Government Issues

Consultant Roundtable 2015: Execs Foresee Changing Federal Role

Posted on June 17, 2015 by Alex Roman, Managing Editor

Jyothis
Jyothis

With MAP-21 operating under another short-term extension, the cry for a new mechanism to fund a long-term bill has never been greater. With new ideas few and far between, though, many believe it may be time for the industry to embrace a changing federal role in funding capital projects.

METRO spoke with several consultants who not only discussed how bad the nation’s infrastructure needs are and how desperately the industry needs a long-term transportation bill, but also how tapping solutions being used around the world could be the answer to solving the age-old issue of funding.

Richard Amodei
STV Inc.
Sr. VP/Northeast Regional Manager, Transportation & Infrastructure Division

Richard Amodei
Richard Amodei

Discuss the Northeast Corridor’s much-needed infrastructure  Improvements and how they can be addressed.
Maintaining our region’s aging infrastructure and keeping it in a state of good repair, while also accommodating increased growth and demand, continues to be one of the central public transit needs in the Northeast. Additionally, with the rise of weather-related disasters in recent years such as hurricanes Irene and Sandy, there is also an emphasis on proactively developing more resilient transportation infrastructure, with an eye on keeping these critical services operational in the likely event of a future storm or disaster. In both instances, predictable and dedicated funding sources are a necessity.

Obviously, the reauthorization of MAP-21 is critical to addressing current needs. Also, transportation funding at the state level in New York and New Jersey needs to be a higher priority. Public revenues that are generated to support transportation initiatives are not currently keeping up with the increasing costs of maintenance and capacity expansion. Major transportation agencies like the Metropolitan Transportation Authority in New York, which has capital infrastructure needs of some $32 billion for maintenance of existing infrastructure and expansion initiatives, will continue to experience significant shortfalls unless new and dedicated sources of funding are identified.
Other revenue sources could include congestion pricing initiatives, which failed to pass the

New York state assembly in 2008, but is currently part of a package of proposals in the ‘Move NY Fair Plan.’ Also, the establishment of a National Infrastructure Bank (NIB) could be a funding solution. The NIB would be funded by bond financing and could encourage public-private partnerships (P3). As always, the utilization of P3s to support new transit projects and extensions to current systems continues to be examined as a possible alternative to aid the public sector in meeting its financial and operational challenges.  

What is the current climate for projects looking to move forward?
The outlook for projects moving forward is very positive across the country as we continue to see major investments and capital improvement programs with an emphasis on rail in the Northeast, Mid-Atlantic, Southeast, Midwest and in the West, as well as in Canada. For example in the Northeast, Amtrak’s Gateway program continues to forge ahead with the overbuild of Hudson Yards and the planning and design of the infrastructure for a potential cross-Hudson connection between New York and New Jersey. Ongoing projects, such as East Side Access and Second Avenue Subway, continue to move forward with talk of future investments to extend Metro-North Railroad into Penn Station, as well as future phases of the Second Avenue Subway.

California is serving as a pioneer for high-speed rail in the U.S. with the California High-Speed Rail system currently under development. There are also a number of large-scale transit projects in the works in Southern California, such as the Regional Connector light rail, Expo Phase 2 to Santa Monica and the Crenshaw/LAX Transit Corridor.

What current global trends could be applied to the U.S.?
One of the most impressive global trends — which, hopefully, will take root in the U.S. — is the level of investment other nations have made in infrastructure. Europe invests five percent of its GDP in its infrastructure, and China invests nine percent. Comparatively in the U.S., total public spending on infrastructure is much lower and has declined over the past four decades. There needs to be an increase of pressure on the U.S. to address its aging infrastructure and maintain its global competitiveness by developing a comprehensive strategy that reverses these trends.

P3s have had a lengthy and successful history internationally, so they may be the trend that has commanded the most attention not only in our industry, but also among elected officials and policymakers at every level of government. While Europe leads the infrastructure P3 market, you can look much closer to home for a remarkable commitment to P3 infrastructure projects. In Canada, the federal and local governments have long recognized the merits of well-structured P3s by establishing a federal program dedicated to improving the delivery of public infrastructure and achieving better value by increasing the effective use of P3s. From the Canada Line in British Columbia to the Confederation Bridge linking New Brunswick and Prince Edward Island, P3s have been playing an important role in meeting public infrastructure needs across throughout the country.

