[Federal Register Volume 71, Number 55 (Wednesday, March 22, 2006)]
[Notices]
[Pages 14568-14571]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-2744]
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DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
[Docket No. FTA-2006-23697]
Public-Private Partnership Pilot Program
AGENCY: Federal Transit Administration (FTA), DOT.
ACTION: Notice; solicitation of comments and preliminary expressions of
interest.
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SUMMARY: Section 3011(c) of SAFETEA-LU authorizes the Secretary of
Transportation to establish and implement a pilot program to
demonstrate the advantages and disadvantages of public-private
partnerships for certain new fixed guideway capital projects. This
notice solicits comments and preliminary expressions of interest with
respect to the Secretary of Transportation's establishment and
implementation of the pilot program.
DATES: Comments and/or preliminary expressions of interest must be
received by June 1, 2006. Late-filed comments or preliminary
expressions of interest will be considered to the extent practicable.
ADDRESSES: To ensure your comments and/or preliminary expressions of
[[Page 14569]]
interest are not entered more than once into the DOT Jacket, please
identify your submissions by the following docket number: FTA-2006-
23697. Please make your submissions by only one of the following means:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for making submissions.
Web Site: http://dms.dot.gov. Follow the instructions for
making submission on the DOT electronic docket site:
Fax: 1-202-493-2478.
U.S. Post or Express Mail: Docket Management System, U.S.
Department of Transportation, 400 Seventh Street, SW., Nassif Building,
Room PL-401, Washington, DC 20590-001.
Hand Delivery: To the Docket Management System; Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW.,
Washington, DC between 9 a.m. and 5 p.m., Monday through Friday, except
Federal Holidays.
Instructions: All submissions must make reference to the ``Federal
Transit Administration'' and include the docket number for this notice
set forth above. Due to security procedures in effect since October
2001 regarding mail deliveries, mail received through the U.S. Postal
Service may be subject to delays. Parties making submissions responsive
to this notice should consider using an express mail firm to ensure the
prompt filing of any submissions not filed electronically or by hand.
Note that all submissions received, including any personal information
therein, will be posed without charge or alternative to http://
http://dms.dot.gov">dms.dot.gov.
Docket: For access to the DOT docket to read materials to this
notice, please go to hhtp://dms.dot.gov at any time or to the Docket
Management System.
FOR FURTHER INFORMATION CONTACT: David B. Horner, Esq., Chief Counsel,
Federal Transit Administration, U.S. Department of Transporation, 400
Seventh Street, SW., Washington, DC 20590-0001. E-mail:
[email protected]. Telephone: (202) 366-4040. Office hours are
from 8:30 a.m. to 6 p.m., Monday through Friday, except Federal
holidays.
SUPPLEMENTARY INFORMATION:
A. Statutory Background
Section 3011(c) of SAFETEA-LU authorizes the Secretary of
Transportation (the ``Secretary'') to establish and implement a pilot
program (the ``Pilot Program'') to demonstrate the advantages and
disadvantages of public-private partnerships (``PPPs'') for certain new
``fixed guideway capital projects,'' as defined by 49 U.S.C. 5302(a)(1)
and (4) (each, a ``Project''). Section 3011(c) sets forth generally the
terms and conditions of the Pilot Program.
Section 3011(c)(2) authorizes the Secretary to select up
to three Projects participate in the Pilot Program.
Section 3011(c)(3) provides that no Project is eligible to
participate in the Pilot Program unless the sponsor of a Project
submits an application that contains, at a minimum: (i) An
identification of a Project that has not entered into a full funding
grant agreement or project construction grant agreement with FTA; (ii)
a schedule and finance plan for the construction and operation of the
Project; and (iii) an analysis of the costs, benefits and efficiencies
of the proposed public-private partnership agreement.
Section 3011(c)(4) provides that the Secretary may approve
the application of a Project to participate in the Pilot Program if the
Secretary determines that: (i) Applicable State and local laws permit
public-private agreements for all phases of development, construction
and operation of the project; (ii) the recipient is unable to advance
the Project due to fiscal constraints; and (iii) the plan implementing
the public-private partnership is justified.
Section 3011(c)(5) limits the term of the Pilot Program
from fiscal year 2006 through fiscal year 2009.
Beyond the terms set forth above, section 3011(c) states no
operative criteria for implementation of the Pilot Program and is
notably silent on what benefits, if any, participation in the Pilot
Program would confer on a Project. However, section 3011(c) affords the
Secretary broad discretion to devise or approve arrangements between
government and private enterprise setting forth incentives and
obligations within the framework of section 3011(c) that would
demonstrate the advantages or disadvantages of PPPs as applied to
eligible Projects.
