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Agency Seeks PPP Proposals for Denver FasTracks Rail Expansion

Leonard Gilroy
October 1, 2009, 3:26pm

The Denver Business Journal reports the latest on the procurement for a public-private partnership (PPP) to expand the FasTracks rail system with a new $2.3 billion line from downtown Denver to the DIA airport and other extensions. The regional transit authority has issued a request for proposals to three bidding teams, and the winning bidder will finance, design, build, operate and maintain the new lines and will need to deliver up to $1 billion of private financing to the table to supplement federal and state funds:
The three teams are Mile High Transit, which includes Englewood’s CH2M Hill Cos. Ltd. and Longmont’s Flatiron Corp.; Denver Transit Partners, which includes the internationally known Fluor Corp. engineering firm and the Australian Macquarie bank; and Mountain Air Transit Partners, which has companies ranging from the Denver office of Peter Kiewit and Sons to London-based HSBC bank.

The contract is for construction of rail lines from downtown to Denver International Airport and Arvada, plus a section of a third line into Westminster and a maintenance facility. [...]

The three teams are expected to submit bids for the project in March 2010, with an award and contract due in the summer of 2010 and groundbreaking on the line from downtown to DIA expected a year from now, RTD officials have said.

The project calls for a public-private partnership, dubbed the "Eagle P3," to design, build, operate, maintain and finance the lines for RTD. The agency's board voted Sept. 22 to send the contract out to bid.

Whoever wins the contract is expected to bring nearly $1 billion of the team's own money to the project, and be repaid by RTD over 40 years. RTD also expects federal grant money will help pay for the project. [...]

Each team is expected to spend between $10 million and $20 million on preparing its bid. RTD will pay the teams $2.5 million for their trouble, a standard practice for large, design-build contracts such as FasTracks or T-REX.

As I wrote here back in 2007, transit PPPs are in many ways conceptually and structurally similar to a PPP toll road concession. The key difference is that transit PPPs are premised upon subsidy minimization—public-sector rail systems don't capture enough revenue to cover their full operating, maintenance, debt service and other costs—as opposed to revenue (or asset value) maximization, as is generally the case with PPP toll road concessions.

» Reason Foundation's Transportation Research and Commentary


Leonard Gilroy is Director of Government Reform


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