The VTI National Transport Library Catalogue

Case studies of alternative approaches to project financing, act II Greene, Sharon et al

By: Greene, SharonPublication details: Transportation Research Board, 2001; Conference proceedings 24, Description: nr 24, s. 104-9Subject(s): USA | Conference | Light rail | Financing | Partnership | Public transport | J13Bibl.nr: VTI P9000:24Location: Abstract: Until recently, innovative financing techniques have seen relatively limited use for "new start" transit projects. Now, however, transit properties are starting to employ the GARVEE concept, whereby they pledge projected federal transit revenues to pay debt service. The Hudson-Bergen light rail project in New Jersey provides an example of this evolution, first pledging formula funds under the Section 5307 formula program, then Section 5309 fixed-guideway modernization funds (which are essentially distributed by formula), and finally discretionary funds under the 5309 new start process. An 8.9-km (5.5-mi) light rail extension to the Portland, Oregon, airport offers an example of another way of financing transit investment through nontraditional means. By bringing together a broad-based public-private partnership, sponsors of this bond-financed project were able to access a wide range of revenue sources, including airport passenger facility charges, tax increment funding, and private contributions that will ultimately be recouped through another key element of the overall project--a 120-acre real-estate development. Looking beyond these specific projects, the final speaker in this session noted that private-public partnerships and design/build/operate/maintain contracts often involve a transfer of risk for cost overruns, performance, and schedule from the public sector to the contractor. This action makes it incumbent on the public agency to ensure that its private partners have the financial capacity to bear the specified risks. Model guidelines, including appropriate thresholds and disclosure and surety requirements, could help public agencies zero in on salient indicators of financial capacity, reduce the private sector's cost to prepare bids, and ensure that risk exchanges occur not only in theory but also in practice.
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Until recently, innovative financing techniques have seen relatively limited use for "new start" transit projects. Now, however, transit properties are starting to employ the GARVEE concept, whereby they pledge projected federal transit revenues to pay debt service. The Hudson-Bergen light rail project in New Jersey provides an example of this evolution, first pledging formula funds under the Section 5307 formula program, then Section 5309 fixed-guideway modernization funds (which are essentially distributed by formula), and finally discretionary funds under the 5309 new start process. An 8.9-km (5.5-mi) light rail extension to the Portland, Oregon, airport offers an example of another way of financing transit investment through nontraditional means. By bringing together a broad-based public-private partnership, sponsors of this bond-financed project were able to access a wide range of revenue sources, including airport passenger facility charges, tax increment funding, and private contributions that will ultimately be recouped through another key element of the overall project--a 120-acre real-estate development. Looking beyond these specific projects, the final speaker in this session noted that private-public partnerships and design/build/operate/maintain contracts often involve a transfer of risk for cost overruns, performance, and schedule from the public sector to the contractor. This action makes it incumbent on the public agency to ensure that its private partners have the financial capacity to bear the specified risks. Model guidelines, including appropriate thresholds and disclosure and surety requirements, could help public agencies zero in on salient indicators of financial capacity, reduce the private sector's cost to prepare bids, and ensure that risk exchanges occur not only in theory but also in practice.

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