Cascadia Prospectus

For a nation thought to embody the concept of "Big Government," Canada has some lessons for advocates of private investment in the West Coast's lagging transportation infrastructure. The Los Angeles Times reports that while efforts have stalled in the state legislature to broaden private sector involvement in the enhancement of California's transportation system, Governor Arnold Schwarzenegger found inspiration for that cause during last week's visit to Vancouver, British Columbia.

At a Vancouver construction site that he dropped by, workers were busily boring a tunnel for the type of public works project that the governor has been unable to get off the ground at home: one owned and operated entirely by a private company. A 12-mile rail line that will connect Vancouver's waterfront to its airport is one of dozens of ventures like it in Canada. Provinces are turning to private companies to build and operate trains, roads, public hospitals, university facilities -- even local schools. "The way they do it is, I think, the right way to go," Schwarzenegger said in an interview....He said that Wall Street is clamoring to invest in private infrastructure projects and that California must examine ways to "benefit from all the private money that is out there."

However, Schwarzenegger's incremental, politically cautious approach to promoting privatization at home has drawn criticism.

....Adrian Moore, vice president of research at the Reason Foundation, a Los Angeles think tank....worked with the Schwarzenegger administration to craft privatization plans soon after the governor was elected. But he has since become critical of what he sees as Schwarzenegger's reluctance to antagonize public employee unions. "Canada is doing it, for crying out loud. I just spent 10 days in China, a communist country, and they are creating these partnerships right and left," Moore said. "They don't see this as some kind of mystical thing. They see it as a way to get things done."

But the Democrats who control California's Legislature have sided with public-employee unions that see privatization as a threat to tens of thousands of government jobs."Democrats -- we're not in the business of contracting out state services," said Assembly Speaker Fabian Nuñez (D-Los Angeles). "It doesn't fit well with our political diet."

OK. Give Nunez points for honesty. But not vision.

Taxpayer protections are par for the course, The Times reports.

....many governments have found ways to structure their contracts so that if a project is not completed on time or fails to provide the promised level of service, it is investors rather than taxpayers who get stuck with the bill. Most projects in Canada include such provisions. "It is very rare that they come in late or over budget. If they do, the private company eats the costs," said Jane Peatch, executive director of the Canadian Council for Public Private Partnerships.

Among the successes is a $1-billion bridge, built by a private company, linking Prince Edward Island to New Brunswick. A hospital in Vancouver was built and is maintained by a private company; government and university doctors provide care. A privately built water treatment facility was completed $10 million under budget, and several sections of roadway throughout the country have been built and are maintained by private firms. At a makeshift conference table under a canopy at the Vancouver construction site Thursday, British Columbia Premier Gordon Campbell told the governor that within a decade every major infrastructure project in his province will be built and managed by private interests.

The Governator's snazzy blog includes this video on the topic from special economic advisor David Crane, who says California must draw on the lessons of BC and Canada to finance needed infrastructure with private capital - resulting in projects that are built more quickly, at lower taxpayer cost, and are better maintained.

This press release from Schwarzenegger's office provides a good quick overview of BC's approach.

British Columbia's government owns Partnerships BC (PBC), an independent organization that evaluates and implements financing and construction of major infrastructure projects. PBC is staffed by professional project finance experts who determine the best approach for each project, conduct a standardized and competitive bidding process, and then oversee construction. PBC uses a number of financing models for projects, including traditional bond financing, vendor financing and public-private partnership financing. Public-private partnerships are increasingly being used by governments around the world. The province of Ontario, Britain, Ireland, Australia and others already use professional-financing models similar to British Columbia's.

"Public-private partnerships have been a tremendous success in British Columbia, resulting in millions of dollars in additional benefits to over 20 projects, including critical transportation and health care infrastructure," said British Columbia Premier Gordon Campbell. "P3s take advantage of innovation and expertise of the private sector, while reducing risks and delays. P3's will be fundamental to B.C. meeting our infrastructure requirements."

