Effect of Public-Private Partnerships and Nontraditional Procurement Processes on Highway Planning, Environmental Review, and Collaborative Decision Making (2013)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

10 Overview The primary goals of the SHRP 2 Capacity focus area include promoting best practices and encouraging innovation and col- laboration throughout transportation decision making and project development processes. Therefore, the Transportation for Communities—Advancing Projects through Partnerships (TCAPP) initiative has established the Decision Guide, which is a four-phased structure of key decisions common to the devel- opment of all transportation projects through the completion of the environmental review process that typically culminates in a record of decision (ROD) or finding of no significant impact (FONSI). TCAPP is now known as PlanWorks. (For a glossary of relevant terms, see Appendix A.) Problem Statement The specific purpose of this research study was to assess the interplay between the use of public–private partnerships (P3s) and transportation and environmental planning processes to identify whether P3s should be considered as a means to pro- cure transportation improvements and how and when they should be considered. The framework of the established Deci- sion Guide was considered throughout this process, with spe- cial attention paid to how P3 procurements interface with and influence it. The research for SHRP 2 C12 was conducted from the perspective of two outcomes: • The primary product of the research is a report on the nature, timing, and implementation of P3 projects. Experience in the United States demonstrates that there is a great deal of flexi- bility in the use of P3 strategies, and the report explores the different points in the overall project development process when private involvement can be introduced. • The second aspect of the research involved identifying points in the Decision Guide when it is beneficial to con- sider the use of P3s in developing projects and ultimately mapping the findings on the implementation of P3 projects to the various steps in the Decision Guide. The report also explores other types of nontraditional contracting arrange- ments and their effect on the project development process as set forth in the Decision Guide. Although this project envisioned a discussion of funding mechanisms other than P3s, the research found that except for P3 projects, the NEPA process does not differ for public toll projects or other public projects funded in nontraditional ways. The type of funding a project uses does not change the trans- portation planning and NEPA processes. Rather, it is the parties to the process that lead to a different dynamic. For example, a private participant is typically driven by financial pres- sures to be more concerned about implementation time and certainty of outcome. The complexity of the typical P3 trans- action also has implications for project timing and decision making. Finally, the range of P3 projects includes many of the nontraditional funding sources that could also be used by states without private-sector involvement. Thus, to some extent, these matters are covered by the discussion of P3s. (For a literature review and additional P3 resources, please see Appendix B.) P3s: Current Context In the United States, the private sector historically has played an important role in highway construction operation and financ- ing through the mid-part of the 19th century. Although pri- vately financed motorways are common in countries around the world, they have not generally been favored in the United States. There are two primary “drivers” behind this trend: the prohibition of tolling on the interstate highway system intro- duced in the 1956 Interstate Highway Act (with the exception of legacy toll facilities) and the municipal debt market, which enables public agencies to obtain cheaper, tax-exempt debt compared with commercial credit markets that are available to private investors. However, beginning in the 1990s, a small number of privately financed design–build–finance–operate–maintain (DBFOM) C h a P t e r 1 Introduction and Orientation

11 are currently under construction, representing a collective investment of over $13.1 billion. This demonstrates that P3 procurement has indeed accelerated over the past 5 years and is now being used to deliver larger and more complex projects. In addition to the projects included in the table, five publicly procured toll facilities have been leased to private investors, providing the public sponsors with over $8.3 billion in pri- vate money. As state governments continue to face budget gaps and revenue shortfalls, their interest in tolling and use of P3 procurement to deliver highway improvements continues to grow. As the research concluded, 32 states and Puerto Rico toll roads began to be built in the United States, due in part to the added financing flexibility provided by the Intermodal Surface Transportation Efficiency Act of 1991. This act allows federal funds to be used to support the construction of new noninterstate toll highway, bridges, and tunnels. This act also allows the use of congestion pricing on designated highway lanes, including those on the interstate system on a demonstra- tion basis. As shown in Table 1.1, as of October 2012, 11 highway proj- ects with a combined construction value of over $2.7 billion have been developed through P3 concessions or on strictly private bases. An additional eight P3 toll facility concessions Table 1.1. U.S. P3 Highway Projects in Operation and in Construction, as of October 2012 Project State Type Location Value (millions) Distance (miles) Operating P3 Projects 1 Alabama River Parkway Ala. New private toll road Montgomery County $12 5.8 2 Black Warrior Parkway Ala. New private toll road Tuscaloosa County $25 6.4 3 Emerald Mountain Expressway Bridge Ala. Private toll bridge Montgomery County $4 2.4 4 Foley Beach Expressway Ala. New toll highway Foley $44 13.5 5 SR 91 Express Lanesa Calif. New priced managed lanes Orange County $130 10 6 South Bay Expresswaya Calif. New toll highway San Diego $658 9.3 7 Camino Columbiaa Tex. New toll highway Laredo $90 21.8 8 SH 130 Segments 5 and 6 Tex. New four-lane toll highway Austin $1,328 40 9 Adams Avenue Parkway Utah New toll road and bridge Ogden $10 1 10 Dulles Greenway Va. New toll highway Northern Virginia $350 14 11 South Norfolk Jordan Bridge Va. New two lane high-level bridge with shoulders Chesapeake $100 1 Total $2,750 125.2 P3 Projects in Construction 1 Presidio Parkway (Phase II) Calif. Six-lane roadway San Francisco $456 1.5 2 I-595 Express Corridor Improvements Project (595 Express) Fla. Three reversible HOT lanes Fort Lauderdale $1,834 10.5 3 Port of Miami Tunnel Fla. Subaqueous tunnel Miami $1,113 1 4 I-635 LBJ Managed Lanes (LBJ Express) Tex. Six new elevated managed lanes Dallas $2,615 13 5 North Tarrant Express Tex. Four new managed lanes, two general purpose lanes, four frontage road lanes Dallas–Fort Worth $2,043 13 6 I-495 Capital Beltway HOT Lanes (495 Express Lanes) Va. New four-lane HOT facility in median Northern Virginia $2,068 14 7 I-95 Express Lanes Va. New two- and three-lane reversible HOT facility in median Northern Virginia $938 29.4 8 Downtown Tunnel/Midtown Tunnel/ MLK Extension Va. New tolled tunnel and related improvements Norfolk/Portsmouth $2,089 2.5 Total $13,156 84.9 a Sold to a public agency. Source: Parsons Brinckerhoff, October 2012.

