Transit Public-Private Partnerships: Legal Issues (2014)

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The Problem and Its Solution The nation’s 6,000 plus transit agencies need to have access to a program that can provide authoritatively researched, specific, limited-scope studies of legal issues and problems having national significance and applica- tion to their business. Some transit programs involve legal problems and issues that are not shared with other modes; as, for example, compliance with transit- equipment and operations guidelines, FTA financing ini- tiatives, private-sector programs, and labor or environ- mental standards relating to transit operations. Also, much of the information that is needed by transit attorneys to address legal concerns is scattered and fragmented. Con- sequently, it would be helpful to the transit lawyer to have well-resourced and well-documented reports on specific legal topics available to the transit legal community. The Legal Research Digests (LRDs) are developed to assist transit attorneys in dealing with the myriad of initia- tives and problems associated with transit start-up and operations, as well as with day-to-day legal work. The LRDs address such issues as eminent domain, civil rights, constitutional rights, contracting, environmental con- cerns, labor, procurement, risk management, security, tort liability, and zoning. The transit legal research, when con- ducted through the TRB’s legal studies process, either collects primary data that generally are not available else- where or performs analysis of existing literature. Applications Public-private partnerships (PPPs) provide an increas- ingly important project delivery alternative in a public agency’s toolbox, as a way to implement and finance public projects. One attribute of PPPs is that they enable transit agencies to collaborate with private, for-profit entities to provide increased transit service. Partnering Legal Research Digest 45 TRansiT CoopeRaTive ReseaRCh pRogRam sponsored by the Federal Transit administration July 2014 TrAnSIT PublIc-PrIvATe PArTnerShIPS: legAl ISSueS This report was prepared under TCRp project J-5, “Legal aspects of Transit and intermodal Transportation programs,” for which the Transportation Research Board is the agency coordinating the research. The report was prepared by Larry W. Thomas, The Thomas Law Firm, Washington, DC. James B. mcDaniel, TRB Counsel for Legal Research projects, was the principal investigator and content editor. responsible Senior Program Officer: gwen chisholm Smith public and private entities share resources, risks, and rewards, and, in so doing, have the potential for allowing the public entity to leverage its funding and provide more transit service. Transit-related PPPs have the potential to involve complex concession agreements in which pri- vate entities may design, build, finance, operate, and maintain entire transit corridors or modalities for a transit agency. PPPs can also pose significant legal and practical challenges. Among issues that may arise are: • Risk issues. For example, PPPs may involve a private entity serving as a concessionaire but retain fare- setting power with the public entity. Such arrangements can raise issues regarding revenue risk allocation. • Tax and financing issues. To obtain financing and favorable tax treatment, the private entity may need to demonstrate ownership of the asset being devel- oped by the PPP, yet the public entity needs to main- tain continuing control of the project (among other reasons, to qualify for federal funds). • Federal and local legal issues. PPPs currently involve several major exceptions to standard federal laws and regulations. In addition, local laws may restrict or im- pact PPPs. Care must be taken to ensure that the PPP framework complies with Federal Transit Administra- tion requirements and other applicable legal provisions. • Insurance issues. PPPs may involve complex insur- ance arrangements and project-specific policies. • Labor issues. If a PPP includes a private entity per- forming transit operations or other related work, labor issues may need to be addressed by the partners. This digest should be useful to transit lawyers, planners, and transit administrators as they assist with negotiating PPP agreements and arranging for imple- mentation of PPP programs. TRanspoRTaTion ReseaRCh BoaRD OF THE NATIONAL ACADEMIES