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. HedlundChief Counsel

Federal Railroad Administration

Federal infrastructure bank Federal and state grants and loans Contribution of ROW Sale of equity Municipal tax bonds Foreign investment Buy America

Tools to implement PPPs

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The founding fathers of PPPs

Collis P. Huntington, the hardware storekeeper-turned-empire builder for the Central Pacific, late 1860s.(The Huntington Library: HEH 61/1/2/13)

Leland Stanford, one-term California governor and titular head of the Central Pacific, late 1860s. (California State Library: 8527)

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

Recent US PPP Precedent

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Ridership and revenue hard to predict• New market• Competition from air and highways• Network connectivity issues

Potential for long-term operating lossesVs. “Ramp up” period for new toll roads

Technology risk

Can highway model be adopted to rail?

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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

Additional issues

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Hudson-Bergen DBOM

Las Vegas Monorail

Denver Eagle P3 – in procurement

LA Metro Extension – in planning

Oakland Airport Connector – in re-procurement

Transit PPPs - unproven

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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

California High-Speed Rail Project

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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

CA – HSR: Request for Expressions of Interest

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“Availability payment” financings

◦Port of Miami Tunnel

◦Fort Lauderdale I-595 managed lanes

Florida deals show the way?

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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

Availability payments – apply to rail

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Tampa – Orlando High Speed Rail

First to leave the station -

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