Federal Highway Administrator Mary Peters
Excerpts from remarks as prepared for delivery
"Partnerships for Transportation and Real Estate: A Union Station Anniversary Workshop"
Sponsored by the National Council for Public-Private Partnerships (NCPPP)
Wednesday, September 24, Washington, DC

OPENING

I want to be clear about where the Bush Administration stands, where U.S DOT and Secretary Mineta stand, and where FHWA stands. We are for public-private partnerships. We support them. We want to make them easier -- much easier -- to do.

ADVANTAGES

Public Private Partnerships apply to more than major construction projects involving tolls. They also apply to operations, maintenance, and asset management. In addition to supplementing public funding sources, other benefits of PPPs may include improved:

• Flexibility - Privatizing the design and construction of new roads, buildings and large projects allows the formation of a workforce tailored to the needs of the project, at each stage of the project.
• Speed - Privatized construction can be done on time and within budgets.
• Access to Expertise - People with the most experience and highest technical skills are better compensated in the private sector.
• Innovation - Competing private firms have greater freedom to innovate and more incentive to do so.
• Efficiency - A recent report notes that maintenance costs were reduced 15-20 percent under long-term asset management contracts.

SUCCESS STORIES

• Experience in Arizona. Did not succeed with privatized toll roads, but we tried, starting in 1991.

  -- Arizona's partnership with the private sector to implement design-build was very successful.
  
  -- Now we are seeing many successes across the country that we all can learn from.

• E-470 freeway in Denver
• The Route 895 Connector project -- the first capital project under the Virginia Public-Private Transportation Act of 1995. This legislation allows for innovative financing, including tax-free bond financing of projects on which private developers and the state collaborate.
• $1.2 billion International Arrivals Terminal building and associated facilities at J.F.Kennedy Airport. The project, opened in May, 2001, consists of a new 140,000-square-meter, three-level terminal plus ramps, roads, parking areas, and provisions for future light-rail transit system. This project represents one of the largest public-private joint ventures to be undertaken in the United States.
• Alameda Corridor rail partnership to ease movement of freight out of the ports of LA/Long Beach
• The 2003 Oregon Legislature passed the Oregon Innovative Partnerships Program within the Oregon Department of Transportation. ODOT has broad authority to enter into contractual relationships in the form of partnerships with private sector firms and units of government.
• At the recent AASHTO national meeting there was a session on innovative financing and tolling with states discussing what has and what hasn't worked.

Despite notable successes in such projects as the Alameda Corridor and less than two weeks ago the groundbreaking of SR 125S near San Diego... public private partnerships are still viewed by many in transportation as unique and fraught with legal, financial, and administrative hurdles.

Abundant experience in the use of PPPs in other areas, and the growing experience in transportation illustrate that these hurdles can be overcome. We can lower costs and speed project completion. In a time of funding shortages at all levels of government, it is particularly important that we look to opportunities for the private sector to participate in funding transportation infrastructure improvements.

UNION STATION EXAMPLE

Union Station's revitalization in the 1980s is an excellent example of PPP. The project is considered a prototype for the "inter-modal center of the future." Here's what the Washington Post wrote in July of 1991:

"Three years after it opened as a kind of mall into which trains run ...Union Station has blossomed into the kind of yeasty social gathering center transcending race and class that visionary planners of old urban cores have advocated for generations, but rarely achieved."

This bustling facility serves 50,000 Amtrak travelers daily, Maryland Area Railway Commuter (MARC) riders, Washington Metropolitan Area Transit Authority (WMATA) subway riders, and bus riders, tourist bus passengers, taxicabs, office and government workers, and area residents.

While transit clearly is the essential function, the addition of a shopping mall allows this place to serve as a central square where neighborhood residents and others can go to shop, eat, and meet friends.

SAFETEA

SAFETEA, our bill to reauthorize TEA-21, has several sections on innovative finance.

• Private activity bonds -- The purpose of this proposal is to encourage additional private participation on surface transportation infrastructure projects.

  -- SAFETEA expands the types of projects eligible for exempt facility bonds and excludes certain facilities from volume caps. This allows additional private activity on the projects while maintaining the tax-exempt status of the bonds.

