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.

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”

Moody’s: U.S. Public Private Partnership Market (P3s) Set For Growth

According to a Moody’s Investors Service, the U.S. market for public-private partnerships (P3s) is equipped for growth and positioned to become one of the world’s largest. According to a new report from Moody’s important factors like availability of new state and federal resources, political support, the underlying legal structure to enforce P3 contracts and a strong capital market shape the necessary foundations for steady growth.

“State-level P3 activity has risen over the last three years, and nearly all P3 projects have been completed early or on time,” said John Medina, Moody’s VP – Senior Analyst “The need for more inter- and intra-government P3 best practice sharing remains key for the US P3 market’s long-term development compared to other markets where infrastructure development and funding may be more centrally aligned.”

The announcement of Moody’s Investors Service’s report can be seen here.

Jose A. Aquino (@JoseAquinoEsq on Twitter) is a special counsel in the New York office of Duane Morris LLP, where he is a member of the Construction Group and focuses his practice on commercial litigation with a concentration in construction law, mechanics’ lien law and government procurement law.. This blog is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this blog are those of the author and do not necessarily reflect the views of the author’s law firm or its individual attorneys.