Dive Brief:
- Even though the Charlotte Area Transit System (CATS) just last week presided over the opening of a new $1.1 billion light-rail extension, CATS system chief John Lewis is pushing for construction of three new lines, an initiative that is expected to cost between $5 billion and $7 billion, according to The Charlotte Observer. Lewis also wants to develop a streetcar system, which would be an additional cost.
- Rather than phasing in each line, Lewis said he wants to build all three at the same time, which leaves open the question of how CATS will pay for such an ambitious plan. Funding possibilities include a special transit sales tax, state and federal contributions, rental car taxes, higher vehicle registration fees, special "value capture" property tax districts, public-private partnerships (P3s), or a strategy that incorporates more than one of these options.
- The Federal Transit Administration paid for approximately half of the newly opened Lynx Blue Line Extension, but the president's infrastructure plan would reduce federal funding levels to approximately 30% for future transit projects. State financing could pay for 10%. Lewis is open to a P3, but, according to The Observer, Charlotte doesn't have the revenue base to pay a private partner if the P3's structure requires guaranteed annual payments.
Dive Insight:
One of the ways Charlotte could pay a P3 developer would be to increase taxes, but that's a tough option to get past taxpayers. Even so, as a recent Moody's Investment Group report said, President Donald Trump's infrastructure proposal has the potential to grow the P3 market in the U.S. as long as state and local governments are willing to open up new revenue streams like additional taxes or tolling in order to pay for these initiatives. Reduced federal funding might also force transit agencies to turn to private investment through P3s.
Overall, P3s are considered to be a way for public agencies to shift the risk of design, financing, construction, operations and maintenance to the private sector, which can often offer efficiencies that the public sector cannot. Also, private sector expertise can also benefit public projects by using P3s by introducing the latest building techniques.
One of the biggest P3 rail projects currently underway is the $5.6 billion Purple Line project in Bethesda, Maryland, which is part of the Washington, D.C. Metro system. After a year of legal wrangling over ridership and environmental issues, which stalled construction, the courts at the end of last year authorized construction to move forward.
