The Regional Transportation District’s evolving public-private partnership philosophy paid its first dividend last week as the transit agency arrived at a plan to electrify two commuter rail lines without increasing the overall cost of the FasTracks project.
In a related move, RTD and private developers agreed to put the commuter trains serving Union Station in an open-air trench with covered sections. Previous designs had called for putting the trains in a tunnel with buildings directly overhead. The trench plan will not only reduce initial construction costs, it also moves some development originally planned for the Union Station site itself further into the Platte Valley, providing a better view of the mountains.
FasTracks was billed as a $4.7 billion project when voters approved it in 2004. But rapid increases in the cost of construction materials have pushed the current price tag to $6.2 billion. In response, the agency has tried to reduce costs by entering into “design, build, operate, maintain and finance” contracts with private companies to the extent that existing law and union agreements allow.
The first two parts of that mantra have long been standard operating procedure, as RTD and its periodic partner, the Colorado Department of Transportation, have saved money by contracting with private firms to design and build their projects. For its four proposed “commuter rail” lines – which use heavier cars than the familiar light-rail vehicles – RTD wants to seek additional savings by allowing private firms to operate and maintain the lines. It has eschewed that approach for light rail, existing or proposed, because its labor contracts specify those operations will be conducted “in house” by unionized workers. Because the transit agency doesn’t currently operate commuter rail, it has no similar agreements giving those operations to union workers and is thus free to seek cost savings in the operation and maintenance of the new facilities.
Yet, welcome as such operational savings would be, they wouldn’t ease another problem caused by the rising costs of construction. It’s a little- known fact that RTD’s enabling legislation limits it to paying a total of $7.2 billion in principal and interest for FasTracks. That’s why the agency now wants private firms to help finance the project as well – because money borrowed and interest paid by private firms doesn’t count against that limit.
This peculiar aspect of RTD economics explains why the public-private partnership approach allowed the agency to electrify the Gold Line to Arvada and the train to DIA even though that decision will add about $100 million to the initial construction cost of the project.
RTD expects that additional cost can be recouped in about 10 years because electric power is cheaper per mile of operation than diesel fuel. But if RTD financed the project under its own name, it might exceed its $7.2 billion principal-interest ceiling. By letting a private partner design, build, operate, maintain and also finance the lines, the long-term operational savings from electrified lines can pay off the bonds and actually yield a lower net cost to taxpayers over the life of the project – while providing an environmentally cleaner transit service.
It’s a creative solution that benefits neighborhoods and taxpayers alike.