12 had enacted P3 authorization legislation, and several of these bills have been either enacted or expanded in the past 6 years (Rall 2012). Although the total number of P3 projects remains just fraction of overall investment in highway infrastructure in the United States, their number is likely to increase. Overview of the tCaPP Decision Guide The SHRP 2 Capacity focus area is underpinned by the SHRP 2 Project C01, A Framework for Collaborative Decision Making on Additions to Highway Capacity. TCAPP established a col- laborative decision-making framework that is associated with planning and gaining environmental approvals for transpor- tation projects. Now known as the PlanWorks Decision Guide, this framework was designed to enhance collaboration in deci- sion making for highway capacity expansion projects. The Decision Guide identifies the following four phases associated with the transportation planning and environmen- tal review processes: 1. Long-range planning. This phase establishes the founda- tion that is made throughout the decision-making process, effectively connecting planning to project implementation. Stronger public understanding is one of the key benefits to this approach. 2. Programming. The Decision Guide aims to create a pro- gramming process that both informs and is consistent with long-range planning. 3. Corridor planning. Corridor planning draws appropriate data, analysis, and decisions from the long-range planning phase and provides a finer scale of consideration to support environmental review under the National Environmental Policy Act (NEPA). 4. Environmental review/permitting. The Decision Guide connects the procedural steps of NEPA, other environ- mental statutes, and permitting to the decisions that are made in long-range planning, corridor planning, and programming. Within the four-phase structure, the Decision Guide lays out 44 individual decisions that must be made throughout development. Within each phase, the Decision Guide outlines the interests of all parties involved in the collaborative process, and within each specific decision, the guide considers ques- tions that must be addressed to ensure that the collaboration covers each party’s interests. The Decision Guide also outlines several key external pro- cesses, such as P3 arrangements to be considered at key deci- sion points in the development of transportation projects. See www.transportationforcommunities.com for further information. Structure of the report The report is organized into seven chapters, including this introduction. Chapter 2 describes the different forms of P3 arrangements and recent developments in transportation partnership projects in the United States, as well as the attrac- tion of P3 projects for both the public and private sectors. Chapter 3 presents the legal and regulatory issues associated with P3 project implementation, including those issues required by both planning and NEPA processes. The chapter also discusses the financing options available with P3 procure- ments and their influence on the use of different P3 models. Chapter 4 discusses the many challenges associated with imple- menting P3 projects, from obtaining enabling legislation to fielding the new responsibilities P3 projects introduce to spon- soring agencies to coordinating projects with both planning and NEPA processes. Chapter 4 also includes a discussion of the impediments to public acceptance that can be expected with P3 projects, along with a presentation of strategies to overcome impediments. Chapter 5 introduces a key distinction made during the research effort and focuses on the difference between making a decision to procure a project on a P3 basis and the consid- eration of P3 delivery as an option for moving transportation infrastructure projects forward. The chapter also presents dis- cussion of the study’s finding that it is best to consider the pos- sible use of P3 procurement as early as possible in the TCAPP process, and to use the Decision Guide process to vet that possibility. This is followed by discussions of P3 procure- ments before or during NEPA and decisions to use P3 deliv- ery after NEPA completion, including respective advantages and disadvantages. Chapter 6 interprets the research findings to suggest a series of strategies for facilitating and encouraging the early consid- eration of P3 project delivery. These include • Incorporating tolling in the state and regional planning processes; • Including the assessment of tolled alternatives in NEPA analyses; • Aligning the definition of highway projects during NEPA reviews with their potential to generate toll revenues and any other funding available for their implementation; and • Managing the NEPA process to afford greater flexibility for innovation once it has been completed. Chapter 6 concludes by setting forth a vision for incorporat- ing these strategies in the Decision Guide process. Chapter 7, which is the final chapter, identifies specific recommenda- tions for integrating the consideration of P3 delivery for high- way improvements within the 44 steps that make up the Decision Guide.