rail investment and public/private partnerships september 2014 david p. simpson david p. simpson...

Rail Investment and Public/Private Partnerships

September 2014David P. Simpson

David P. Simpson Consultants LLC

Rail Investment and Public Private Partnerships

Can states be more than observers to the process?



Discussion Sequence

• Who are the players?• What do we know about them?• What are the dimensions of the issue?• Hotels, apartments or condos?• Next steps – building a business model that

works!



Who are the players?

• State DOT’s• FHWA / FRA• MPO’s (Large Cities)• Class I carriers



Who are the players?

• State DOT’s• FHWA / FRA• MPO’s (Large Cities)• Class I carriers• Short line Carriers• Large Trucking Firms• New Rail Franchisees



What do we know about the the public stakeholders?

• Very limited funding for rail• Not part of mainstream planning efforts• Traditional “Niche” focus –– Public safety / grade crossings– Shortlines/branchline preservation– Passenger/commuter rail



What do we know about the private stakeholders?

• Rail carriers in capacity rationing mode– Long-haul, high volume corridor emphasis– Threshold volumes for new services rising– Trainload traffic opportunities a priority– Little appetite to broaden market scope– Domestic intermodal becoming more important




• Real pricing increases – Financials strong– Little incentive to change business model




• Motor carriers under duress – hours of service and job structure issues– Extreme labor turnover issues– Hours of service regs impact availability– Drug testing – Willingness to explore new structures– Large vs. small firms



What are the dimensions of the issue?



Public is sympathetic to freight rail• AASHTO Freight Rail Bottom Line Report



Public is sympathetic to freight rail• AASHTO Freight Rail Bottom Line Report• Motorist frustration with truck volumes



Public is sympathetic to freight rail• AASHTO Freight Rail Bottom Line Report• Motorist frustration with truck volumes• Corridor studies confirm importance of freight

congestion issue




congestion issue• No public sector model to move forward with

freight rail




congestion issue• No structural model to move forward with rail• Geographic scope a big challenge for states



Challenges of Public Rail Investment

• Whose assets are they?




• Whose assets are they?• What are we buying?




• Whose assets are they?• What are we buying?• How do we measure capacity?




• Whose assets are they?• What are we buying?• How do we measure capacity?• Who will guarantee service?




• Whose assets are they?• What are we buying?• How do we measure capacity?• Who will guarantee service?• How do we track investment?




• Whose assets are they?• What are we buying?• How do we measure capacity?• Who will guarantee service?• How do we track investment?• How to allocate ongoing investment?



Public Sector Evaluation Criteria

• Confidence in forecasted impacts




• Confidence in forecasted impacts• Clarity of value equation– Capacity vs. investment– Service quality and market fit





• Conservative market approach





• Conservative market approach• Capital vs. subsidy bias



Private Sector Evaluation Criteria

• Return to shareholders




• Return to shareholders• Cash versus annuity value




• Return to shareholders• Cash versus annuity value• Relationship to core business focus




• Return to shareholders• Cash versus annuity value• Relationship to core business focus• Regulatory risk




• Return to shareholders• Cash versus annuity value• Relationship to core business focus• Regulatory risk• Commercial risk



So What?



Hotels, Apartments or Condos?



What are structural options?

ASSET NETWORKSTRIPPING INTEGRATION

Easement sale/lease Broaden Core BizLimited Corridors Multiple Use AssetsMarket Isolation Marketing

Integration



Next Steps – Building a Business Model That Works!



Next Steps – Building a Business Model That Works!

• Identify key advantages and liabilities for various PPP business structures– Carrier perspectives– Public sector perspective



Next Steps

• Identify key advantages and liabilities for various PPP business structures– Carrier perspective– Public sector perspective

• Develop two or three specificspecific business models that may have application to corridor needs.



Next Steps

• Identify key advantages and liabilities for various PPP business structures– Carrier perspective– Public sector perspective

• Develop two or three specificspecific business models• Engage in collaborative effort to secure

funding and initiate pilot project(s)



Thank You!



rail investment and public/private partnerships september 2014 david p. simpson david p. simpson...

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