The issue resonates in Washington state. Even if one chooses not to factor in debt and inflation, Central Puget Sound is looking at tens of billions in needed transportation network improvements - the big-ticket item now is the roads and transit package facing voters this fall. Well worth review is this video of King-5 TV's "Upfront" public affairs program aired yesterday (Windows Media Viewer required). Always-incisive host Robert Mak and guests discuss the November transportation funding measure - which relies on hikes in sales tax, motor vehicle excise taxes, and long-term debt.

Clearing the decks for robust private sector investment in Washington state's public infrastructure only makes sense. Taxpayers are willing to pay for what they perceive to be pieces of the solution to road congestion and maintenance problems. But the project list is long, and the standard menu of tax increases and public debt will not suffice, over the long haul.

TECHNORATI TAGS: PUBLIC PRIVATE PARTNERSHIPS, TRANSPORTATION, ROADS, TRANSIT, ARNOLD SCHWARZENEGGER, BRITISH COLUMBIA, PARTNERSHIPS BC, CALIFORNIA, WASHINGTON

As part of its current budget proposal, the Metropolitan Transit Authority of Los Angeles County is planning to add eight more "Metro Rapid" bus rapid transit routes to the 20 that will already be in operation by later this month. The LA Times reports. If you're someone at all inclined to take the bus to and from work once or more a week, see how this sounds.

Service on the Metro Rapid Program, implemented in June 2000, is 25% faster than regular service because the buses make fewer stops and run every three to 10 minutes during peak travel times, the MTA says. Also, the Rapid buses have equipment that extends green lights or changes red lights 10 seconds faster. By June 2008, 500 Metro Rapid buses, up from 359, will serve 28 transit corridors covering 420 route miles and 35 cities throughout the county.

More here on what makes Metro Rapid rapid. One additional factor is "low floor," near ground-level entrances; rather than the usual several steps. That's part of a larger Metro Rapid emphasis on cutting the amount of time that buses are stopped - either for passenger ingress and egress, or traffic signals.

In the central city-suburban core of the Seattle region, King County Metro, which operates a bus system and wastewater treatment facilities, is planning to initiate five bus rapid transit "RapidRide" routes as part of the "Transit Now" package approved by voters last fall. This map shows the routes. Metro says RapidRide service will include increased frequency, new buses, upgraded passenger waiting areas, and technology to synchronize traffic signals.

A clear and publicly-stated emphasis on fewer stops, enablement of faster boarding, and specific pledges of reduced travel times - as in LA - would be helpful, and increase public interest in the planned RapidRide routes. It would also be good to see King County Metro gather and make easily available online information on which among all current routes have the highest and lowest riderships. This could help guide decisions on re-allocating existing funding to additional, selected RapidRide routes.

Ridership data made easily available to the public online should include average and peak hour load factors (percentage of seats filled) for the given routes, and the system-wide average and peak load factors. Where a route's load factor continues running significantly below the system-wide average even at peak hours, that route should be cut, and the savings funneled into expansion of "best practices" rapid bus service on high-capacity transit corridors.

RELATED: "Fewer Bus Routes, More Frequency."

TECHNORATI TAGS: BUS RAPID TRANSIT, LOS ANGELES, SEATTLE, KING COUNTY

A new report by the Congressional Research Service notes that traffic congestion has reached crisis proportions in some places. But, the report notes, not everyone agrees that congestion is a major national problem warranting a federal government response. Because congestion tends to be geographically concentrated in major metropolitan areas, past Congressional action has tended to favor a predominantly state and local response.

The report speculates that Congress may well decide to continue with this approach in the next reauthorization of the guiding federal transportation policy legislation, known as SAFETEA-LU, which expires October 1, 2009. States and localities that suffer major congestion would be free to focus their resources on congestion mitigation, while those who are relatively congestion-free could devote their resources to other priorities. However, should Congress conclude that congestion has become a problem of national significance, a congestion mitigation program would become a major focus of the next reauthorization, the report states.

