Cascadia Prospectus

A recent series of events, notably an invitational conference on Public-Private Partnerships convened by the National Conference of State Legislatures (NCSL), has focused attention on the role of public-private partnerships (PPPs) in transportation, and underscored once again the need to more clearly define  the proper federal role in PPP oversight.

The NCSL Conference on Public-Private Partnerships. For the past 18 months, a working group of the National Conference of State Legislatures has been studying domestic and international experience with public-private partnerships. The group's objective has been to provide state legislators with an informed and objective appraisal of PPPs-- something that the NCSL believes has been missing from the public dialogue. "Boosters and detractors of PPPs have dominated public debate," states NCSL, "while reasoned voices have been hard to discern."

To share its findings with the transportation community and seek its input, the NCSL invited an influential group of state legislators and leading members of the transportation community to a meting on March 26 to consider the next steps. Opening speakers featured Jane Garvey chairman of the investment fund Meridiam Infrastructure (North America) and the recently appointed board chairman of the Bipartisan Policy Center; former Secretary of Transportation Mary Peters; and U.S. DOT's Regina McElroy, Director of the Office of Innovative Program Delivery. Co-sponsoring the meeting was UK Trade and Investment (UKTI), the economic  development arm of the British Government. The NCSL program was designed as a US-UK government-to-government dialogue.

The formal presentations and subsequent breakout group discussions evidenced strong support for the use of PPPs as a method of financing transportation infrastructure. However, support for PPPs was conditioned on the need to protect the public interest in PPP transactions.  A key theme running through the discussions was the appropriate state and federal role in protecting that interest.  The tenor of the day-long discussions could be summarized as follows:

The discussions proceeded from the assumption that state legislatures are primarily responsible for deciding whether and on what terms states can enter into public-private partnerships. Currently, 28 states have PPP enabling statutes. These statutes are designed  to guide PPP implementation and ensure through  groundrules for the contracting process and bidding procedures that the public interest is properly protected. State legislation also provides for legislative oversight--typically on a program rather than project basis, although eight states require individual PPP proposals to be approved by the state legislature. State executive agencies are responsible for negotiating specific contracts with the private parties. Key provisions that protect the public interest in PPP contracts include length of concession, bidding procedures, performance standards, toll policies, labor protections, revenue sharing, risk allocation, use of toll proceeds, transparency, and public participation.

The federal role in PPP oversight is less clear. As a financial partner in PPPs (through TIFIA, Private Activity Bonds, TIGER grant program and other financial mechanisms) the federal government  has a legitimate interest in and shares the responsibility for protecting the public interest. But a highly regulated oversight of PPPs at the federal level would preempt state authority and could have, in the words of more than one speaker, a "chilling effect" on private sector participation in infrastructure investment.

The proposed federal Office of Public Benefit (OPB), which would have the authority to approve or disapprove all tolling and PPP projects on a case-by-case basis, came in for special criticism. OPB represents "regulatory overreach" that could stifle partnership initiatives and  discourage private investment in infrastructure,  many participants asserted. Private investors, it was alleged, may be reluctant to develop costly project proposals if there is a risk that federal approval will be withheld even though the project conforms to all state legislative requirements and has been selected and approved by the governor and the state DOT.

Striking the proper balance between the federal interest in protecting the public interest and the states' right to determine the appropriate level of private sector participation and to exercise oversight over the contractual PPP process will be a critical challenge in designing future federal legislation. The prevailing sentiment among the conference participants was that the proper federal role should be one of encouraging rather than inhibiting public-private partnerships. The responsibility to regulate PPPs and ensure that they protect the public interest should be reserved to the states.

With the City of Woodinville's support, Seattle's Eastside this week took one more step toward realizing a vision for a dual use rails and trails corridor along the 42-mile Eastside corridor. The Woodinville City Council passed a resolution expressing its support for an idea long supported by Cascadia Center. From the resolution:

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WOODINVILLE, WASHINGTON, DOES RESOLVE AS FOLLOWS:

Section 1. Support of Dual Rails and Trails Use of the Eastside Rail Corridor. The Woodinville City Council supports dual rails and trails use of the entire Eastside Rail Corridor, including the main line between Snohomish and Renton; and the spur between Woodinville and Redmond.

Section 2. Support of Dual Rails and Trails Use by All Communities. The Woodinville City Council encourages all agencies and communities along the Eastside Rail Corridor, including the mainline and the spur, to actively support dual rails and trails use of the corridor.

