New York City wants the state to authorize it to use design-build, a procurement process under which one team from a public agency or the private sector handles a project from start to finish.
Mayor Bill de Blasio acknowledged the uphill battle -- amid headwinds from labor unions -- for such project delivery, which could profoundly affect how much bang city officials get for their buck.
"It's going to be a fight. Obviously I understand why it's a fight," the mayor said at a City Hall news conference Tuesday, when he released his $84.7 billion fiscal 2018 preliminary budget.
"We've been working with all our allies at doing a better job in Albany explaining how important this is, but we still have to go farther," said de Blasio. "I believe if everyone who would benefit from affordable housing to new schools to better roads … if we can get all those voices heard better, I think we could win the day.
"It seems to be common sense."
One day earlier, he urged members of the construction industry trade group New York Building Congress to crank up the pressure on Albany.
Gov. Andrew Cuomo, in his own fiscal 2018 budget proposal, called for expanding design-build to more state agencies but left the city out of the mix. The Dormitory Authority of the State of New York has the capability, and design-build is in effect for the Penn Station/James A. Farley Building, LaGuardia Airport and Javits Center projects.
According to a report the Rudin Center for Transportation Policy and Management at New York University in mid-2015, the New York State Department of Transportation was saving more than $100 million by awarding design-build contracts on dozens of bridges and roads. The Association for A Better New York and RBC Capital Markets sponsored the report.
"Obviously local governments like it so they can do their procurements with one entity rather than RFP after RFP after RFP," said Empire Government Strategies vice president Anthony Figliola, referring to the request-for-proposals process.
"I've talked to a lot of school districts that like it."
With unions and large construction firms, it's a different story.
"Obviously the unions don't like it," said Figliola. "If XYZ Company gets a contract under design-build, a union carpenter or steelworker might have not as great an opportunity.
"It's worked on some projects, absolutely. But politics is the poison pill and I'm not convinced that this is the year."
Project finance attorney Roddy Devlin, a principal at law firm Squire Patton Boggs in New York, said the state is behind the times.
"The whole debate about design-build is interesting in New York. Most states moved past that discussion 15 or 20 years ago," he said. "New York is still holding on.
"There are literally hundreds of examples of design-build working well at the local level across the U.S. If you look at the evolution of design-build, it's become a default go-to outside of New York State. It's highly efficient. The risk transfer to the private sector is greater in design-build."
According to Devlin, smaller issuers would especially benefit.
"Public owners with smaller projects, say $20 million to $30 million, want a straightforward and efficient procurement process," he said. "Design-build can provide that – removing that option does not make a whole lot of sense. Plus, with design-build, the public owner only has to deal with one party."
Moody's Investors Service, in a Jan. 23 commentary about New York City, referenced "pressing infrastructure needs" among other financial challenges.
"The city's vast infrastructure is costly to maintain, and failure to update aging roads, bridges, tunnels, mass transit and schools would dent the city's competitive position," said Moody's, which rates the city' general obligation bonds Aa2. S&P Global Ratings and Fitch Ratings assign equivalent AA ratings. All three have stable outlooks.
Additionally, said Moody's, more city residents live within the 100-year floodplain – which the Federal Emergency Management Agency considers high risk -- than any other U.S. city. That, said Moody's, forces the city to budget more to ward off climate-related disruption that could reduce the city's economy.
Infrastructure upgrades were among several focal points of de Blasio's budget proposal.
De Blasio called for an additional $147 million to repave 1,300 lane miles each in fiscal 2018 and 2019, a populist move that could resonate well for the mayor in a re-election year.
He also asked for $303 million to make the Brooklyn-Queens section of city water tunnel No. 3 activation ready by the end of 2017 and to fully fund remaining construction.
"The third tunnel is built, but not all the things are connected," said the mayor. The new tunnel, which officials see as a fallback redundancy should either of the other two fail, already carries water into Manhattan and the Bronx. Brooklyn and Queens are home to 5 million people.
The budget would also add $162 million for flood mitigation in southeast Queens; $329 million to improve the city's trash collection fleet; and an additional $571 million to repair bridges citywide.
De Blasio additionally budgeted $1 billion to replace 729 roofs at New York City Housing Authority buildings citywide, and $150 million to develop a campus and incubator space for bio-engineering research.
Speaking last year at a Bloomberg transportation conference in midtown Manhattan, city transportation Commissioner Polly Trottenberg said New York could save "tens of millions" on bridges and speed up their completion.
"In New York City we would really like to use [P3]," she said.
Cities use the system nationwide, notably for transportation, civic buildings and water-wastewater, according to Kim Wright, director of strategic communications for the Design-Build Institute of America. "It's definitely not a state-only thing," she said.
Wright said 25 states allow full design-build, which means most, if not all, of their cities have been using it. Partial authority exists in 18 states.
Noteworthy municipal design-build projects, according to Wright, are the Chicago Public Library's Chinatown branch; the Henry B. Gonzalez Convention Center expansion in San Antonio; the Spokane Central Service Center in Washington; the Davis-Woodland Water Supply Project in Woodland, Calif.; and the 11th Street bridges in Washington, D.C.
Others include the San Diego Zoo parking expansion. While the city owns the zoo, a nonprofit association leases the property from the city and manages it. A county undertaking, the San Diego County Water Authority, was honored for Design-Build Institute's project of the year.
The District of Columbia Water and Sewer Authority in the nation's capital has used design-build extensively for city projects for years.
Cities with explicit home-rule authority may not need statutory authority with the state, said Stephanie Wagner, a partner in the government and global trade practice at Chicago law firm Mayer Brown LLP.
Wagner's background on complex public-finance infrastructure transactions includes representing the underwriters on the $2.3 billion All Aboard Florida project, the first new privately funded intercity rail service since Amtrak.
According to Wagner, design-build capability can exist as a general authority or by specific type, such as transportation. "In P3 legislation, it can also find its way in as a component," she said, referring to public-private partnerships.
"At the state level, it's used a lot at DOTs [departments of transportation], places like Texas and California."