The question may already have been settled. The U.S. DOT, through its "National Strategy to Reduce Congestion," has made congestion mitigation a central element of the federal surface transportation program. Equally important, the need to eliminate truck bottlenecks and reduce congestion in heavily traveled interstate truck corridors has been recognized by the transportation community as a national priority. Indeed, if the second half of the 20th century was characterized by a national effort to create a continental highway system, the first half of the 21st century may become known as an era of a concerted national effort to prevent that highway system from becoming hopelessly gridlocked.

Congestion Initiative Update

Nine cities have been selected by the U.S. Department of Transportation as semi-finalists in the "Urban Partnerships" program. Thereby, the U.S. DOT is seeking proposals from metro areas to implement a comprehensive policy response to urban congestion, including demonstrations of variable tolling or congestion pricing, enhanced transit services such as bus rapid transit, increased use of telecommuting, and deployment of advanced Intelligent Transportation Systems (ITS) technology. From the nine semi-finalists the Department plans to select up to five "Urban Partners," which it will support with financial resources, regulatory flexibility, and technical assistance. The nine semi-finalists are Atlanta, Dallas, Denver, Minneapolis-St, Paul, Miami, New York City, San Diego, San Francisco and Seattle. Winners will be announced in mid-August. The program commands significant discretionary resources. These include up to $100 million from the ITS Congestion Mitigation Operational Testing program; up to $30 million from the Value Pricing Program; up to $260 million in other Federal Highway Administration discretionary funds; up to $715 million in Federal Transit Administration discretionary funds; and $150 million in President's FY08 energy budget proposal -- for a total of over $1.2 billion.

Of all the proposed urban partnership projects, New York's proposal to implement congestion pricing in Mid- and Lower Manhattan is attracting the most attention as the boldest and most challenging of the initiatives. Combining as it does "cordon pricing" (i.e. a charge for entering a cordon area, as in the case of Stockholm) and "area pricing" (i.e. a charge for moving inside an area, as in the case of London) it is more sweeping in its breadth than anything that has been implemented to date.

The Mayor's proposal has been greeted with applause by some and deep skepticism by others. To many skeptics, the mayor's proposal seems more like a giant revenue raising scheme than a targeted congestion reduction initiative. The project would generate $380 million a year, to increase to $900 million/year by 2030, but it would reduce traffic within the charge zone by a mere 6.3 percent, according to Mayor Bloomberg's staff.

Most polls show a majority of New Yorkers (but not residents of Manhattan) opposed. State lawmakers, who must approve the proposal before it becomes law, are reported to be undecided. Opposition to congestion pricing runs deepest in the Assembly, many of whose members from the boroughs outside of Manhattan and from the city's suburbs view congestion charges as just a commuter tax by another name.

At a public hearing in Manhattan on June 8, state legislators gave a cool reception to Mayor Bloomberg's proposal. Assemblymen Herman Farrell, Jr. (D) and a dozen of his colleagues raised the familiar concerns such as the fairness of the congestion charge and its regressive effect on low income drivers, the ripple effect the program would have on neighborhoods just outside the charging zone and the threat to privacy inherent in having hundreds of cameras photographing license plates for billing purposes.

Although the project has been represented as a three-year demonstration, lawmakers at the hearing pointed out that the Mayor would retain entire discretion whether or not to continue the project. Also controversial are the huge start-up costs which could eat up most of the anticipated $500 million federal Urban Partnership grant.

Whether the legislature can act upon the congestion pricing proposal by the June 21 end of the regular legislative session is not certain. The city runs the risk of losing the federal grant if the mayor's plan does not obtain legislative approval by mid-August when the U.S. DOT plans to announce the winners of its Urban Partnership competition.

