Monday, December 16, 2013

NY moves ahead with Major Transportation Infrastructure P3


The Port Authority of New York and New Jersey expects to start construction of a $1.5 billion cable-stayed bridge connecting Elizabeth, N.J. and Staten Island, N.Y., by year-end now that a public-private partnership financing package has been agreed.

The Goethals Bridge replacement will be the first new bridge structure built by the Port Authority in the last 80 years and it’s the largest public private partnership in the region.

In addition to a $461 million bond issue to be sold by the Economic Development Authority on behalf of the project’s private developers, NYNJ Link Partnership, and a $474 million loan, the developers will make equity contributions to build the bridge. In return, the developers will receive payments from tolls over 30 years.  The amount of those payments will depend on the on-time, on-budget performance of contractors building the bridge.  Completion is expected by 2017.

Yet another example of state and federal resources, local transit agencies and the private sector all coming together to make vital infrastructure modernization happen.

Monday, October 28, 2013

Pennsylvania Wants More P3s


In May, the Commonwealth of Pennsylvania opened it's doors wider to P3s by announcing it would accept unsolicited P3 proposals in a month long pilot program.  During May, private sector entities were encouraged to submit proposals offering innovative ways to deliver and manage transportation projects throughout the state. 

Six proposals were submitted and two were ultimately considered for action by the Office of Public Private Partnership, and subsequently approved.  

The unsolicited proposal program, which applied to Pennsylvania Department of Transportation (PennDOT) projects only, was considered so successful that it has been extended through the end of October

Pennsylvania is fairly new to the P3 arena.  The act authorizing P3 projects was signed into law in September 2012.  

For more information on P3s in Pennsylvania visit - http://www.p3forpa.com

Tuesday, October 15, 2013

QBS. It's the Law


If you needed major surgery and had to choose a surgeon, would you make that choice based on the lowest cost?  Probably not.   Most people, when making a medical decision, consider the degree of specialization, reputation and expertise, and sometimes even the “bedside manner” of the doctor first, before considering the cost. 

That’s a wise decision.  Making major decisions based on cost alone doesn’t guarantee value. When bidders know that cost is the predominant differentiator in a bidding situation they could be tempted to cut corners to win business opening the door to potential safety, quality and environmental issues with the project.

That’s why federal and California state law require that federal, state and local public agencies use Qualifications Based Selection (QBS) to select engineering, land surveying and architectural services.  The purpose of the statutes is to make sure that public agencies, and thereby the general public, receive design services from the best qualified design professionals for a particular project, not simply the cheapest. 

It’s a competitive contract procurement process, but one that isn’t predicated on price.   QBS typically involves a Request for Qualifications (RFQ) segment in which firms are invited to submit their suitability for the project along with credentials.  Unfortunately, too often we’ve seen some RFQs in California that require a fee submission and even some that specifically say that fees will be used as the basis for assigning points in the selection process.  This violates state law which dictates that price not be used as a comparison tool when public agencies select engineering, architectural or land surveying services.

QBS is used throughout the country and at the federal level because it is sound, cost effective public policy.  Professional services for design of a project can’t be priced upfront in the same way that construction services can.  With construction, there exists a set of plans and specs upon which all bidders can base their cost estimates and compete on price as well as other factors.  That’s just not feasible for professional services firms competing to come up with those plans and designs and to introduce cost as a competitive factor in the selection process is not only poor public policy, it is potentially hazardous.  Engineers shouldn’t be encouraged to cut costs just to be part of the selection process.  Public agencies should pick the best firm or firms for the job and then negotiate on price.  If agreement on price can’t be made, the selection committee should have a short list of candidates culled from the RFP process to go to.   


Monday, September 23, 2013

Sure, We’ll Pay More…If You Use it Wisely


A new survey by non partisan reform group California Forward says that a majority of Californians are willing to pay certain increased fees and taxes if the money is put to use rebuilding our state’s vital infrastructure.   At the top of the infrastructure priorities list were schools, followed by streets and roads, water and transportation.