In Ontario, a leader on P3s, the City of Ottawa is building the Confederation Line, a new light rail line, as part of an ambitious plan to develop a world-class transportation system. STV, in a joint venture, provided preliminary engineering and continues to support this $2.1 billion design-build-maintain-finance project with project management and construction administration. The ongoing implementation of light rail in the Region of Waterloo with their Ion Project and Toronto’s Eglinton Crosstown are continuing the trend and taking advantage of alternative delivery systems.

Comparatively speaking, use of P3s in the U.S. is still in its infancy. But, as federal, state and local governments struggle under mounting deficits that have limited their ability to improve aging and deteriorating roads, bridges and airports, we will likely see an increase in the viability and use of P3s.

What has the public transportation industry has done right in terms of capitalizing on its growing popularity? What’s the next step?

The popularity of public transportation has continued to increase over the past several years with several transit agencies reporting record ridership. This increase in popularity can be attributed to the rise in gas prices and the obvious change in demographics across the country.

Millennials, baby boomers and empty nesters are also part of the reason why popularity has grown and this is largely caused by their attraction to the quality of life offered by living, working and pursuing recreation in an urban environment. Urbanized living is more popular than ever because of the convenience and accessibility of public transportation and other amenities. If I remember back to my earlier days, the most important thing when growing up was to get a driver’s license. But this is not true for today’s younger generation, who are less enthused about driving and owning an automobile. Use of public transportation by this demographic is up significantly along with biking and simply walking.

Another factor driving these trends is the increase use of technology such as smart phones. Today, we can use our smart devices to better understand what transportation options are available, how to make connections, bus and train schedules, and their real-time locations and times of arrival, including any delays. Technology is making it simple to understand and use public transportation. I think the public transportation industry has done a great job of taking advantage of technology offering many different apps that improve the use of their systems through smart technology. One of the next steps is to keep improving how information is accessed to make it easier to understand and use public transit.

Jeff Boothe
Boothe Transit Consulting LLC
President

Jeff Boothe
Jeff Boothe

Where does Congress put this bill in order of importance?
Progress has been made during the course of this year by the committees of authorization that are important to pass a long-term funding bill. The two primary questions pertain to a funding source and if that includes a percentage increase in annual funding? And if so, where does Congress find the monies to accomplish that purpose? We have overcome, for the most part, the idea that devolution is even an option. But, there isn’t yet any consensus around the funding mechanism and how much it can generate.

Are we getting any closer to finding a new funding mechanism?
What I observe that has mostly been addressed is what has been taken off the table. At this point, a proposal to repatriate revenues held overseas has been both and off the table at various points.  If there’s a tax increase of any type, the Republicans will insist that it be fully offset and that will be very difficult for the Democrats to embrace given what will have to be cut to provide the funds. It is still a challenge, in terms of what the mechanism is to be able to get this done.

I don’t know that we have any consensus. The most Rep. Paul Ryan will commit to is that he has identified funding of about $12 million that would get us to the end of 2015. There is a lot of resistance to his proposal in the Senate, because the belief is that this is Congress continuing to kick the can down the road. And, what will happen is that the end of the year becomes next year and next year becomes an election year, and then pretty soon, we can’t get a bill done. The worry of folks is there is such a tendency by Congress to avoid difficult issues and to keep punting. It is very frustrating to see this continue, and for Congress to seemingly not be able to resolve the issue.

At the end of the day, it comes down to political will. Is Congress willing to identify a long-term funding mechanism that would provide sustainable resources to be able to allow states and local governments and transit agencies to make long-term commitments. There seems to be a lack of appreciation within Congress over the impact the lack of sustainable funding has on project decisions and making investments decisions on the state and local level around surface transportation. It is very frustrating, and the reality is that industry will not get a long-term funding mechanism until both sides are willing to take the political leap together.

What is the impact of not having long-term bill in place?

There is a reluctance to commit to a large project unless it’s part of a bonding program that, for the most part, includes state or local monies. In terms of any federal funding being dedicated to a larger project, there seems to be hesitance to make that commitment. Or in my arena, the capital investment grants program, people are initiating projects, the constraint is the lack of federal funding to match, what is increasingly become more than a 50% match, at the local level. The constraint is largely that you don’t have the ability to make those commitments. You are seeing some degree of regulation of how projects move forward to sort of manage a pipeline, of which there is a lot of interest, in trying to figure out where to manage those expectations and manage the resources to make sure you can honor the commitments you have made.