TECHNORATI TAGS: TRAFFIC CONGESTION, SAFETEA-LU, URBAN PARTNERSHIPS, NEW YORK, MICHAEL BLOOMBERG, CONGESTION PRICING, SEATTLE

The San Jose Mercury News carries the full Associated Press story on the recent opening of the 21-mile Loetschberg Base Tunnel. Billed as the world's longest land tunnel, it is a trainway built through the Alps to ease road congestion and deliver skiers twice as quickly from south of Bern to the gateway town of Visp near the Zermatt and Gourmayeur ski regions of Switzerland and Italy, respectively. The tunnel's cost in U.S. dollars: $3.5 billion. Passenger trains will reach speeds of 150 miles per hour in the tunnel; freight trains 100 mph. BBC reports the tunnel will eventually handle up to 42 passenger trains and 80 frieght trains per day. A picture of the tunnel's construction is below, right. AP notes:

Switzerland is at the center of a north-south European axis where traffic has increased more than tenfold since 1980. The Swiss have tired of traffic jams caused by big rigs and vacationers filling their narrow valleys, and the rail plan has remained popular despite running billions of dollars over budget. "We did not want to become part of the road corridor for 40-ton trucks streaming north and south, and so decided to opt for rail tunnels," (Swiss Transport Minister Moritz) Leuenberger said.

A planned twin train tunnel was not built due to cost constraints, but had it been, even at an additional cost of twice the one built, the total cost per mile would have been $500 million. (For now, trains going in different directions will take turns using the tunnel).

Globally, train and roadway tunnels are being built in a variety of locales, at costs per mile far less than the $3.4 billion estimated for the (mile-long) downtown Seattle waterfront tunnel to replace the crumbling and earthquake-prone Alaskan Way Viaduct section of the regional aterial, State Route 99. That proposal was firmly rejected by local voters in an advisory March ballot measure, but as the Seattle Post-Intelligencer reported last month, an inland tunnel replacement for the viaduct's stretch of SR 99 - as opposed to a waterfront tunnel like that rejected by voters - is being discussed.

Some downtown businesses are talking about another tunnel replacement, dug several blocks east of the waterfront with boring machines rather than formed in an open trench, to avoid shutting waterfront businesses. "We shouldn't discard any ideas at this point," said John Blackman, chairman of Argosy Cruises and head of a waterfront historical group.

The idea of an inland tunnel replacement for the viaduct, combined with surface-transit improvements and perhaps even tunnel tolling as part of a larger regional tolling strategy, is likely to get further consideration in coming months. Limiting taxpayer exposure on tunnel costs via state-of-the-art "deep boring" tunnel technology and by private investment will likely be part of that coming conversation.

Economist Glenn R. Pascall, a regular guest op-ed columnist for the Puget Sound Business Journal outlined the case for an inland tunnel to replace the Viaduct in a piece he wrote for that publication shortly after the advisory vote. (As he acknowledges in the op-ed, Pascall also is advising our Cascadia Center For Regional Development on viaduct replacement strategies).

The question is whether there is a way to liberate the part of the city that has been violated by the viaduct, while maintaining essential transport capacity, holding construction disruption to an absolute minimum, and financing the project's dollar cost in the very low billions. There may be an answer: the Bored Tunnel Alternative. Truth in packaging: I've been working as an adviser to a group that has been examining alternatives over the past few months and has focused on this one as the most promising. Members of the dialogue include Bruce Agnew, director of the Cascadia Center; John Wilson, a principal at the Gallatin Group; and Gary Lawrence, a principal at Arup consultants....they are poised to put forth the case for such an approach soon.

Bored tunnels have been built around the world for decades, but the technology of boring machines (called "moles") has advanced by leaps and bounds in recent years. This has enabled larger diameters (up to 51 feet), increased productivity and greater control of ground movements in a wide variety of conditions. Recent bored roadway tunnels include the M30 tunnel in Madrid, the SMART tunnel in Malaysia, the 4th Elbe Crossing in Germany, and the A86 West Tunnel in Paris. This type of technology is being used in Seattle by Sound Transit on its Beacon Hill tunnel, and is proposed for the University Link Extension and for King County's Brightwater project.