As engineers we are often called upon to advise on infrastructure programs in other states and countries and so we know the value of having a properly supported infrastructure program.  But it’s good to know that taxpayers are willing to support that investment.

One part of the survey overlooked by some media:  survey respondents most often cited wasteful spending and the need for wiser usage of existing monies as the reason for their response to infrastructure funding options.  

Monday, September 9, 2013

Gasoline Blues


Last month, in a blog post we mentioned that California has one of the highest gas taxes in the nation and we wondered if it wasn’t time for a rethink in the way we finance our roads.  Other West Coast states are apparently way ahead of us.

In July, Oregon became the first state to establish a voluntary road usage charge system for transportation funding.  The system, which goes into effect in 2015, will allow up to 5,000 Oregon motorists to pay a 1.5 cent per mile road usage charge to Oregon Department of Transportation (ODOT) rather than the 30-cent per gallon gas tax.  (Participants in the program must apply for a refund of the gas tax and also can seek a refund for miles driven on private property.)

It’s a fact that Californians are buying less gas.  With the pressure on carmakers to make even more efficient hybrid and alternative fuel vehicles, gas consumption is only going to go lower.  And, with the advances in smartphone applications and GPS technology, it’s far easier to track actual vehicle miles traveled from outside the car.  That’s why alternative funding mechanisms like the program adopted in Oregon may become are likely to be the rule, rather than the exception, in the future.

The time is now in California for a broad discussion of how best to finance our future transportation needs in our ever-changing world, including such innovative ideas as Oregon's road usage charge.

Monday, August 26, 2013

California Can Be a "Can-Do" State



The Brookings Institution held a forum in Washington D.C. last month titled ‘Can-Do States:  A New Era for Infrastructure Investment.’  Public and private sector representatives from Colorado, New York, Virginia and British Columbia discussed their various approaches to public private partnerships.

New York is the latest state to take a can-do approach to P3s.  In June, the state unveiled a $174 billion plan to coordinate the budgets of almost fifty state agencies and authorities to better leverage resources across eight areas of infrastructure.  A key component of the plan is finding ways to attract private investment by cutting red tape and speeding the delivery of projects.

That’s an attitude we could use here in California, but we first need the public and our politicians to truly understand what P3s are and what they can and can’t accomplish. 

As Tony Kinn, Director of Virginia’s Office for Transportation PPPs told the Brookings audience:  “The most difficult part of successful P3s is the outreach with the public and the legislature.   I would contend that in your state, most of the legislators do not have a full understanding of P3s.  And if they don’t, what percentage of the public do you think has an understanding? 

Click below for more information on The Bookings Institution forum: 

http://www.brookings.edu/events/2013/07/12-infrastructure-investment

Monday, August 12, 2013

Gas taxes can't meet wear and tear on state's roads


A report from the American Petroleum Institute said that California has the highest state excise tax on gasoline of any state in the country, at 36 cents per gallon.  Compare this to Florida at 4 cpg; New York, 8.1 cpg; New Jersey at 10.5 cpg, or even the national average of 20.9 cpg, and you would probably think that California’s roads are the best in the nation.

They are not.

According to a study by the Federal Highway Administration, California has the fourth worst road conditions in the country (after the District of Columbia, New Jersey and Hawaii.)  A 2010 report by the Reason Foundation put California 48th out of the 50 states (behind Alaska and Rhode Island) in quality of roads and bridges.

One reason that the high relative state gas tax doesn’t correlate with improved road quality is perhaps that the consumption of gas in the state has declined in each of the last three years.  Last year, California drivers consumed 14.5 billion gallons of gasoline, down from 14.6 billion gallons in 2011, according to California Board of Equalization. Clearly, the trend toward higher MPG, hybrid, zero emission and electric vehicles is driving – and will continue to drive -- consumption down.  But the fact is that Californians aren’t driving any less, and so wear and tear on our state’s roads is constant.   

