P3 Profiles: EagleP3, a section of Denver’s comprehensive transit expansion, FasTracks
By Chrissy Mancini Nichols
Apr 6, 2011
This post first appeared at metroplanning.org
P3 Profiles is an ongoing series of case studies on national and international public-private partnerships.
Location: Denver, Co
Project Sponsor: Regional Transportation District
Private Partner: Denver Transit Partners: Fluor (10%), John Laing (45%) and Uberior (45%)
Project Delivery: Design, Build, Finance, Operate, Maintain
Cost: $1.64 billion
Funding Sources:
• Government contribution: $1.14 billion construction payments and $44 million pre-completion service payments
• Equity: $54.3 million
• Debt: $397.8 million in Private Activity Bonds
• Underwriters: Barclays Capital and Bank of America Merrill Lynch
With a population that’s expected to grow by 154 percentby 2020, Denver’s Regional Transportation District (RTD) knew residents needed improved transportation options if the quality of life that attracts people to the city was to remain. Rather than build another highway that would eventually be congested, the RTD began FasTracks,a $7 billion, 12-year program to build 122 miles of new commuter and light rail, 18 miles of bus rapid transit service, 21,000 new parking spaces at rail and bus stations, and enhanced bus service for easy, convenient bus/rail connections across the eight-county district.
Due to the sheer size of FasTracks, the six new rapid transit corridors and three existing corridor extensions are built and financed in stages. Most of the funding is generated from a voter-approved sales tax increase of 0.4 percent (4 pennies on every $10), passed in 2004. Since the tax was approved, the RTD has been pursuing innovative financing options through which they can leverage local dollars to obtain efficient outcomes. Financing includes federal New Starts and other grants, Transportation Infrastructure Finance and Innovation Act loans (TIFIA), sales tax bonds, local contributions, and Public Private Partnerships (PPP).
Eagle P3
The RTD pursued PPP’s to implement many of the FasTracks projects, including Denver Union Station, North Metro and I-225 corridors, as well as the East Corridor, Gold Line and commuter rail maintenance facility. These three projects, East Corridor and Gold Line (known as Eagle) and commuter rail maintenance facility, or Eagle P3, were collectively accepted by the Federal Transit Administration as part of its Public-Private Partnership Pilot Program (Penta-P). The Penta-P allows the RTD to partner with a private company or consortium to design, build, operate, maintain and finance the Eagle P3 under a single contract. The project is the first of its kind to move forward within the Penta-P pilot program, which allows for private participation in the financing of public transit infrastructure. Historically, transit projects have been funded by the public sector through a combination of federal, state and local transportation funds.
The RTD chose Denver Transit Partners (DTP), a private consortium led by engineering firm Fluor and Australian investment bank Macquarie Capital, to deliver the Eagle P3. DTP will design, build, finance, operate, and maintain the 22.8-mile East Corridor and the 11.2-mile Gold Corridor. The East Corridor will connect downtown Denver’s Union Station with the Denver International Airport, while the Gold Corridor will connect commuters with the western suburbs. RTD will set and retain all assets and revenues generated from transit fares, advertising, and parking. The concession period will last 34 years, with a five-year design/build period and 29 years of operation and maintenance. In return, RTD will make availability payments monthly to DTP based on availability and performance of the Eagle P3. In total, RTD will pay DTP $5.5 billion in service payments over 29 years in exchange for operating and maintaining the rail lines. All corridors of the Eagle P3 are scheduled to open in 2016.
Lessons Learned
Cost savings
DTP can build the two lines for about $300 million less that the RTD's most recent cost estimate for the project.
Economic Impacts
More than 1,000 direct jobs and 1,500 indirect jobs will be created during the construction phase of the Eagle P3. The project will result in more than 300 permanent jobs.
The 12-year design and construction period of all FasTracks projects will create an average of 6,213 direct and indirect jobs annually resulting in almost $3 billion in additional wages for the Denver economy and $90 million in state income taxes. This will generate $2.4 billion in additional consumer spending and $46.1 million in state and local sales taxes.
Operations and maintenance of the FasTracks system will result in a total of 2,573 jobs each year due to the direct, indirect, and induced impacts of FasTracks expenditures on operations and maintenance after build out. This will add over $150 million annually in wages and salaries to the metro Denver economy.
Land use coordination
Denver coordinated the first phase of light rail development (1994 to 2000) in accordance with their “Light Rail Station Development Program,” created to encourage transit-oriented development and mixed-use around light rail stations. The RTD FasTracks plan promotes these concepts while also encouraging and enhancing local plans.
Light rail, commuter rail, and improved bus service increase the transportation choices for Denver residents, enable high-density development, and reduce urban sprawl and traffic congestion. Travel time per commuter will be reduced by as much as 600 hours each year.
Growing industry
The Eagle project also has implications for the larger industry that’s growing around private investments in public infrastructure projects in the US. The public sector has been able to leverage private investment in public highway projects, but until now, the transit sector has not followed. Nicholas Hann, the managing director at Macquarie who’s leading his team’s equity participation in DTP, believes the transit sector will catch up. “I’m absolutely confident [the Eagle P3] will be a landmark transaction in the delivery of US transit projects. The cost savings that RTD is seeing are actually quite typical of those achieved in public-private partnerships.”
The Eagle P3 was named the North American Transport Deal of the Year by Project Finance Magazine.
Here's a map of the entire FasTracks system.