Accordingly, FTA invites interested parties to comment on the
following questions: (i) What, if any, operative criteria beyond those
set forth in the statute should the Secretary adopt to implement the
Pilot Program, and (ii) what, if any, benefits should the Secretary
confer on Projects that participate in the Pilot Program? In answering
these questions, interested parties should explain how such criteria
and/or benefits would realize savings for Federal, State and/or local
governments and otherwise improve the delivery and operation of transit
infrastructure or a particular Project. Interested parties should also
comment on whether it is significant that section 3011(c) provides no
special funding for the Pilot Program. In addition, FTA invites comment
generally on what, if any, changes in law or new financial incentives
are appropriate or necessary to promote the participation of private
enterprise in the delivery and operation of transit systems.
FTA also invites interested parties to respond to other questions
set forth in this notice, including questions with respect to: (i)
Appropriations for eligible Projects, (ii) the National Environmental
Policy Act (``NEPA''), (iii) the Common Grant Rule, (iv) the seniority
of the ``Federal Interest'' and (v) tax-exempt financing.
Finally, FTA solicits preliminary expressions of interest from
project sponsors and others concerning participation in the Pilot
Program.
B. Objective of Pilot Program
As a matter of public policy, PPPs are justified by the view that
private enterprise, when appropriately compensated for performance and
the assumption of risk, can deliver goods and services for less and on
better terms than the public sector. The Pilot Program will evaluate
this view as applied to the procurement and operation of eligible
Projects.
1. Procurement. FTA invites comment on whether, and on what terms,
the Pilot Program should stream-line FTA's discretionary grant-making
process to promote PPPs that would realize significant savings in the
procurement of eligible Projects. In particular, FTA seeks comment on
how its New Starts application process--notably its due diligence and
NEPA components--may be altered to accelerate project delivery (and
thus reduce costs) without impairing FTA's duties as a steward of
Federal funds and the environment.
Due Diligence. Throughout the New Starts application process, FTA
performs detailed due diligence on all aspects of a proposed capital
project, including reviewing ridership projections, cost estimates,
forecasts of cash flows and financing capacity as well as evaluating
State and lcoal political commitments to provide the ``local share'' of
funding for the project. Because in many cases FTA (and by implication,
the Nation's taxpayers) bear substantial economic risk with respect to
the New Starts share that the project will experience cost overruns or
delays or fail to realize projected travel travel-time savings
(``Taxpayer Risk''), FTA's exhaustive due diligence attempts to
minimize Taxpayer Risk at the planning and development stages of the
project. Other than FTA's own due diligence,
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there are no devices currently contemplated by the New Starts process
that may be substituted for FTA's due diligence to reduce Taxpayer Risk
in a way that would shorten the application process and realize savings
for project sponsors. FTA believes, however, that such benefits may be
achieved through arrangements typical of PPPs, notably the agreement of
private enterprise to assume certain project risks in exchange for the
opportunity to earn financial returns commensurate with the risks
assumed. In practice, these arrangements include ``design-build''
agreements, equity investments by private contractors and other risk-
shifting or risk-reducing devices customary in private sector project
development transactions. FTA invites comment on whether and to what
extent the Pilot Program should take into account, for purposes of
determining the level of FTA's due diligence, the quality of
construction and service warranties, the amount and risk of equity
investments, the availability of legal and other professional opinions
and the use and terms of indemnities, escrows and other devices that
might reduce or shift Taxpayer Risk.
NEPA. It is axiomatic that a Federal agency and project sponsor
must conduct an objective evaluation of the alternatives under study in
a NEPA document, including the ``no-action'' alternative. To reduce
Taxpayer Risk of third-party challenge to projects under NEPA (and to
comply with regulations of the Council on Environmental Quality set
forth at 40 CFR 1506.1), FTA generally prohibits project sponsors from
taking any action that would advance any particular ``build''
alternative under study prior to the issuance of a Record of Decision
(``ROD''). In design-build contracting, however, there may be good
reasons to allow a sponsor to engage a single firm to conduct
preliminary engineering and final design prior to the issuance of a
ROD, including time savings, economies-of-scale, continuity of
expertise and avoidance of multiple contracting. FTA invites comment on
whether, and the extent to which, the Pilot Program should permit
acquisition of engineering and design services prior to the issuance of
a ROD. FTA invites comment, in particular, on whether the Pilot Program
should adopt procedures with the same or similar effects as those
described in 23 U.S.C. 112(b)(3)(D), as amended by section 1503 of
SAFETEA-LU, concerning design-build contracts. If so, pursuant to what
statutory authority would the Pilot Program adopt such procedures?
