Consider P3 for Chicago-Area Train, U.S. DOT Official Says

CHICAGO — With public-private partnerships offering the nation’s cash-strapped transit systems a financial means to jump-start new projects, a federal official yesterday said the Chicago Transit Authority should consider such a partnership to finance and operate express-train service from downtown Chicago to O’Hare International Airport. “It’s a procurement that should be contemplated,” said David B. Horner, deputy assistant secretary for Transportation Policy at the U.S. Department of Transportation, during a panel discussion at the William O. Lipinski Symposium on Transportation Policy in Chicago yesterday.The train service could cost the CTA as much as $1.5 billion to build, according to a consultant’s analysis last year. The service would originate from a super station under construction beneath Block 37 in downtown Chicago. Although the long-vacant block has a troubled history, construction of a retail and office complex is now underway. The $200 million project is currently over budget, according to press reports. The station would connect two light-rail subway lines and would lay the ground work for the express service to the airport. The tunnel work is expected to be completed next year. The consultant’s report recommended that the CTA look to leverage private-sector involvement in both the financing and operation of the service, since the CTA’s resources are limited.The CTA is strapped for cash on both the operational and capital side. Officials are pushing Illinois lawmakers to adopt legislation that would increase the region’s sales tax to generate new transit revenue. Transit riders face increased fares and service cuts next month if the state does not come up with additional funding and more drastic action next year under a proposed 2008 budget released last week. Federal approval would be needed for any private partnership if the project relied on federal funds. Private-sector involvement in transit could benefit projects on several levels, Horner said. With projects typically taking an average of 13 years to deliver, private-sector involvement would speed up the construction timeline. “One should look for every opportunity to shorten” that term, he said. From a federal standpoint, private operators are better able to provide more accurate forecasts on the projected usage of the new project, forecasts that affect the level of federal assistance, and are often better able to manage costs.Because most transit systems operate at a net loss, the dynamics of transit partnerships differ from the concessions or leases that the market has become more familiar with involving up-front payments to government entities to operate existing transportation assets or in the design, construction, and operation of new roads or other projects that typically generate a profit for the private operator.“You don’t need a profitable asset” to realize a return from the private sector, Horner said. While the P3 market so far has been focused on maximizing the up-front payment to the government entity, in a transit partnership the question shifts to “how small a subsidy will” the transit operator pay a private company or consortium to build and operate a new asset. Operations and maintenance contracts, like those used in London, could also benefit transit agencies and should be tried on a limited, experimental basis, Horner said.The Federal Transit Administration has a pilot program to assist up to three transit partnerships. The three benefit from their participation in the pilot program through a reduction in the review time for their projects and a potential increase in their overall ranking to receive federal funds under the new starts program that provides funding to transit projects seeking more than $75 million.