrancisCroup
Edinburgh NapierlUNIVERSITY
INTERNATIONAL JOURNAL OF STRATEGIC PROPERTY MANAGEMENTISSN 1648-715X print / ISSN 1648-9179 online
UNDERSTANDING IMPACTS OF TIME AND COST RELATEDCONSTRUCTION RISKS ON OPERATIONAL PERFORMANCEOF PPP PROJECTS
Hemanta DOLOIFaculty of Architecture, Building and Planning, The University of Melbourne, Victoria 3010,AustraliaE-mail: [email protected]
Received 17 November 2011; accepted 21 February 2012
ABSTRACT. The risk attributes in construction project is one of the widely published topics,yet there is no or little investigation whether or not risks associated with construction phasepropagate over operational phase. As operation phase of the PPP projects is significantlylong compared to the construction phase, understanding the impact of time and cost relatedconstruction risks over operation phase is quite important. In this research, risk attributesassociated with the PPP procurement method have been identified across three dimensions,time, cost and operational performance. A questionnaire survey was used for collecting datain seven major PPP projects in Australia. Based on standard statistical methods and factoranalysis, a number of key risk factors infiuencing time, cost and operational performancehave been extracted. The research revealed that site conditions and design complexity is oneof the most critical risk attribute infiuencing time performance in projects. Similarly, marketdynamics is the most critical attribute infiuencing both construction cost and operational per-formance in PPP projects. Based on regression modeling, partner's dispute was found to be agood determinant of time and cost performance. Technical obsolescence has significant impactson the operational performance of PPP projects. It was revealed that the design complexity,financial structure and government policy are the three main common factors affecting risksacross time, cost and operational performance in PPP projects. It is anticipated that the find-ings wül impact the construction firms for improving the front-end risk management capabil-ity for efficient positioning within the competitive business environment.
KEYWORDS: Construction risks; Operational risks; Puhlic-private-partnerships; Factoranalysis; Multiple regression
1. INTRODUCTION
Risk management is a topic area that in-terests most industry sectors and particularlyin the construction industry. However, tradi-tional risk management framework applied inconstruction industry predominately focuseson management of risks over constructionphase. In fact, the current risk management
processes are significantly inadequate in man-aging risks associated with issues such asselection of procurement routes, contractualarrangements, management of stakeholders,organisational complexity and operationalperformance and de-investment decisions (PM-BOK, 2008). A contemporary risk managementframework must be able to deal with everyincreasing complexity with bigger stakes and
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Understanding Impacts of Time and Cost Related Construction Risks on Operational... 325
the PPP project. Lack of cooperation from thegovernment with factor loading of 0.853 is oneof the most significant attributes in this fac-tor. Misinterpretation of contract (with factorloading of 0.850) in construction phase exertscost performance in overall projects. Failure/delay in obtaining permit/approval due to bu-reaucracy in government organizations (withfactor loading of 0.716) is found to be crucial
in PPP project. Partner's dispute was found tohave significant impact (with a factor loadingof 0.577). Failure or delay in material deliveryscored 0.507 for the project. Due to involve-ment of a multitude of stakeholders in the PPPprocess, a measure of real time communication(factor loading of 0.476) between stakeholdersshould impact positively on overall cost out-comes in projects.
