Colorado’s Regional Transportation District (RTD) develops, operates and maintains the regional mass transit system in eight counties in metropolitan Denver. Now, with construction costs high, the economy deep in a recession, and gas tax revenues – which fund 80 percent of the Federal Transit Authority’s overall budget – becoming increasingly unreliable, the RTD is embarking upon the nation’s largest transit expansion project using an up-and-coming innovative finance tool: Public-Private Partnerships (PPPs).
PPPs are binding agreements between public and private sectors that allow for a private firm to assume significant control of, and risk for, multiple elements of a project. These types of agreements can benefit transportation projects by utilizing a wealth of resources and expertise not readily available to government agencies. Because the private sector provides immediate access to private sources of capital, the delivery time of a transportation project is shortened and can result in 6 to 40 percent savings on construction costs alone.
Denver plans to build a commuter rail line that connects passengers to Union Station using Public-Private Partnerships to finance the project.
Photo Courtesy of Richard Youngdahl
This year’s high fuel costs and increased traffic congestion set a record for the RTD: 100 million passenger trips from July 2007 to July 2008, the most in RTD’s 30-year history. Increased ridership led the agency to recognize the need for commuter transit accessibility, as well as better, more direct service to Denver’s airport. Unfortunately, the process to apply for government funding would take forever. To expedite the process and meet the transit needs of the region, the RTD published a request for proposals for development teams to finance, build and operate the two commuter rail extensions in Denver. With PPPs, the winning private entity can begin financing, constructing and building the commuter rail lines faster, saving the RTD valuable time and money. While the RTD expects the winning development team to spend up to $10 million preparing a detailed proposal, the agency anticipates the winning bid will bring in at least $1 billion in private financing. When complete, it is expected to be the largest transit PPP in the country.
PPPs give cities and regions the opportunity to fast track transit projects and provide the costly, but necessary, infrastructure improvements, upgrades, and maintenance needed for an effective transportation system. Today, traditional ways of funding transportation projects are not keeping pace with demand. Congestion is getting worse, scarce resources are increasingly misallocated, and the lengthy process transportation projects must endure to matriculate makes it difficult for an agency to accurately forecast project budgets. As the increasingly preferred approach for the delivery of new transportation projects and capital improvements, PPPs are a much more reliable option for the future.
This article was featured in Talking Transit, MPC’s bi-weekly e-newsletter. To receive the newsletter, visit http://www.metroplanning.org/signup.html.