Pair of ambitious infrastructure projects turn to private investors

Two distinct types of infrastructure projects are turning to private developers to bring them to fruition.

The O'Hare Flyer, a high-speed train between O'Hare International Airport and downtown Chicago that would be the nation's first airport express train, and a U.S. Department of Transportation initiative called America's Great Corridors of Commerce will both need private investment to advance.

The project sponsors outlined details of the proposals Tuesday at The Bond Buyer's Infrastructure conference in Chicago, where the topics more often focus on traditional public financing like municipal bonds than private capital.

"People are talking about P3s as a financing tool — it's not just that," said Morteza Farajian, executive director of the Build America Bureau, the USDOT division that oversees public-private partnerships. "The financing piece is not the difficult piece. It's about the delivery model itself, and about building new business."

The America's Great Corridors of Commerce, or AGCC, initiative looks to locate utilities along state-owned highway and railroad rights-of-way, converting them into "high-value" corridors for power-hungry companies like data centers and advanced manufacturers.

The projects may include some public financing but the delivery would be overseen by a private entity, Farajian said. The companies would lease the land from the state DOTs or railroads, giving them a fresh revenue source.

"Everyone gets something out of it," Farajian said, adding he has participated in more than 300 meetings and four workshops on the program since it was first proposed a year ago.

Farajian said the feedback from private and public entities so far is "cautiously positive."

"It makes a ton of sense" to put utilities in highway and rail rights-of-way, which have already been disturbed and are unsuitable for other uses, like housing or retail, he said. It would create economic development, relieve pressure on the grid, and isolate politically unpopular data centers and other businesses from community hubs.

The USDOT in August released a Request for Information on the proposal and is taking comments through Oct. 2.

The department next expects to issue a Request for Expressions of Interest, Farajian said.

The project would be structured as a long-term concession between the state DOT or railroad and a private entity, which has the right to build underground and then lease the space in the tunnel. Farajian likened it to managed lane P3s, which have become increasingly popular in recent years.

The DOT has developed a draft term sheet that "is very similar to a term sheet for a managed lanes project," he said.

Existing federal programs, such as Transportation Infrastructure Finance and Innovation Act loan program, could be tapped as part of the financing, he said.

"Most of the usual suspects" in the P3 world have indicated interest, Farajian said. A few utility companies or large funds that own utilities have proposed creating a subsidiary to build the tunnels themselves, he added.

"P3 developers are ready, they want to get involved," Farajian said. "I'm optimistic that the private sector is up for the challenge."

The bureau would act as a "concierge" for the various parties, helping to streamline permitting and simplify environmental reviews for the utilities, which would be built underground.

A private entity would act as the corridor manager.

The DOT hopes to select up to five corridors in its first round, with an additional five selected every year, Farajian said.

Meanwhile, in Chicago, the O'Hare Flyer is a $2.25 billion battery-electric express train that would be funded entirely with private money. Led by a group of Chicago business leaders, the train promises a 15-minute ride between downtown and O'Hare, a ride that typically takes about 45 minutes on the public transit train.

It would be the nation's first airport express train.

The project would not seek any public funds or an operating subsidy, said Jessica Andujar-Redman, executive vice president of business development at World Business Chicago.

The project relies on existing railroad tracks, which is a key benefit, Andujar-Redman said.

"Where the O'Hare flyer differs … is that there's embedded infrastructure — three railways that are stitched together," she said. "The scope of the infrastructure buildout is less of a barrier compared to other developments."

Since the railways already exist, communities are familiar with the trains, most of which carry cargo, Andujar-Redman said. "Now we're talking about passenger transit; that's very green," she said.

"You're working with a market that understands the pain of community from an airport," she added, saying that the organizers are working to "build the demand for the rider volume."

Some suburbs are already lining up in opposition. The Village of River Forest, one of the communities the train would pass through, passed a resolution Monday formally opposing the train.