Factor 1: Planning and design5. Change in scope 0.8664. Defects in design 0.8351. Changes in output specification 0.5692. Innovative design 0.54311. Delay in operation 0.538
Factor 2: Communications23. Lack of cooperation of the government 0.85330. Misinterpretation of contract 0.85032. Fedlure/delay in ohtaining permit/approval 0.71629. Partner's disputes 0.5779. Failure/delay in material delivery 0.50726. Lack of communication hetween stakeholders 0.476
Factor 3; Site conditions38. Commercial rights due to development in vicinity 0.87141. Site contamination 0.85837. Adverse changes in tax 0.61442. Force Majeure 0.520
Factor 4: Market dynamics36. Adverse changes in interest rates 0.88335. Financial failure of private consortium 0.85621. Unanticipated inflation 0.71633. Unavailahility of financing 0.674
Factor 5: Construction risk6. ConstructahiHty 0.87028. Destructive industrial action 0.8408. Unforeseen site condition 0.7747. Failure/delay in site acquisition 0.753
Factor 6: PoUcy, legislation & regulation17. Unanticipated economic downturn 0.11918. Increased competition 0.11224. Misunderstanding the role of stakeholders 0.74331. Adverse changes in law, pohcy or regulations 0.722
22.65%
18.05%
14.05%
11.60%
8.85%
7.65%
Total variance explained = 82.85%
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The Ro I e of P rivate I nvestm e nt i nMeeting U.S. TransportationInfrastructure Needs
• What We've Learned from Two Decades' F~cperience withTransportation Public-Private Partnerships (P3s) in theUnited States
• Recommendations for Increasing Private Investmentin Transportation Projects Going Forward
By William Reinhardt, 23-year P3 observer, publisher and editor of"Public Works Financing" newsletter
American Ao3d & Tra~spoitation Bai/dersAssociation
TransparfationDevelopmentFoundation
May 2011
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Executive Summary
Over the past 22 years, the Congress and the federal government have proactively supported development
and implementation of public-private partnerships to finance and build transportation projects in many
significant ways. These include:
• A statutory framework that allows the use of federal funds on P3 projects;
• Two pilot programs. The first, from the 1998 federal surface transportation authorization law, the
"Transportation Equity Act for the 21St Century" (TEA-21), permits toll finance to reconstruct three
existing Interstates. The second, from the 2005 law, the "Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users" (SAFETEA-LU), permits toll finance to pay for three
new Interstates;
• Encouraging the establishment of state infrastructure banks (SIBS);
• Providing substantive assistance from the Federal Highway Administration's (FHWA) Office of
I nnovative Program Delivery;
• FHWA's "Special Experimental Project"(SEP-15) program to promote new P3 approaches to
project delivery;
• Private activity bonds (PABs); and the
• The "Transportation Infrastructure Finance &Innovation Act" (TIFIA) federal credit assistance
program.
Since 1989:
Using a broad definition that includes design-build as P3 projects, the data show:
• 24 states and the District of Columbia have used a P3 process to help finance and build at least 96
transportation protects worth a total $54.3 billion. The implementing states include: Alaska,
Tlie Role of Private Investment in Meeting U.S. Transportation Infrastructure Needs Page 7
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Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota,Tennessee, Vermont, West Virginia, Wisconsin and Wyoming.
• Over the past 10 years, 2001 through 2010, on average, five states started a transportation P3protect each year.
• Of the $54.3 billion in transportation P3 contracts let over the past 22 years, almost 75 percent ofthe contract value is accounted for by eight states—Texas ($9.57 billion, 17.6 percent), California($6.02 billion, 11.1 percent), Florida ($5.63 billion, 10.4 percent), Colorado ($4.85 billion, 9 percent),
I ndiana ($3.85 billion, 7.1 percent), Virginia ($3.88 billion, 7.1 percent), Utah ($3.66 billion, 6.7percent), and New Jersey ($3.35 billion, 6.2 percent).
• 79 of the transportation P3 projects, worth $31.5 billion, have been either Design-Build (DB),Design-Build-Finance (DBF),'or Design-Build-Operate-Maintain (DBOM) contracts.
• 11 of the transportation P3 proj.ects, worth $12.4 billion, have included a P3 financing component,been Design-Build-Finance-Operate-Maintain (DBFOM) contracts, or straight concessions involvingtraffic forecasting risk.
• Over the period, there have been four transportation asset privatizations with total up-frontpayments to government valued at $6.9 billion. These include the:
o Indiana Toll Road (Indiana Finance Authority) in 2006—a 75-year (ease for $3.85 billion;
o Chicago Skyway (City of Chicago) in 2005—a 99-year lease for $1.83 billion;
o Pocahontas Parkway (Virginia Department of Transportation) in 2006—a 99-year lease for$611 million; and the
o Northwest Parkway (Colorado, Northwest Parkway Authority) in 2007—a 99-year lease for$603 million.
• The P3 market share of total U.S. capital investment in hi~hways by all levels of government since2008 is about 2 percent.
• A number of large P3 contracts have been signed since 2008 and, together, these account for about11 percent of total national capital investment in new highway capacity in 2011. These new projectsare mostly express lanes that can be tolled, built next to existing freeways in heavily congestedurban areas.
Going Forward...
Many states have adopted alternative delivery contracting approaches that capture some of the benefits ofPas but do not entail private finance. As the data show, there is room for substantial growth in thedevelopment of new capacity through privately financed concessions.
However, given (a) the nation's enormous, unmet transportation infrastructure needs, (b) almost two-decades of proactive federal policy and legislative advocacy for implementation of P3 transportationprojects, (c) the financial challenges facing all levels of government, and (d) the claimed "$100 billion to $400billion in private funds available for P3 projects," several questions must be asked at this juncture:
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• Why have there been so relatively few privately financed P3 transportation projects in the United
States over the ►ast 22 years? Whv haven't there been many more?