• State Infrastructure Banks - SAFETEA continues the State Infrastructure Bank (SIB) pilot program for transportation infrastructure projects.

  -- SIBs are intended to complement the traditional Federal-aid highway and transit programs by supporting certain projects that can be financed in whole or in part with loans, or that can benefit from the provision of credit enhancements.

• TIFIA -- There is no better example of innovative government thinking than TIFIA, the Transportation Infrastructure Finance and Innovation Act of 1998. This program provides secured loans, loan guarantees, and lines of credit from the federal government for surface transportation infrastructure projects of national or regional significance.

  -- SAFETEA makes TIFIA financing accessible to more highway, transit and rail projects by lowering the eligibility threshold to $50 million.
  
  -- These projects can include intermodal facilities, border crossing infrastructure, expansion of multi-state highway trade corridors, and other investments with regional and national benefits.

  The SR125 South project is another TIFIA success story that shows how innovative public investment can attract significant private investment.

  -- SR 125 South is a privately developed, 9.2-mile toll road advanced under California's pioneering AB 680 toll road demonstration program, enacted in 1989.
  
  -- The TIFIA credit program will fund 22 percent of project construction, with the remaining costs funded by private bank loans (51 percent), private equity (19 percent), and donated right-of-way (8 percent). This is the first TIFIA project with private bank debt and substantial private sector equity.

• Tolling - SAFETEA would modify tolling provisions for Federal-aid highways.

  -- The Interstate System Rehabilitation and Reconstruction Pilot Program, established under TEA-21 to permit states to collect tolls on the Interstate for the purpose of reconstructing and rehabilitating Interstate highway corridors, is modified to ease the eligibility requirement for participation in the pilot program.
  
  -- The Variable Toll Pricing program, for alleviating congestion and reducing emissions, mainstreams the value-pricing concept initiated in a pilot program under ISTEA and TEA-21.

• Privatization of rest areas -- Permits rest areas in pilot projects to include commercial operations that provide goods, services, and information benefiting the traveling public and commercial motor carriers.

SAFETY IN SAFETEA

Safety is a big part of our bill. SAFETEA doubles the amount of funding for safety over TEA-21 levels. It would invest about $14 billion to reduce highway fatalities, prevent injuries and encourage safe driving -- including funding for grants to address drunk driving and promote safety belt use.

Secretary Mineta has challenged the entire Department to be safety advocates -- to raise the bar on safety. Our goal is to reduce preventable deaths to no more than one per one hundred million vehicle miles traveled by 2008.

WORKSHOPS

FHWA's Office of Policy has started a project with NCPPP and several other organizations to conduct a series of workshops to identify best practices in public private partnerships.

The workshops will target elected officials and other transportation decision makers to answer some of the questions that inevitably come up when considering public-private partnerships. The workshops will highlight some of the successful projects that have been implemented in transportation and other areas including how legal, financial, and administrative hurdles were overcome. These workshops will build on issues discussed at today's afternoon sessions. I want to hear your recommendations as we move forward.

HIGHWAYS FOR LIFE

That principle of flexibility to address local problems with local solutions led us to create a new initiative to Congress called Highways for LIFE. L-I-F-E stands for Long Lasting, Innovative, Fast Construction, Efficient and Safe.

Highways for LIFE is an effort to fundamentally change the way we do business and serve our customers. We propose to dedicate a portion of our overall federal surface transportation program to motivate states to embrace innovation and creativity.

Simply stated, we want to work with you and the entire transportation community -- again in partnership -- to build highways faster and make them last longer. We've all seen examples of excellence -- things being done faster, things being done better. Why can't we do that all the time, everywhere?

This important new initiative will be formally proposed to Congress soon. We feel that we can make it a reality only through a strong partnership with you and the highway industry to fully shape the proposal.

CLOSE

Our transportation system is indispensable to our quality of life and to our economy.

There are tremendous benefits from public-private partnerships. The U.S. Department of Transportation is doing all we can to encourage public private partnerships and we want to remove constraints that hinder projects.

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