Two Cities Exploring ‘Innovative Transport Financing’ For New Rail Lines

The House transportation committee is holding a hearing today on "innovative financing" for infrastructure projects — a topic near and dear to lawmakers who continue to hunt for a politically feasible, sustainable strategy for funding a new six-year federal transport bill.

dal_lrt_pax_deboard_Akard_stn_v2x2_DART.jpgRiders in Dallas, where a public-private partnership could be the ticket to a new expansion. (Photo: JCWinnie.biz)

Meanwhile, in the Denver and Dallas metro areas, planners are edging toward public-private partnership agreements to pay for new rail lines, a prospect all but ruled out in a November analysis by the Government Accountability Office that cast significant doubt on the potential for private-sector transit funding.

Denver officials hope to accomplish the tricky feat of wooing private capital to transit by executing a deal directing sales-tax revenue to the winning bidder, which would provide immediate financing and collect operating profits. From yesterday’s Dow Jones report:

Denver’s transit agency hopes to skirt the dilemma by using a portion of its
dedicated sales-tax revenue to essentially lease the completed rail lines,
vehicles and maintenance facility from the winning investment group under a 40-year agreement, in exchange for the up-front investment and ongoing operation.

If the plan comes to fruition, the agency will maintain ownership of the
project and control over fares, but provide the investors with a profitable,
long-term revenue stream. …

The arrangement, known as "availability financing," is relatively commonplace
in Europe but has been used only rarely in the U.S., where privatization of
public infrastructure and services in general has been much slower to catch on.

In Dallas, the local transit agency is weighing a plan to expedite construction of a new rail line with no upfront contribution from the public. The proposed link between Fort Worth and Wylie, Texas, known as the "Cotton Belt," would be paid for using "value capture" taxation methods that aim to harness the economic benefits of rail for local businesses.

But as the Dallas Morning News noted last week, the new financing pitch "would most likely include much steeper fares for the Cotton Belt [and] paid parking." From Michael Lindenberger’s local report on the transit expansion:

Dallas City Council member Ron Natinsky urged colleagues to embrace the idea, and said he was ready to vote Thursday.

"There is no downside here," he said. "This simply says we’re going to
solicit bids. Those bids have to be returned, and if they aren’t to our
liking, we can turn them down. And we’re no worse off than we are now."

No matter who is in charge of negotiating the deal, a
privately financed rail line will represent a seismic shift in how
passenger rail is built in Texas, just as Gov. Rick Perry’s pursuit of
privatized toll roads has transformed the way those roads are paid for.

As with toll
road deals, private partners who invest in rail lines would insist that
every service decision – from ticket costs, to station locations, to
schedules and parking fees – be examined with an eye on how much
revenue they could produce. 

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