There is more to do, of course. But this is an important step in the creation of a functioning North-South corridor that would have an immediate positive effect and that would extend to future generations on Seattle's Eastside.

Source: WSDOT

Optimists always like to look for the positive, even in the most dire of situations. Even so, you almost hate to talk about silver linings with regard to the slow economy that has hurt so many individuals, families and businesses. But the lower-than-expected bid that came in yesterday for replacing a section of the Alaskan Way Viaduct just might fall into that category. The Seattle Times reports that all of the bids to replace the Sodo section of Viaduct "were below the state engineers' estimate of $153 million, a reflection of the recession making construction companies hungry for business."

"....We have the benefit of being in one of the most favorable environments for affordable, low-cost construction bids and we need to take advantage of them now," Gov. Chris Gregoire said. "The fact that today's bids for the south mile of the project came in millions below our estimates is proof of that."

The project manager for the Viaduct told the Seattle Times that this "could be a sign the bid for a proposed tunnel under the central waterfront also could come in under estimates." And Washington State officials say "about 600 construction jobs" will be created by the Sodo project.

Jobs. Cost-savings. Important infrastructure work being done. Maybe, despite the surrounding economic gloom, it's okay to find the silver lining.

Seattle Times editorial columnist Lance Dickie just penned a strong piece about the Eastside Rails and Trails issue -- the 42-mile corridor that connects Seattle's Eastside communities. It's the same corridor that Cascadia Center has been encouraging be used for both rails and trails.

Bruce Agnew, policy director of the Discovery Institute's Cascadia Center, has a ready answer: Rails and trails must be done simultaneously. It is the only way Agnew sees it happening.

He views the Cascadia Center as the neutral broker among a variety of public entities and potential users of the corridors. The center is a longtime proponent of rail from Eugene to Vancouver, B.C., and has actively led discussions and hosted field trips on the possibilities for the Eastside corridor.

Agnew, consultant Thomas M. Jones of TMJ Group, LLC, and Loren Herrigstad, president of All Aboard Washington, have crunched the numbers to find competitive estimates for refurbishing tracks, building and paving a bike trail and developing commuter service.

I'll let the article do the talking. Here it is.

Hoping to sustain interest in the Committee's efforts to enact a new multi-year transportation bill during this session of Congress, Reps. James Oberstar (D-MN) and Peter DeFazio (D-OR), leaders of the House Transportation and Infrastructure Committee, convened a hearing on April 14 to explore innovative ways of financing highway and transit investments. But while the hearing provided a useful survey of available financing tools and programs, it produced no new answers to the key question that has bedeviled transportation advocates for many months and remains as the chief obstacle to moving the legislation forward-- the question of how to pay for the proposed multi-year surface transportation program.

The Administration's opposition to increasing the current 18.4 cents/gallon federal gas tax-- the most obvious means of generating the needed funds-- was reiterated once again at the House hearing by Christopher Bertram, U.S. DOT's Assistant Secretary for Budget and Programs. The White House has also announced its opposition to any additional taxing of motor fuel as part of the Senate energy legislation. "The Senators don't support a gas tax, and neither does the White House," the White House said in a statement, thus squelching any secretly entertained hopes that the energy bill might offer a backdoor way of raising the gas tax in the guise of a " carbon fee." (The proposed Kerry-Graham-Lieberman energy plan reportedly would have called for an additional levy of 15 cents/gallon. To fully fund the proposed $500 billion six-year transportation bill would require approximately a 20 cents/gallon increase in the gas tax.)

White House opposition to a gas tax increase is only one of several obstacles standing in the way of an early passage of a multi-year law. Three other factors make passage of the legislation this year unlikely:

1. The Senate faces a crowded legislative agenda that includes confirmation hearings for a Supreme Court justice and consideration of the Finance Reform Bill in addition to the energy bill. The likelihood of taking up a multi-year transportation bill on top of that busy agenda in the 60 legislative days remaining before the pre-election congressional adjournment, appear remote according to congressional observers.

2. Passage of the HIRE Act has taken the pressure off the lawmakers to move the multi-year bill this year. The Act not only has extended the existing law until the end of December 2010; it also has transferred $19.5 billion from the General Fund into the Highway Trust Fund and restored an earlier $8.7 billion rescission of contract authority. The latest projections by the Congressional Budget Office indicate that the General Fund transfer, when added to the projected revenue stream from the gas tax, is expected to support highway and transit programs at the levels authorized for Fiscal Year 2009 through the end of Fiscal Year 2012 and into FY 2013 (Congressional Budget Office, "Highway Trust Fund Projections, March 19, 2010.) Our own reading of the CBO projections suggests that both the Highway Account and the Transit Account of the Trust Fund could remain solvent as long as the second or third quarter of Fiscal Year 2013. With assured funding possibly through mid-2013, the case for passing a multi-year transportation bill this year has become less than compelling. In an unspoken acknowledgment of this state of affairs, many interest groups have quietly dropped their efforts to lobby for enactment of the reauthorization bill this year.