Likewise, to reduce their costs as far possible, project sponsors
located in inflationary real estate markets may seek to acquire rights-
of-way and parcels of land prior to the issuance of a ROD for reasons
of ``hardship'' or ``protective purposes,'' as permitted by the
Categorical Exclusion set forth at 23 CFR 771.117(d)(12). FTA invites
comment on how the Pilot Program should construe the Categorical
Exclusion to realize savings for project sponsors in connection with
the acquisition of rights-of-way and parcels of land. In responding to
the question, interested parties who propose an expansive construction
of the Categorical Exclusion should explain why, if adopted by FTA, it
would not materially increase Taxpayer Risk of legal challenge to an
eligible Project.
Occasionally, a change in project scope after the issuance of a ROD
may trigger the requirement for supplemental NEPA study, which could
delay or even thwart a project under a public-private partnership. FTA
invites comment on whether and how the Pilot Program should address
NEPA to anticipate changes in project scope.
2. Operation. FTA invites comment on whether, and on what terms,
the Pilot Program should provide grants for eligible Projects
contemplated by long-term operation or concession agreements with
private enterprise.
In the United States, the operation of transit facilities currently
depends on significant State and local subsidies. FTA invites comment
on how the Pilot Program might encourage transit systems to enter into
PPPs that would reduce the amount of subsidy needed to operate a
transit system. In particular, where a concession to operate a transit
system requires by its terms a capital improvement, should the Pilot
Program make available a grant to support such capital improvement in
the event that improvement qualifies as an eligible Project?
C. Common Grant Rule
FTA interprets 49 CFR 18.25 (the ``Common Grant Rule'') to require
that income to a Federal grantee generated by a federally-funded asset
(``Program Income'') must be used by the grantee to reduce program
costs, unless an alternative use of Program Income contemplated by the
Common Grant Rule is authorized by regulation or agreement with the
grantee. FTA invites comment on the extent to which the Pilot Program
should authorize the use of Program Income to support a PPP that
sponsors an eligible Project.
D. Seniority of the Federal Interest
FTA generally requires that any Federal funds used by a recipient
to acquire an asset--the so-called ``Federal Interest''--be repaid in
priority to all other claims with respect to that asset upon
disposition. However, FTA has permitted the subordination of the
Federal Interest and waived the requirement of repayment upon
disposition, so long as such subordination or disposition was for an
eligible transit purpose and the asset remained under the recipient's
``effective continuing control.'' FTA invites comment on the degree to
which this flexibility would be useful in structuring a PPP.
In addition, 49 CFR part 640 refers expressly to the Transportation
Infrastructure Financing and Innovation Act (``TIFIA''), which permits
the subordination of the Federal Interest under certain conditions. FTA
seeks comment on the extent to which loans, loan guarantees and other
credit enhancing devices available under TIFIA might be used to
facilitate the financing of an eligible Project.
E. Tax-Exempt Financing
Under section 142 of the Internal Revenue Code, certain public
transportation projects are eligible for tax-exempt financing using
private activity bonds (``PABs''). Additionally, under section 11143 of
SAFETEA-LU, public transportation projects may be eligible to use
private activity bonds not subject to State population-based bond
issuance limits (``new PABs''). FTA seeks comment on the extent to
which PABs or new PABs might assist in financing an eligible Project.
F. Preliminary Expressions of Interest
FTA is interested in receiving preliminary expressions of interest
from project sponsors and others concerning participation in the Pilot
Program. Preliminary expressions of interest should address the
criteria set forth in sections 3011(c)(3) and (4) of SAFETEA-LU, and
should be submitted to FTA on or before June 1, 2006. FTA intends to
respond by July 15, 2006 to submissions that are timely filed.
Depending on the response to the issues raised above and the number and
nature of project proposals received, FTA may ask for additional detail
from those submitting preliminary expressions of interest. Following
FTA's establishment of the Pilot Program, FTA expects to issue a
separate notice requesting formal proposals for participation in the
Pilot Program.
[[Page 14571]]
Issued on March 16, 2006.
Sandra K. Bushue,
Deputy Administrator.
[FR Doc. 06-2744 Filed 3-21-06; 8:45 am]
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