Do you see a long-term bill coming anytime soon?
Everybody’s pointing the finger someplace else, but I think, ultimately, the authorizers can’t do anything until the Ways and Means and Finance Committees act.  The House and Senate authorizing committees can’t act on a bill until they know how much money is available. Both the Ways and Means and Finance Committees, in this day and age, take their lead largely from leadership. Thus, leadership must provide the committees direction and political support to get a bill done. That signal has not yet been sent.

It is maddening to see where we are on this. The crazy thing is that what is going to happen at the end of the day is we are going to turn to the solution that has always been in front of us — raising the gas tax. And, the amount we would have had to raise it in 2008, when it should have been done in the first place, would have been a lot less than what we have to raise it today to sustain the program. Continuing to punt on the issue has actually required the gas tax to be raised higher than it would have been if we had begun increasing it in 2008 and indexing it to inflation. The pain would have been a lot less in 2008 than it will be in 2015 or 2016, when we will have to raise it even higher because there is a bigger funding gap to fill.

Huelon Harrison
Legacy Resource Group
Principal

Huelon Harrison
Huelon Harrison

How is your role different than some of the larger firms?
The Legacy Resource Group team works primarily with the primes — the general contractors, engineering firms and design firms  — during the stage of considering preparation of a proposal for an opportunity at an agency. My firm’s role is to help the client in identifying firms to team with, either in a joint  venture role or as a sub-contractor. The firms usually have a proven track record in their respective areas of expertise, add value or bring a unique skillset to their team, as well as help the team meet or exceed the agencies DMWBE goals.

What I’ve found is that if a firm has developed a good working relationship with a particular firm, they may include that company  on opportunities all around the nation. I have noticed that the agencies desire seeing participation of local firms on opportunities. If primes continue bringing in outside talent, local firms may not have an opportunity to land a meaningful  role. Many times my firm will  get engaged during the early stage, talk to the prime to see what they are looking for and what skillsets they need, and then identify and match them with firms in the marketplace. We will then arrange  a meeting or site visit, if possible, to see if there’s a mutual desire to work together.

Do the agencies have any say on who works on these contracts?
When an agency puts together a procurement, a DMWBE participation goal may be assigned. It’s not that the primes can’t do it themselves; it’s just that sometimes they like to get a different point of view or a different approach. Many times, they will engage my firm to work with them from the RFQ stage on through to the RFP. If they are successful, there are times where Legacy Resource Group staff will be on the team and serve in the  role as a coordinator of the DMWBE firms to interface and act like a liaison for the prime.
I created Legacy Resource Group after serving on the  Dallas Area Rapid Transit board. I’d notice  firms come in from out of the state or the area with their own team, which in many instances included DMWBE firms. They already had a winning combination so why go outside to bring someone else in?

Is the biggest challenge for these smaller firms actually getting work to prove themselves?
Many times, the primes are open to  working with local firms, once they are identified and vetted. It’s not that they don’t want to use a local firm, they just don’t know who they are or how to find them. Many times they will bring firms  in that they have an established relationship with. My firms’s goal  is to identify talent locally  for the primes to  work with, if  at all possible. If the relationship materializes, that person or firm may be considered for  future needs on other projects in the area. Or, the prime firms can take them on the road to get even more experience.

What kind of advice do you give these smaller firms who are trying to attain these contracts?

They have to make themselves visible. I have brought quite a few new members to APTA over the years, because it gives them a chance to interact with industry peers on a national level. Also, the exposure is great and firms get the opportunity to participate in the public transportation arena on a larger scale. I truly believe membership in an organization like APTA is valuable. The resources and tools made available are unlimited. I have witnessed many success stories, many associated with relationships developed through APTA membership.

Greg Kelly
WSP | Parsons Brinckerhoff
President/CEO, U.S., Central and South America Region

Greg Kelly
Greg Kelly

Explain the country’s infrastructure needs, particularly in the Northeast Corridor, and How they can be addressed?
Beyond the urgent need to fund and build new transportation systems, nearly all of our clients are deeply concerned with maintaining and preserving existing infrastructure. This is especially true in the urban Northeast, where highways, airports, and railroads date to the post-War era or even the turn of the century.

The infrastructure needs in the Northeast are enormous and will require large capital projects to address them and maintain the region’s global competitiveness. That is both a challenge and an opportunity, as the well-documented deterioration of our road, rail, and airport infrastructure and the promise of capital projects, such as New York’s Second Avenue Subway, have combined to convince many that funding for large infrastructure projects cannot continue to be delayed. A key factor in the need for new infrastructure is the trend, particularly among young professionals, of living and working in urban areas and relying on the transit and rail systems that serve our cities. A related challenge is the decreased reliance on the automobile, and the concomitant decline in toll revenues, combined with decreased gas tax revenues as a result of more fuel-efficient vehicles. These changes require a renewed focus on creative tolling strategies and state-of-the-art electronic toll collection.
 
