P3 Is Riding the Wave in the Aloha State — Hawaii is Calling

P3 Options for Honolulu Rail Transit Project/HRTP

By: Doreen M. Zankowski, Esq.

The Aloha state will soon be calling for qualified P3 firms.  The $8.26 billion Honolulu Rapid Transit Project (HRTP) is moving again — no pun intended!   The HRTP, when finished, will be an automated, 20-mile elevated transit line, capable of moving 100,000 daily riders between Kapolei on the western side of O’ahu via the Honolulu International Airport and Pearl Harbor.  It will continue through downtown Honolulu and Ala Moana to Waikiki Beach and the University of Hawaii at Manoa.

On behalf of Honolulu Rail Transit, JLL conducted an assessment of potential alternative finance and delivery structures for the remaining elements of the HRTPJLL’s study concludes that public funding is necessary to bridge the $2 billion capital funding gap.  After analyzing many delivery options, including design-build-finance (DBF), design-build-finance-maintain (DBFM), design-bid-build, and design-build-finance-operate-maintain (DBFOM), and a P3 approach, the conclusion is that a design-build-finance-P3 is the way to go.  JLL has cautioned the public authority that the P3 approach will not, however, result in any project development investment, but it will cover the gap portion.  The private partner will provide gap financing during construction, and will be paid back after the rail system is operating and generating revenue.  The gap financing will give Honolulu Rail Transit greater cost and schedule certainty. Once the system is generating revenue, the private partner can be paid back with the appropriate interest costs.

The HRTP has been underway for some time — construction began in 2012.  The study by JLL was to identify the most efficient way to complete the project.  Namely, the $132 billion Section 4 “City Center Guideway and Stations” (4.2 miles across 8 stations from Kalihi to Ala Moana Center Station), the $315 million Pearl Highlands Transit Center, as well as fund and maintain a system-wide O&M program.

To date, construction of stations were bid by sections (there are 4 sections), using design-bid-build and design-build contracts.  The guideways were bid out by section using design-build contracts.  To date, sections 1-3 are under contract.   And, Ansaldo holds a 5-year Core Systems O&M contract.

According to JLL, capital costs currently are estimated at $8.2 billion — which includes a 65% increase since 2012.  The full rail line is scheduled to be opened in late 2025 — a greater than 7 year delay).

The Ohana (family) in the Aloha state recognize the limited P3 experience in the state, so putting together the best team is key.  Hats off to a great start with team members JLL, EY and HDR.

2018 Infrastructure Update: Congress is Diligently Working on a New Water Resources Bill

By:  Doreen M. Zankowski, Esq.

2018 Water Resources Development Act (WRDA):

Washington, D.C. – Senate and House Committees are diligently working on a new water resources bill to be filed in 2018 that would authorize federal funds for new Army Corps of Engineers flood protection, harbor and coastal dredging, and seaport improvement programs.  The Water Resources Development Act (WRDA) over the past four years (2014 and 2016) has authorized $14.7 billion in spending for approximately 64 projects.  WRDA-2018 should have appropriations exceeding the 2016 authorization of $10.3 billion.  All of this falls in line with President Trump’s stated campaign promise to focus on infrastructure and rebuild America. If the Democrats and Republicans can work together on WRDA-2018, expect funding for at least six projects:  two in Texas, two in Florida, and one each in Hawaii and New York.  The most significant project of the six is a coastal storm protection and environmental restoration projects from Sabine Pass to Galveston Bay in Texas.  The project’s estimated cost is $3.3 billion. 

It should be noted that Senate panel working on WRDA was told at a hearing on Capitol Hill that the Army Corps of Engineers construction backlog is an estimated $96 billion, which is only for current needs and does not include any future requirements.  What does all this mean?  It means that Federal spending should rise in 2018 and 2019 for much-needed infrastructure projects in the United States.  Continue reading “2018 Infrastructure Update: Congress is Diligently Working on a New Water Resources Bill”

Pay to Play: America’s Infrastructure Program 2018 and Beyond

Ways to Pay for America’s Infrastructure Needs:  How will we pay for the future infrastructure bill that is heating up on Capitol Hill?  More importantly, bill or no bill, how will we pay for the infrastructure needs of the United States?  In its 2017 Report Card, the American Association of Civil Engineers (ASCE) estimated that the U.S. needed to invest $4.59 trillion in its infrastructure between right now and 2027.  ASCE estimated that Public Private Partnership (P3) programs will only fund 10-15% of America’s infrastructure needs.  This blogger believes that the 10-15% must and will be increased to 40-50% for using P3 delivery methods, otherwise our infrastructure will continue to crumble. 

Currently, the major funding sources on the table are: direct appropriation by the Federal Government; P3 programs; National Infrastructure Bank; Move America Bonds, Tax Credits; Tax Repatriation; Carbon Tax; and Sale of Government Loans.  On a more micro-level, there has been talk of a gas-tax hike, but will that generate enough revenue to fund the ever-growing need to build and replace America’s infrastructure needs.  I dare to say, the gas-tax won’t provide enough fire to fuel this engine.  Continue reading “Pay to Play: America’s Infrastructure Program 2018 and Beyond”