Perhaps its time to rethink the way we finance our roads?  In addition to – or instead of -- a gas tax, perhaps a way to more equitably pay for wear and tear on our roads is to look at factors such as vehicle weight and miles travelled?

Monday, July 29, 2013

Good News for P3s: Investor allocations to infrastructure set to grow




 A report issued by global private equity advisor Altius Associates reportedly forecasts that institutional investors are set to increase their allocations to infrastructure funds from 1 percent to 5 percent of total assets over the next decade.  If such a prediction comes to pass, that’s good news for California infrastructure.

The press release announcing the report, which is only available to the firm’s clients, doesn’t get into actual dollar numbers, but a quick look at the state of California’s employee pension fund, one of the largest in the world, provides an interesting hypothetical example.

As of Jan 31, 2013, the $248.8 billion fund had invested $3.2 billion in infrastructure (which it groups as an asset class with forestry).  This represented a one percent allocation within its total investment portfolio.  If the Altius prediction is correct, CalPERS might reasonably be expected to invest at least that amount purely in infrastructure and to grow that allocation to more than $12 billion by 2023.  Not all of this money would be invested in the state but, in 2011, CalPERS did commit to invest $800 million over three years solely in California infrastructure. 

And CalPERS is not the only institutional investor eyeing California infrastructure.  The state has strong appeal for both domestic and foreign funds because of the size and strength of California’s economy. 

Of course, creating a robust P3 sector to handle investor demand and provide good projects for investment will be critical for the state’s ability to attract institutional investors as those allocations increase.

Monday, July 15, 2013

Zig meir das Geld



At a speech in Miami in April, President Obama returned to the topic of infrastructure development in the United States.  It’s a contentious debate that is frustrating to many of us because there seems to be widespread agreement that the U.S. needs updated infrastructure. 

Case in point:  our colleagues at ASCE recently released their updated Report card on U.S. Infrastructure.  This year’s grade, D+, is the worst since 2001.

As usual, what’s holding up investment and improvements in our roads, bridges, ports and other vital infrastructure is….money.  Who will pay?  The federal government, states and municipalities are still recovering from the economic downturn; funds are tight and, even if money can be found, the political climate is hardly conducive to incurring more debt at any level of government.

This is why one of the President’s proposals is particularly welcome:  eliminating the tax penalty currently levied on foreign pension funds investing in U.S. infrastructure. 

The U.S. is – has always been -- one of the most attractive markets for foreign investment in real estate.  And, recently, foreign pension funds have become increasingly attracted to investing in major U.S. infrastructure assets.  The reasons for this are many, but the combination of relative political and economic stability in the U.S. combined with the ability to put large allocations of dollars to work over long periods of time, typically 25 years or more, is attractive to large pension funds looking to match assets to the long term liabilities of their pensioners.  

Funds from Australia, Canada, the United Kingdom and other areas of Europe are already investing heavily in infrastructure in other parts of the world.  But being able to invest on an equal footing with domestic funds in public private partnerships and other ventures would likely increase their interest in U.S. infrastructure because they could diversify the risk in their infrastructure portfolios.

Wednesday, May 22, 2013

The not-so Golden State



A new study by CBS Marketwatch shows the widening gap between the haves and have nots among California municipalities. 

Five cities within the state’s Central Valley – Sacramento, Stockton, Modesto, Fresno and Bakersfield – are big enough to be included among the nation’s 100 largest metro areas.  That’s the good news. 

The bad news:  all five also appear in the bottom 10 of Marketwatch’s Top Cities for Business Growth in 2012.   Also on that list, the city of Riverside, making California a dominant force in lack of business growth last year.  

Of course, San Jose (#4) and San Francisco (#7) counterbalance this somewhat by appearing in the top 10 (with Los Angeles and San Diego just outside).  But, still, six cities in the bottom 10?  What does that say about our state?