What new trends you are seeing that are helping projects reach completion sooner?
Long-term, secure funding for infrastructure at the federal level remains a challenge, but we are seeing promising developments at the local level, as state and local governments are taking action, within their means, to address the funding of transportation projects locally. Some states have raised gas taxes, and certain state and local governments have voted to increase taxes to fund infrastructure development. These local initiatives are welcome, but they can’t compensate for inadequate federal support.

Many of the transit and highway agencies we serve are committed to integrating multiple modes of transportation in well-planned corridors that promote the efficient movement of people and goods. To do this, localities are increasingly looking to new financing and delivery tools, such as design/build, CM/CG [construction management/general contractor] or CM-at risk, and public-private partnerships.

The MAP-21 legislation includes several provisions that have been helpful in expediting project delivery, including a streamlined environmental review process and concurrent federal agency reviews. For that reason alone, the extension and adequate funding of MAP-21 is critical.  

Other trends that expedite project delivery include public-private partnerships; design/build; creative tolling strategies, such as managed lanes and variable pricing; and private activity bonds, which allow state and local governments to fund private initiatives. None of this, however, negates the need for increased and sustained federal funding of infrastructure. We have seen a marked slowdown in project start-ups at the state and local level as localities are unsure of the federal commitment to infrastructure spending.  

It’s worth noting that transportation projects advance most expeditiously when clients and consultants take the time during the planning stage to develop collaborative relationships with host communities and project stakeholders.

What is your company’s greatest challenge?
We place a high priority on leading technological change in our industry through our contributions to technologies, such as connected vehicles, managed lanes and positive train control, which will enable our clients to meet the challenges of moving people and goods efficiently and safely in the 21st Century.

Another critical challenge is providing our clients with comprehensive asset management, enabling them to manage a complex network of interconnected transportation systems, both fixed infrastructure and rolling stock, with respect to capital needs as well as operations and maintenance. Our clients need more certainty with respect to schedule and budget, and increasingly, they face the pressure of completing projects within election cycles. It’s no longer enough to perform good engineering; clients need a comprehensive, integrated, long-term approach to their capital needs.    

What are some of your company’s newest sustainability initiatives both internal and external?
Internally, we recently sponsored a competition designed to encourage our people to think creatively about ways to reduce waste going to landfill on our projects. For instance, on a tunnel project in Washington, D.C., we used ground freezing (as opposed to jet grouting) to reduce excavated material, and also reused bricks that had to be temporarily removed during construction. On a pond restoration project in Maryland, we propose to reuse a significant amount of the soil that must be excavated, as opposed to sending it to landfill and replacing it with new soil. In addition to saving resources, we expect this proposal to save our client money.

Externally, as a charter member of the Institute for Sustainable Infrastructure (ISI), we continue to work to advance a system of sustainability rating for infrastructure projects, similar to the highly successful LEED [Leadership in Energy and Environmental Design] program for buildings of the U.S. Green Building Council. In joining ISI, we set a goal of certifying 100 of our employees in ISI’s EnvisionTM credential, and we easily surpassed that goal earlier this year.

We continue to incorporate measures to address green infrastructure and resiliency in our projects, not as ‘add-ons,’ but an integral part of our approach to project delivery.

With the large change of members in Congress, how have you/your company reached out to those representatives to communicate the importance of what you do?

We’ve continued our bipartisan outreach to members of Congress, at both the federal level in Washington and at the local level, nationwide. For instance, we regularly have conversations with the staff of Sen. James M. Inhofe (R-OK), chairman of the U.S. Senate Environmental and Public Works Committee, just as we did with the staff of his predecessor, Sen. Barbara Boxer (D-CA). A challenge for us is making the case to legislators that the transportation initiatives we seek will grow the economy, help localities prosper, and meet the everyday needs of constituents, in addition to increasing our business.

In our outreach to members of Congress, we seek the long-term extension and adequate funding of MAP-21, the reauthorization of the PRIIA [Passenger Rail Investment and Improvement Act] legislation providing adequate funds for Amtrak, and the reauthorization of the Federal Aviation Administration bill. Our overarching concern, however, is for a long-term, sustainable source of funding for the Highway Trust Fund. An increase in the federal gas tax would offer a short-term solution, but the nation’s road, bridge and transit infrastructure will continue to deteriorate if Congress does not address funding for the Highway Trust Fund on a long-term basis.

