FasTracks option a little-used plan

Private firms one alternative to RTD shortfall

Kevin Flynn, Rocky Mountain News

Published June 18, 2007 at midnight

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Privatizing construction and operation of new rail transit lines, a strategy RTD is considering as it wrestles with a $670 million FasTracks shortfall, has been little used in the United States.

One of the more recent projects to employ the public- private partnership method called DBOM - for design, build, operate and maintain - is New Jersey Transit's 20-mile Hudson-Bergen light rail line from Bayonne through Jersey City, the Hudson waterfront and on to North Bergen.

The $2.2 billion project opened in phases from 2000 through last year. A consortium of private companies now led by Washington Group International took over the project in 1996, designed it, built it and will operate it at least through 2020.

But it's difficult to say whether New Jersey Transit saved money compared with doing the Hudson-Bergen project the traditional way of in-house designing and managing low-bid contractors. The agency has no figures it would release to compare original estimates with the final cost.

That model is among the possibilities for RTD.

The agency board Tuesday night will consider hiring a financial adviser team of JPMorgan and Goldman Sachs to study FasTracks' entire financial structure with an eye toward finding as much construction funding as it can. DBOM will be in the mix.

"The financial adviser will be looking at our whole model and our traditional approach, re- evaluating that and coming up with alternatives," said Liz Rao, RTD's FasTracks manager.

FasTracks is now priced at nearly $6.2 billion, largely because of the rising cost of construction materials and additions to the project. RTD anticipates collecting $5.5 billion from the FasTracks sales tax, grants, loans and other sources. Managers say the best way to reduce the $670 million gap is to seek out private firms to take over some or all of the work on at least four of the rail corridors.

Other DBOM uses

Turning to private partnerships isn't only for rail projects.

North of Toronto, the York Regional Council hired a private group to handle development and operation of a system called Bus Rapid Transit. In Seattle, expansion of the city's monorail is being pursued through a DBOM process.

And Miami is planning a tunnel from the mainland to its port facilities for increasing truck traffic.

Use of varying extents of privatization in public works projects isn't new to Denver. In fact, DBOM isn't even new to Denver.

The city in 1990 hired AEG Westinghouse for $84 million to design, build, operate and maintain the underground train connecting the terminal and concourses at Denver International Airport.

The same contract is still in effect 17 years later, although the original company has since been bought out by current operator Bombardier.

T-REX used private companies to design and build the $1.75 billion highway and transit project for a guaranteed price. When it was ready to open, the keys were turned back to RTD and the Colorado Department of Transportation.

But with FasTracks, companies could bid not only on designing and building the rail lines, but on a package that includes helping with finances and running the service for up to 50 years.

Potential bidder

The process would help save RTD money upfront because the private group obtains its financing in exchange for annual subsidy payments from RTD.

One potential bidder for this work already is at the table.

Veolia, a worldwide French company that operates some of RTD's bus routes under contract since 2005, has built and operated rail systems around the world.

It is currently partnering with other firms to build and run a light rail system in Jerusalem.

Typically, such partnerships consist of big civil construction companies, rail car makers, engineering firms and others. In assuming the risks in design and construction, they work to reduce costs with an eye toward having to run the systems when complete.

"Our schedule was compressed because they were able to do design and construction in parallel," Dan Stessel, New Jersey Transit spokesman, said of the Hudson-Bergen contractor. "The fact that the contractor knew that they would have future operating and maintenance responsibility provided a strong incentive for good design and construction work. It reduced the possibility of defects and omissions."

flynnk@RockyMountainNews.com or 303-954-5247

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