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Public-Private Partnerships

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 itsdedicated 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 theproject and control over fares, but provide the investors with a profitable,long-term revenue stream. ...

The arrangement, known as "availability financing," is relatively commonplacein Europe but has been used only rarely in the U.S., where privatization ofpublic 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 tosolicit bids. Those bids have to be returned, and if they aren't to ourliking, 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, aprivately financed rail line will represent a seismic shift in howpassenger rail is built in Texas, just as Gov. Rick Perry's pursuit ofprivatized toll roads has transformed the way those roads are paid for.

As with tollroad deals, private partners who invest in rail lines would insist thatevery service decision – from ticket costs, to station locations, toschedules and parking fees – be examined with an eye on how muchrevenue they could produce. 

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