• Why have only five states—California, Florida, Georgia, Texas and Virginia—developed the capabilityto execute complex P3 transactions involving private finance?
• What is a realistic forecast for P3 projects in the future?
Obviously, there are some impediments to widespread use of P3 approaches for meeting transportationinfrastructure needs.
Experience is showing, for example, that Pas are likely not feasible replacements for the 80-90 percent oftotal public capital investment each year that is directed to transportation infrastructure repair,rehabilitation and reconstruction.
Potential investors are also not looking to participate in smaller, less expensive new construction projects or
routine maintenance where governments and their traditional contracting partners deliver a high level ofservice.
It is also true that most of the profitable toll road corridors in America have already been developed and arebeing operated by independent toll authorities or states.
Tolling the Interstate system in order to pay for its reconstruction has been proposed as a major newbusiness opportunity for P3 developers. But the political barriers to tolling in.~eneral and to tolling existingfreeways in specific are formidable, especially among states.
It has become clear that the following reasons go a long way toward explaining why the P3 share of theoverall U.S. transportation infrastructure construction market has been fairly limited over the past twodecades and will likely remain so in the decades ahead:
• P3s do not provide "new" or "free" money for building transportation projects.
Public sector investment in transportation projects and infrastructure is made in the public interest as acore~function of government. The investment is funded through government-levied taxes and user fees,or through public borrowing—debt which must be repaid with interest with public funds generated byfuture tax or fee collections.
The private sector must meet the same public interest test and also find projects that provide anadequate return on investment—a profit.
Pas do not provide project funding, they provide project financing—borrowed money that must bereimbursed, at a profit, to the lender. Therefore, P3 projects must include a reliable revenue stream,which, as has been demonstrated over the past two decades' experience, is generally accomplishedthrough tolling.
While technology has made toll collection far more efficient and opened the door to "variable pricing" ofinfrastructure use based on demand, the fact remains that the decision whether or not to allow thecollection of tolls from the public is a decision that must be made by elected officials. And the decisionto initiate tolls—or increase existing toll rates—is no less a political decision than whether or not to raise
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the motor fuels excise to pay for transportation infrastructure. As is the case with the gas tax, many riskaverse politicians are not interested in having to make a decision to levy tolls.
Ultimately, public-purpose infrastructure must be paid for by some combination of users and taxpayers.I nnovative financing models can access new sources of borrowing and allow leveraging of public funds.But they don't create new funding sources per se.
Pas are a financing solution chasing a funding problem.
• U.S. tax policy is a hurdle for Pas.
The U.S. public finance industry very efficiently employs long-dated, tax-exempt debt to meet a largepart of the capital-raising needs of governments and non-profit authorities. When compared tothe interest rates on the taxable debt used in Pas, there'is acost-of-capital advantage'of 1% to 2%conferred on state and local borrowers by federal tax rules. Some of that advantage can be offset whenF3s access special federal financing instruments that help to level the playing field.
To compete with the low cost of public borrowing, P3 projects as a class must be tightly managed tocontrol expenses, meet schedules and deliver life-cycle cost savings. Having to meet those demands inevery project ultimately may be one of the greatest benefits of adding Pas to the Americantransportation infrastructure toolbox.
• P3s are often the preferred option for delivery of large, complex projects that add newcapacity in heavily-travelled corridors or reconstruct deteriorating existing capacity on theInterstate Highway System.
With the need to generate a return on investment a prerequisite for bringing private investors into atransportation project, Pas are best suited for lame protects with a high probability for strong revenuegeneration over many years.
Unfortunately, despite the staggering cost of traffic congestion to the U.S. economy and quality of life,the federal government does not have a national strategic business plan for building additionaltransportation infrastructure capacity in all modes—or for even performing necessary reconstruction ofexisting capacity on the Interstate Highway System. Nor do many of the states.
A new national initiative to build multi-modal "Critical Commerce Corridors" with dedicated truck lanesand connections to major airports, waterways, ports and rail hubs, for example, would lend itself quitewell to the P3 model.
To the contrary, however, much federal and state transportation, environmental and fiscal policydiscourages investments. in new transportation capacity. Thus the "market" for P3-like projects in theU.S. is, unfortunately. constrained.
Perhaps two to four new P3 projects per year in the U.S. would be a reasonable assumption for thefuture.
• While relatively few non-highway transportation Pas have been undertaken in the U.S. thusfar, the P3 model has been used successfully to finance Denver's Eagle P3 rail project- andcould play a larger role in the financing of other transit and rail infrastructure projects.
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Pas can never be the "centerpiece" or even a major element of federal transportation
programs. Proactive state actions are needed.