Alan Wulkan
The Wulkan Group
President/CEO

Alan Wulkan
Alan Wulkan

What is your current view on the state of the industry?
With all of the current trends — concerns over sustainability, the growth of cities — I still don’t think there’s ever been a better time to be in public transit. That being said, there is a clear shift in the future funding of public transit and what our industry might look like in the next 10 to 20 years. This challenge with federal funding is not a short-term challenge; I think it’s a long-term issue that, frankly, is signaling a different role for the federal government in public transit in the future.

We are going to look a lot more like the European and the Canadian models in the future. And that means, with all of the local initiatives that are passing and have passed, more and more we are seeing the responsibility for funding pushed down to the local and state levels. That doesn’t mean there is not a role for federal funding, there will always continue to be, but gradually I think the federal role is going to start changing to promote public transit as remaining competitive globally and assisting the private sector and less on a large dependence on federal funds for public projects.

Do you see this change as a positive?
We will go through some growing pains with this change. In the long run, it is positive, because the more you recognize local benefit of transit investments in our country, the broader the support for public transit is going to be. I think it’s positive, but we have had a large number, and still do have a large number, of properties, particularly small- to mid-size agencies, that are very dependent on federal funds. It will take a long time for that to change. And, it will be interesting as we start crafting future reauthorizations, probably not this one, how we balance the fact that the large cities are passing initiatives to fund the vast majority of those projects but we still have to protect the rural and small transit properties as we see them build local constituencies, which is much more difficult at those levels for public transit.

But it is going to happen. We see more and more the value of rural transit being recognized in those communities that 10 years ago we didn’t see. Again, it all plays back to the trend, which is, even with lower gas prices we haven’t seen a cratering of transit use because people still believe it’s the right thing to do. People are still concerned over the environment, the millennials aren’t tied to driving, and our country is getting older, so we are seeing the confluence of a lot of things that say it’s a good time to be in public transit. I just think the way we deliver, and probably in the future, the way we operate is going to change.

How does the lack of funding impact the industry moving forward?
It’s already having an impact. We have seen a lot of the New Starts pipeline slow down. We don’t have a lot of long-term planning going on. We will get some short-term funding, because the Highway Trust Fund needs that money to stay solvent. So, we are going to see Congress, in my judgment, as it has in the past, come up with a couple of short-term fixes, which will provide enough money to sustain the program for the next year or two.

Many feel there is a great desire to get the program reauthorized. My problem is I don’t see a clear path. Everybody agrees we need to reauthorize the program; the problem is it is a revenue issue. Everybody’s been talking about tying the revenue issue to tax reform, but I just can’t see a path in this political environment that major tax reform is going to happen before the next presidential election is over. It is easy to say everybody wants to see it done, but November 2016 is not that far away and the suggestion that we are going to get a bill out of this Congress that this president will sign on tax reform is going to be even more difficult than getting a transportation bill done…far more difficult.

What is the focus of your new company?
I am basically providing advisory services to two groups. One, existing clients who are developing New Starts programs in Honolulu and Albuquerque. Those are my main clients. Then, I am helping a number of companies who are trying to break into the transit industry as a way to bring new thoughts and ideas to the industry.  

One of the Administration’s plans was to streamline the New Starts program…how has that worked?

From a policy standpoint, this Administration has been the most supportive of public transit, certainly in my 42 years in the business. What the president has done with the recovery and TIGER funds and high-speed rail has been positive. The frustration has been that this Administration has not been able to identify a funding source to give us a long-term program – the New Starts program is suffering because of that.

The last budget resolution has a reduction in New Starts projects, so the program is under attack. I would be surprised if you asked many at the local level if they really perceive that the program has been streamlined. Certainly, their efforts in the Small Starts and Very Small Starts programs in the last six years have helped projects like BRT and streetcars move through the process quicker. Off the top of my head, though, I would be surprised if the larger systems would say they have seen a tremendous improvement.

In fact, because of the lack of funding, they have probably had a more difficult time getting New Starts projects started. By the way, there have been other challenges that we are now confronting, including a much more strict enforcement and interpretation of Buy America and a new local preference piece pilot project that is moving through the Administration which is causing a lot of concerns for New Starts projects, especially for the private sector. So it’s a mixed bag when it comes to the New Starts program.

 

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