Public-Private Partnership Program
In November 2007, we investigated opportunities to attract and incorporate the concept of Public-Private Partnerships (PPP) into our Long Range Transportation Plan (LRTP) program of project delivery. This resulted in the development of a Framework and Work Plan for attracting partnerships with the private sector to help accelerate and finance our major transit and highway projects. The Board adopted the Public-Private Partnership Program Framework in June, 2008 and the Work Plan in September, 2008.
Metro’s Public-Private Partnership Program has as its centerpiece objective:
“Creation of a permanent, programmatic approach to identifying, assessing, and implementing projects utilizing private sector participation, with the overall goal of accelerating Metro’s delivery of transit and highway programs in Los Angeles County.”
Our Public-Private Partnership Program major goals are:
- Improving mobility by accelerating project delivery
- Utilizing cost effective procurement, contracting, and construction methods and reducing costs through earlier than otherwise project delivery
- Developing projects integrated with existing transit and highway infrastructure
- Allocating developmental, financial, construction and operational risks fairly and effectively
- Transferring certain project development and implementation risks to private partners while leveraging public resources
Eighty-one LRTP projects (32 transit and 49 highway projects) were evaluated by Metro and our consultant team, HDR/InfraConsult, for potential participation by the private sector. Using a two-step screening process based on project readiness and specific project attributes, we selected three highways and three transit projects for further assessment as candidates for the PPP Program. That assessment is completed, and the three highway projects have emerged as likely PPP projects.
In November 2008, Los Angeles County voters approved Measure R, raising the County sales tax by a half cent and committing the expected revenues ($35 billion over the next 30 years) to traffic relief and transportation upgrades throughout Los Angeles County.
Measure R helps fund dozens of critical transit and highway projects identified in our LRTP, including the projects evaluated in the PPP Program. Delivering the Measure R/LRTP projects could provide more than 210,000 new construction jobs, generate 341,500 jobs total, and stimulate an additional $46.3 billion in economic output, according to estimates by the nonprofit Los Angeles County Economic Development Corporation.
The Measure R half cent tax is just the latest self-help measure that County residents have voted in for our transportation projects, and together with existing Propositions A and C, brings the total local transportation revenue sources to 1 ½ cents of every dollar of sales tax generated in the County. These local funding sources contribute significantly to the delivery of our LRTP program, but as tax revenue, we are limited by the amount generated in each fiscal year. Therefore, the LRTP schedule is constrained by cash flow, or by how much money is forecasted to be available in a given year.
To the extent feasible and prudent, we are considering selling bonds and repaying these bonds over time with some of the sales tax revenues. Securing these bonds will enable us to build many of the Measure R projects early, but likely with a higher interest burden that what we hope to secure through federal infrastructure financing.
30/10 Initiative & America Fast Forward
Metro Board Director and Los Angeles Mayor Antonio Villaraigosa proposed what has become known as the 30/10 Initiative as a means to accelerate construction of 12 Measure R/LRTP transit projects and complete them within 10 years. Our adopted LRTP has these 12 transit projects under construction and opening over the next 30 years. (Hence, 30/10 – 30 years' worth of projects delivered in 10 years).
The 30/10 initiative asks Congress to develop a financing/funding mechanism to lend us money now, using our future sales tax revenue as collateral, so that projects can be built much sooner to make our region more sustainable and livable, improve our air quality, create jobs and stimulate our economy, and pursue our mobility goals. Accelerating construction will also result in substantial cost savings by beating inflation on labor and materials, and by taking advantage of currently weak demand for construction industry capacity.
This Initiative garnered broad support from the local business community, environmental organizations, unions and many of our local, state and federal politicians. To enhance the universality of the proposal, the Metro Board adopted the concept of America Fast Forward (AFF), promoting the use of federal tools that don’t require direct investments in infrastructure.
The AFF plan uses federal tax code incentives and credit assistance to promote these investments. In fact, in its latest transportation bill, MAP-21, the federal government adopted part of AFF, the expansion of the credit assistance program which is the Transportation Infrastructure Finance and Innovation Act (TIFIA).
Putting It All Together
PPPs provide the opportunity to secure new capital for our projects so they can be delivered earlier than originally planned, to share the risks of project delivery, to control costs and to provide accountability for full life-cycle costs of project operation and maintenance through comparison of public and private delivery models.
Measure R makes the PPP concept even more feasible as it provides a guaranteed revenue source for the necessary financial return on private capital investment and as collateral for federal loans.
30/10 Initiative & AFF provides additional public sector funds for PPP projects, making the projects more attractive to private sector equity and debt investors, as well as advancing funding for those projects which may be more suitable for the traditional public delivery model.
Combining the features of the 30/10 Initiative and enhanced TIFIA capacity with the benefits offered by PPPs provides us an opportunity to share project risks and leverage all funding sources, including Measure R, to even greater advantage, maximizing the project delivery tools now available to us and giving us substantial help in accelerating project delivery.
Last Revised: Friday May 17, 2013