Cascadia Center expects to soon announce the date for a fall roundtable discussion on an inland bored-tunnel replacement for the crumbling, unsafe and obtrusive, crime-friendly waterfront elevated viaduct now marring Seattle's downtown.

It is too early to say right now what would be a realistic cost estimate, though that - and firm taxpayer protections - must and will be part of any proposal brought forward.

But it is certainly not too early to say that if the Swiss can build a 21-mile train tunnel through the Alps for $3.5 million - and even granting that a more extensive dual tunnel might have cost as much as three times that figure - we ought not to presume that a stacked, bi-directional, four- to six-lane SR 99 lidded bypass running for a length of one mile or slightly less under downtown Seattle will be a budget-buster. Especially if private-sector partners help foot the bill.

The local debate will again become pitched, with the environmental lobby asserting we can make do quite well with no new viaduct or tunnel replacement for the old structure. It's true that surface and transit improvements will be an important piece of the viaduct replacement puzzle. But when the roadway is torn down, as it certainly will be, replacment capacity at or near the viaduct's 110,000 vehicles served daily must be created. Otherwise, the region's remaining major north-south artery, I-5 - already badly congested - will suffer crippling delays inimical to Puget Sound's economic competitiveness.

Ordinarily the National Governors Association (NGA) does not take a public position on statements made by individual congressional lawmakers. But, concerned about future transportation funding options, the NGA broke that rule recently to respond to a much-noticed warning from U.S. Rep. James Oberstar (D-MN) and U.S. Rep. Peter DeFazio (D-OR) against entering into public-private partnerships (PPPs), in which the legislators threatened to "undo" PPP agreements that did not conform to their conception of "the public interest."

In a June 15 response to the congressmen, NGA chair Gov, Janet Napolitano (D-AZ), NGA Vice Chair Gov. Tim Pawlenty (R-MN), were joined by Gov. Dave Heineman (R-NE) and Jennifer Granholm (D-MI), chair and vice chair respectively of NGA's Economic Development and Commerce Committee. They wrote:

"We believe Congress must work with states to advance our national transportation needs in a way that respects federalism and the states' role as the primary steward of our national transportation network."

"Fiscal pressures confronting the nation's transportation system have prompted governors to look beyond traditional funding mechanisms such as bonding and state tolling to help finance and deliver on transportation. Burgeoning capacity needs and escalating operating and maintenance costs are driving states to pursue innovative financing options to complement traditional financing tools."

The letter went on to say:

"While some governors may choose not to partner with the private sector ...we are concerned that your position on PPP agreements may have already hardened against them, which could make it more difficult for states to use this tool for transportation improvements."

Behind the governors' decision to take this unusual step was a sentiment that the Oberstar/DeFazio challenge to the principles of federalism must not remain unanswered. Couched in polite terms was an unmistakable message: "Do not meddle in what properly is the states' business. Let us be the judge of what is in our states' best public interest." The governors' strong reaction (an earlier version of their letter was even stronger, we've been told) could not have gone unnoticed.

But by inviting the congressmen "to engage constructively with the states" in a dialogue how to improve the state-federal partnership, the governors have left the door open to a less confrontational dialogue. We hope that future exchanges will avoid recriminations and focus constructively on how to address the budgetary shortfalls facing the state transportation programs.

As Rep. John Mica (R-FL), the committee's ranking member observed, Congress has failed to come up with adequate resources to help states meet their infrastructure funding needs, so states are moving on their own to fill the vacuum. For many states this means resorting to tolls to supplement existing sources of transportation revenue and soliciting private sector help to finance future highway capacity.

