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Private Investment in High-Speed Rail: Back to the Future

Private Investment in High-Speed Rail: Back to the Future. Amer ican Association of State Highway Transportation Officials Standing Committee on Rail Transportation  2010 National Meeting September 20, 2010. Karen J. Hedlund Chief Counsel Federal Railroad Administration.

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Private Investment in High-Speed Rail: Back to the Future

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  1. Private Investment in High-Speed Rail: Back to the Future American Association of State Highway Transportation Officials Standing Committee on Rail Transportation  2010 National Meeting September 20, 2010 Karen J. Hedlund Chief Counsel Federal Railroad Administration

  2. Tools to implement PPPs • Federal infrastructure bank • Federal and state grants and loans • Contribution of ROW • Sale of equity • Municipal tax bonds • Foreign investment • Buy America

  3. The founding fathers of PPPs Leland Stanford, one-term California governor and titular head of the Central Pacific, late 1860s. (California State Library: 8527) Collis P. Huntington, the hardware storekeeper-turned-empire builder for the Central Pacific, late 1860s. (The Huntington Library: HEH 61/1/2/13)

  4. Recent US PPP Precedent • Mostly highways and tollroads • CA – SR 91, San Diego Expressway, Doyle Drive • TX – I -35, 161, 635 • VA – Greenway and Pocahontas • FL – Miami Port Tunnel and I-595 • PPPs not “privatization” • Chicago Skyway • Indiana Tollroad • Northwest Parkway

  5. Can highway model be adopted to rail? • Ridership and revenue hard to predict • New market • Competition from air and highways • Network connectivity issues • Potential for long-term operating losses Vs. “Ramp up” period for new toll roads • Technology risk

  6. Additional issues • Role of freight and other ROW owners • Includes systems, equipment and operations • Major operator role re specifications • Multi-jurisdictional funding and governance • Liability • Safety – federal design standards and regulations

  7. Transit PPPs - unproven • Hudson-Bergen DBOM • Las Vegas Monorail • Denver Eagle P3 – in procurement • LA Metro Extension – in planning • Oakland Airport Connector – in re-procurement

  8. California High-Speed Rail Project • PPP investment - $10 – 25 billion (25% total) • Base revenue guarantee • Vendor financing – equipment leases • DB for construction risk transfer • Possibly DBOM (design-build-operate-maintain

  9. CA – HSR: Request for Expressions of Interest • Critical factors • Risk transfer • Public funding commitments • Public policy mandate • Clear P3 authority • No ROW, environmental risk • Ridership risk • Unique nature of project • Lack of comparable models • Could assume more after projections proven up

  10. Florida deals show the way? “Availability payment” financings • Port of Miami Tunnel • Fort Lauderdale I-595 managed lanes

  11. Availability payments – apply to rail • Public owner sets and retains fares • Some progress payments during construction and annual payments for term of agreement • Annual payments based on performance • Number of trains • Headways, OTB • Quality – cleanliness, customer service • Safety • Public obligor must be credit-worthy

  12. First to leave the station - Tampa – Orlando High Speed Rail

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