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February 13, 2016

For ‘P3s,’ Still Some Confusion About What’s Public And What’s Private


President Barack Obama tried to focus attention this week on public-private partnerships to build infrastructure. Despite the existence of well-established “P3″ projects — concentrated in Texas, Florida, Virginia, California, and Colorado — the public is still sometimes confused about what’s public and what’s private.

Florida Secretary of Transportation Ananth Prasad cited the confusion over All Aboard Florida, a high-speed rail line from Miami to Orlando that has been proposed by Florida East Coast Railway.

“They are trying to raise private equity, close to $1.5 billion, to build a completely private-sector, high-speed passenger rail without any state grants or subsidies,” Prasad told The Container in an interview at the American Road & Transportation Builders Association conference on P3s, where he was a featured speaker.

Prasad said the state’s role was limited. “We had to lease a little bit of right of way for them to come on our right of way and they are required to pay fair market value, inflation-adjusted, renting the land. But that project is so unique, if you contrast that with the high-speed rail that we turned down the [federal] dollars for.”

With the proposed federally-subsidized high-speed rail, which Gov. Rick Scott rejected in 2011, Prasad said the state’s taxpayers would have had to pay an operating subsidy once it was running.

But in the case of the privately-owned All Aboard Florida line, Prasad said, Florida taxpayers are not stuck with any of the operating costs.

All Aboard Florida is seeking a $1.5 billion Federal Railroad Administration loan, so it may end up being partly federally subsidized.

Prasad said there has been much debate in his state about the All Aboard Florida line.

“There are a few communities who have valid concerns…. Is this a – the word used is — ‘Trojan Horse.’ Because this [Florida East Coast] is a freight railroad. And more trains” would be running on the existing line.

A group called Citizens Against the Train Fund, is running TV ads in the state depicting the train as a thundering, evil-faced “Big Choo-Choo.” (If you’re a parent, imagine a nightmarish Thomas the Tank Engine.)

And Prasad said some Floridians ask “’Why are we [the state government] putting money in it?’ Even though we have repeatedly said the state is not putting any money in it.”

Prasad drew a sharp contrast between that privately-owned project and the case of a P3 in which a state leases a new highway to a private concessionaire who uses toll revenue to pay off its bonds for building and operating the highway.

If that project at some point were to fail to meet its revenue needs and the concessionaire is not maintaining the highway, “Can the state stay away from it?” Prasad asked. “The concessionaire is responsible for it, he’s taking a loss on this. How does that play out?”
When there’s a public uproar, can the state still say it doesn’t have the responsibility for the leased road?

Ideally, it should be the concessionaire’s responsibility, Prasad said. “That is the right approach, but I think a lot of people may not believe that, even though contractually it’s very sound and legally it’s very sound.”

Unlike in Texas, Florida’s P3 projects do not rely on giving the concessionaire who builds and operates a highway the right to harvest toll revenue to pay off its bonds.

Instead Florida uses what’s called the “availability payment” model in which the concessionaire gets fixed payments from the state as long as it meets performance targets, such as keeping the road in good repair, etc.

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