States have come to this conclusion not because they are ideologically committed to "privatization" but because, pragmatically, they view the prospects for significant increases in the fuel tax -- both at the state and federal level -- as remote in these times of record high fuel prices. If there are other ways out of the fiscal quandary, state officials assure us, they will be more than happy to explore them with congressional lawmakers.

(Note to readers: Ken Orski is a veteran observer and analyst of transportation policy and politics; he is based in the Washington, D.C. area. Cascadia Prospectus is pleased to have Mr. Orski on board as a new contributor. His bio is here; his first post for the blog is here).

TECHNORATI TAGS: PUBLIC PRIVATE PARTNERSHIPS, TRANSPORTATION FUNDING, STATES RIGHTS, NATIONAL GOVERNORS ASSOCIATION, JANET NAPOLITANO, TIM PAWLENTY, JENNIFER GRANHOLM, JAMES OBERSTAR, PETER DEFAZIO

By a vote 27 to 10, the North Texas Regional Transportation Council (RTC) recommended that the 26-mile SH 121 toll road project be awarded to the public North Texas Tollway Authority (NTTA) rather than to the private consortium of Cintra-JP Morgan Asset Management. The latter bidder had won the award in a competitive procurement process earlier this year.

The RTC decision has been widely condemned by the transportation community as wrong on substantive as well as fairness grounds. (See, for example, "A Tale of Two Texas Roads," by Robert Poole of the Reason Foundation). A formal decision is up to the Texas Transportation Commission (TTC) which will vote on the RTC recommendation June 28.

The Commission will be faced with a difficult decision. The U.S. Department of Transportation has questioned the propriety of allowing a competing proposal from NTTA to be considered after the procurement process had been closed and the project was awarded to Cintra/JP Morgan in a fair and open competition.

A letter from the Federal Highway Administration has warned that:

"If the project were awarded to NTTA, FHWA would be legally compelled to withdraw all federal funding from the SH 121 project."

In addition, as Robert Poole has pointed out, a decision to re-open the procurement process would send a message to the private sector loud and clear that there is a high political risk dealing in Texas. Poole writes:

"And that might send private toll road companies and untold billions of private capital to other fast-growing states that know how to play by the rules of fair competition."

The Texas Transportation Commission should take these arguments seriously to heart as it weighs the equities versus the political expediency of accepting or rejecting the advice of the regional planning body.

Elsewhere, impetus for private operation of toll roads continues to grow.

On June 20, Florida Gov. Charlie Crist announced that he had signed a bill that will allow private companies to build and operate toll roads. The measure passed 37-2 in the Senate and 68-49 in the House. The law will allow the state to enter into private concession agreements to operate existing toll roads (except for the Florida Turnpike) as well as build and operate new ones. Concessions will be limited to 50 years but could be extended to 75 years with legislative approval. The bill also permits automatic toll increases on existing and future roads to keep up with inflation.

Infrastructure is viewed by a growing number of pension funds as a source of a "steady, if unspectacular, stream of income," reports the Wall Street Journal in an article titled, "Investing in the Fast Lane." The article quotes one pension fund official as saying that infrastructure should deliver "fairly predictable, stable returns." But, warned Mark Weisdorf who heads the infrastructure fund of J.P. Morgan Asset Management, there are political and regulatory risks.

"Governments can change their minds about how and whether to proceed on deals with the private sector."

Weisdorf here makes an obvious allusion to the shadow cast on public-private partnerships by the North Texas RTC recommendation to nullify the Cintra award of the SH 121 project. Tomorrow will tell whether the Texas Transportation Commission sets things right; or not.

UPDATE, 6/29/07: Yesterday, the commission decided to affirm the reversal of the earlier decision to award the contract to the private partnership.

TECHNORATI TAGS: TEXAS, FLORIDA, TOLL ROAD, PRIVATIZATION, CINTRA, FEDERAL HIGHWAY ADMINISTRATION, CHARLIE CRIST