While the federal government can encourage private investment in transportation infrastructure
through favorable tax treatments, supplementary loans and the easing of restrictions on tolling existing
federally-funded assets, P3 transportation projects must be contracted with state and local governments
or authorities.
Pas are a state or local, not federal, decision. That is why when Congress writes the next federal surface
transportation authorization, it would be a mistake to depend on private sector investment for meeting
most of the nation's surface transportation capital needs.
My recommendations for increasing private investment in needed U.S.
transportation infrastructure:
Authorize the USDOT to Develop a "National Strategic Transportation Business Plan"—
Authdrize in the next federal surface transportation law the development of a multi-modal "National
Strategic Transportation Development Business Plan" aimed at achieving national goals and leading to
necessary expansion of existing system capacity in all modes and the expensive reconstruction necessary
to maintain existing capacity on the aging, original Interstate Highway System.
Enhance TIFIA and PAB tools—There are important transportation projects being planned now that
will be able to arrange financing and start construction with support from existing federal programs. The
amount of funding for the U.S. Department of Transportation's (USDOT) "Transportation Infrastructure
Finance &Innovation Act". (TIFIA) should be substantially increased and the volume capon tax-exempt
"Private Activity Bonds" (PAB) should be removed. Decisions about which projects receive support
should be made on based solely on project merits and economic benefits. Both tools serve to reduce the
cost of capital in P3 financings and, thus, lower the tolls users must pay or the amount of availability-
based payments from legislatures.
Attract Pension Funds—Congress should embrace a form of private "Build America Bonds" (BAB),
indexed bonds, or other debt instruments that would attract critically needed investment from
insurance companies and public-employee and union pension funds.
4. Educate Governors, State Legislators and the Public—P3s should be included in every state's
transportation financing toolbox for use on appropriate projects and to provide much-needed
supplemental dollars. The first step in this process is educating legislators and encouraging them to
enact comprehensive P3 authorization laws. (This is currently a joint project of ARTBA and the National
Conference of State Legislatures). Once in place, state DOTS should be encouraged to thoroughly
consider the application of P3 techniques to all appropriate projects. Collectively, the transportation
community must also do a much betterjob of educating the public on the true costs of providing and
maintaining a safe and efficient transportation network.
5. Further Ease Federal Restrictions on State Tolling of the Interstate Highway System—It has
been clearly demonstrated over the past two decades that the P3 approach can quickly deliver the high-
cost, new capacity highway projects that are needed in many parts of the nation to meet current and
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future mobility demands. Similarly, Pas are also well-suited to the expensive task facing all states ofreconstructing and improving their existing—and aging—Interstate highway capacity.
It is also clear, however, that Pas require a new and consistent revenue stream to retire project debt andprovide a fair return on investment to the private sector partners who help front the project's cost andassume the costs of operation and maintenance. Tolis imposed on a facility's users are a provenmechanism for providing that revenue stream.
Current federal law has four tolling and pricing "pilot programs" that allow a limited number of statesthe opportunity to impose tolls on their Interstate mileage for specific purposes: the "Express LaneDemonstration Program," the "Value Pricing Pilot Program," the "Interstate System Reconstruction &Rehabilitation Pilot Program," and the "Interstate System Construction Toll Pilot Program."
These programs should be made permanent and available to all states with the only restriction beingthat resulting revenue raised from users be exclusively dedicated to financing the reconstruction andimprovement of the state's Interstate mileage and/or the addition of new Interstate capacity.
Conclusions
The United States has a comprehensive and relatively mature transportation infrastructure network in place.As a result, aUaut 85 percent o~ the tota~ public capital investrnefit in the nation's transportation system inrecent years is directed toward maintaining and repairing it, not constructing new facilities or addingcapacity to existing ones.
Two decades of experience have shown that private investment is attracted to large, complex and expensivetransportation projects that add new capacity to the U.S. system and can be supported by a new revenuestream, usually tolling. Thus, the overall market share for P3 projects in the overall U.S. transportationconstruction market has been—and likely will remain—fairly small, less than five percent per year.
The value of this contribution, however, should not be underestimated. For, absent sisnificant increases inpublic funding, Pas will likely be the primary model for building new highway capacity in heavily congestedurban areas in the decades ahead.
Given the economic and social toll caused by traffic congestion in the U.S. and the enormous unmet demandfor new hi~hwav capacity to facilitate freight movement in an increasingly competitive international market,P3~rolects should be a~gressively encouraged and supported.
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Country equals United States and Financial Close equals 2014 and Project Type equals Motorway = 5 projects | 5 closed -- $1,462m project cost