3. Last but not least, there are no signs of a popular outcry about the stalled transportation authorization. Despite extensive documentation of the needs for new infrastructure investments (notably, U.S. DOT's 2008 Conditions and Performance report and the findings of the two commissions established by Congress to study future transportation funding needs) there seems to be no sense of urgency on the part of the public to embark upon a massive program of infrastructure modernization. Signs of aging infrastructure are kept largely hidden from view thanks to diligent efforts by state and local highway agencies to maintain their assets in good repair. In the absence of any visible signs of system deterioration, warnings by advocacy groups about "crumbling infrastructure" are falling on deaf ears. The recent injection of some $50 billion of federal funding into surface transportation in the form of Recovery Act (ARRA) stimulus funds, TIGER Discretionary Grants and High Speed Rail grants has further weakened the argument that the transportation sector is not receiving adequate attention and that we are vastly under-funding our transportation needs.

Leveraging Future Revenue Streams

Although the House hearing shed no new light on how to generate new revenues for the federal-aid transportation program, it sent a strong message that innovative financing methods can help expedite project delivery and offer other benefits to the public. Under traditional methods of financing, transportation projects are completed on a pay-as-you-go basis: projects are built incrementally as public funds become available over a period of years. Using financing tools, notably tax-free bonds, state and local transportation agencies can gain immediate access to the funds necessary to advance projects into construction, and use their traditional funding or project-generated revenue streams to liquidate the indebtedness over time. While toll revenue is often used as security (collateral) in highway financing, project-generated user fees are not the sole means of backing debt issuances for transportation projects. Other types of security include dedicated sales tax revenue, future federal grants and revenues derived from tax assessment districts, transit-oriented development and other "value capture" projects. As Philip Washington, General Manager of the Denver Regional Transportation District testified, this has enabled transit agencies to gain access to private capital even though transit lacks sufficient project-generated revenue to use it as collateral for long-term debt obligations.

Photo Source: The Kitsap Sun

Seattle's Center for Wooden Boats was the setting Thursday evening for a gathering of passenger-only ferry advocates, including those from Kingston and King County, Wash., and the U.S. federal government.

The well-attended event (followed by an Ivar's Seafood-sponsored reception) was organized within the specific context of a new passenger-only service between Kingston and Seattle, and a broader context of supporting more service throughout the region. The Port of Kingston will launch passenger-only service between Kingston and Seattle this fall. (This article in the Kitsap Sun offers details about the new service.)

Capital funding for the new link came from the U.S. Federal Transit Administration. The Port has also developed public-private partnerships to cover initial operating costs. It will, as reported in the Kitsap Sun, "cater to commuters" at first, cutting down on travel times for those who commute to Seattle.

The Port of Kingston's Eric Osnes told the audience assembled at the Center for Wooden Boats that though this new route will connect Kingston and Seattle, they "don't see this as a Kingston-only ferry." Echoing what many have said about a regional approach to the issue, he said he and the Port are interested in the "whole logistics chain not just to Seattle, but beyond." Designed with commuters in mind, Osnes told the crowd that the new Kingston ferry will allow commuters to travel between Kingston and Seattle in 45 minutes and will initially offer two morning and two evening departures.

Cascadia Center has advocated for expanded passenger ferry service for years, having launched the Passenger Ferry Coalition aboard the Royal Argosy on July 1, 2003, with U.S. Senator Patty Murray, U.S. Representative Norm Dicks, and 300 community leaders. Reduction in greenhouse gases, well-paying careers in local marine manufacturing, advancing technology and tourism are just some of the reasons the organization has supported expanded service. Early on Cascadia Center suggested a "Return of the Mosquito Fleet," a theme articulated in this 2008 op-ed.

Though building a network of passenger-only ferries in the Puget Sound is a long process, the new service between Kingston and Seattle, is an important piece of the puzzle. And if the excitement on display at Thursday's event is any indication, communities throughout the Puget Sound could follow in Kingston's footsteps. They'll have to in order to complete the puzzle and, as Cascadia's Bruce Agnew wrote in 2008, "to develop a Salish Sea Express regional foot ferry network transcending political boundaries...."