One thing the study does say is that cities that tend to do well in the overall analysis attract and retain people.  One thing that makes cities like San Francisco, San Jose and others on the top 10 list able to attract and retain population is having the infrastructure in place to create jobs and adequately support industries as they grow.  If our Central Valley cities are to make it out of the bottom 10 and provide the opportunity for business growth, they clearly need more resources for infrastructure building.  

Wednesday, May 15, 2013

New York State Embraces P3's




Wanna buy a bridge? No, but we’ll build it for you…

The Port Authority of New York and New Jersey is the latest public agency to see the wisdom of a public–private approach to major infrastructure projects. 

Last week, the Authority announced that the NYNJLink consortium -- led by Omaha-based Kiewit Corp and Australia’s Macquarie Group -- will design, build, finance and maintain a $1.5 billion cable-stayed bridge designed to replace the 84 year old Goethals Bridge linking New York’s Staten Island to Elizabeth, New Jersey and Interstate 95.

An article in the April 25 Wall Street Journal outline’s key elements of the structure of the deal which sees the Port Authority retain ownership and control of the new bridge while paying off its construction over a 35-year period.  NYNJLink will assume the construction risk over the first five years of the deal and then the day-to-day operational risk until the end of the 40-year contract.
Here’s another example of a design build/P3 deal making a lot of sense.  The Port Authority of NY/NJ operates all of the bridge crossings between New York and New Jersey as well as all the airports in the metro area.  It also owns and operates the bus terminal in New York, the PATH train system and is responsible for the World Trade Center redevelopment in Lower Manhattan.  The authority has an annual budget of more than $2.5 billion and is almost $20 billion in debt. 

Spreading the cost and risk, of what is the region’s largest public transportation project, over 40 years rather than five years of construction will be much easier on the pocketbook in both the short and long term.  In fact, in its 2011 budget report, the authority admitted that it could not afford the $1.5 billion cost of replacing the bridge.  How many similar situations do we currently have here in California? 

Tuesday, February 12, 2013

San Francisco Based T.Y. Lin International Wins Engineering Excellence Award


 T.Y. Lin International has received an Honor Award from the California Chapter American Council of Engineering Companies for their work on the Taijiang Bridge in Sanmin, Fujian Province, China.

 Completed in December 2010, the Taijiang Bridge in Sanming, Fujian Province, China was designed based on the concept of the partially cable-supported girder bridge. This design concept fully utilizes the capacity of both the cable-stayed system and the bridge girder, in contrast to the conventional design concept that neglects the capability of the girder in a cable-supported structure to carry global loads. This unique and aesthetically pleasing new signature cable-stayed bridge with a steel arch-shaped tower was constructed to provide a signature landmark for residents and visitors to admire. In addition, the Taijiang Bridge elevates travelers’ experience and enhances the unobstructed, 360o views of its beautiful Sanming environs.



Thursday, January 31, 2013


 T.Y. Lin International has received an Honor Award from the California Chapter American Council of Engineering Companies for their work on the Rose Creek Bikeway and Pedestrian Bridge in San Diego.  

Completed in April 2012, the 360’ clear‐span bridge fills a gap in the existing regional Class‐I bicycle network. The project is a vital link for cyclists and pedestrians, as it provides safe and convenient access between the beach communities to the west, to the residential and business districts to the north, east and south. The design of this cast‐in place prestressed cantilevered box girder bridge is unique to California and provided San Diego with a landmark structure.


 

Friday, January 18, 2013

Escondido’s Palomar Medical Center Wins Engineering Excellence Award


M-E Engineers, Inc. has received an Honor Award from the California Chapter American Council of Engineering Companies for their work on the Palomar Medical Center in Escondido. 

M-E Engineers performed full infrastructure master planning for the new complex and completed all mechanical/electrical/plumbing design services. The $956 million facility consists of an 11-story inpatient tower with 288 single patient rooms, an attached diagnostic and treatment center, and a power plant on 17 acres. A Green Guide for the Healthcare Pilot Project said the M0E Engineers design created for the Center produces significant energy and water savings, a sophisticated building management system, and a purposeful combination of the latest in modern technology with natural healing elements.