Infra Insight Blog

In an effort to promote project flexibility, funding innovation, efficiencies and timely implementation, this week the Federal Transit Administration (FTA) released its final rule regarding P3s (and other private involvement) in public transportation projects.

The primary goal of FTA’s Private Investment Project Procedures (or PIPP), new 49 C.F.R. Part 650, is to identify and address FTA requirements that are impediments to the greater use of public-private partnerships and private investment in public transportation capital projects, while protecting the public interest and any public investment in such projects.  This new FTA rule was promulgated under authority granted under 2012’s MAP-21 Act.[1]

MAP-21 directed the U.S. Secretary of Transportation to develop policies that promote public understanding of the role of private investment in public transportation and to coordinate private sector participation in delivery of public transportation services.  The mandate was then, among other things, to identify and address impediments to greater use of P3 delivery and private investment in public transportation projects.[2]

FTA elected a strategy to set out special procedures outlined in the PIPP by which project sponsors may petition for modification to some federal, non-statutory requirements that pose the impediments described just above, not unlike the Federal Highway Administration’s strategy via SEP-15 authority.  Put another way, FTA wants to encourage modifications to these federal requirements that will accelerate the project development process, attract private investment and lead to increased project management flexibility, more innovation, improved efficiency, and/or new revenue streams.[3]  FTA is not trying to change the rules themselves.  Rather, it is using a flexibility strategy that lends itself to project-specific sensitivity.

Sponsors may not, however, seek to modify or waive NEPA requirements or statutory requirements, as this is outside FTA’s statutory authority under MAP-21.[4]

PIPP pertains only to public transportation projects that intend to involve private sector investment or developers – essentially P3 public transportation in specific forms.  PIPP defines P3 broadly as a contractual agreement formed between a public agency and a private sector entity that is characterized by private sector investment and risk-sharing in the delivery, financing and operation of a project.[5]  PIPP outlines an application process and the factors with respect to any eligible project[6] that the sponsor must demonstrate to FTA in order for FTA to consider waiving or modifying its non-statutory, non-NEPA requirement.[7]  The factors[8] are essentially whether the waiver or modification:

• Would remove an impediment or discouragement to use of P3 (joint development or private sector investment);

• Would encourage use of P3 (joint development or private sector investment);

• Likely private sector investment or risk transfer warrants modification/waiver; and

• Still protects the public interest and public investment in the project.

Project sponsors retain post-waiver/modification reporting responsibilities.  Central to the application is evidence of committed financing, including private sector investment, but FTA seeks further comment as to whether this is feasible at the time of the application – a chicken-and-egg issue.  Public comment to the final rule is invited, so further changes to PIPP may be forthcoming.

PIPP is largely unchanged from the July 31, 2017 proposed rulemaking.  PIPP outlines substantive changes, largely relating to project identification in long-term planning and other administrative matters regarding applications.

FTA’s move here fulfills the MAP-21 requirements but also is consistent with the Executive Branch’s roadmap for infrastructure, released in February, itself a principled extension and proposed implementation of MAP-21’s subsequent transportation bill, 2015’s Fixing America’s Surface Transportation (FAST) Act.[9]  Specifically, the PIPP supports the proposal’s key principle that project sponsors are to prioritize projects and make investment decisions. The natural extension through PIPP is to identify, and propose to remove, impediments to private investment via P3.

[1] Nossaman’s 2012 blog and more information on the then-remaining challenges to P3s that MAP-21 retained can be found here.

[2] P.L. 112-141 § 20013(b); see 49 U.S.C. § 5315.

[3] FTA-drafted Executive Summary of PIPP.

[4] 49 C.F.R. § 650.13

[5] 49 C.F.R. § 650.5

[6] Defined at 49 C.F.R. § 650.5 as any surface transportation capital project that is subject to 49 U.S.C. ch. 53 [public transportation projects] and that will be implemented as a public-private partnership, a joint development, or with other private sector investment.  See 49 C.F.R. § 650.5 for other relevant definitions.

[7] See 49 C.F.R. § 650, Subparts B and D.

[8] 49 C.F.R. § 650.11(b)(1) to (4).

[9] https://www.infrainsightblog.com/2018/02/articles/news/white-house-releases-roadmap-for-nations-infrastructure-congress-takes-the-wheel/