Public-Private Partnerships for Urban Rail Transit
by Jochen Schneider, Diebold Institute/ Deutsche Bank Fellow, September 1, 1999
(Note: The European part of this study has not yet been funded but the North American part is currently underway)
This project is designed to provide some lessons for European policy makers, capital investors and real estate developers from case studies in Europe and North America
Project-Focus:
Overview and case studies of Public Private Partnerships at (sub)urban rail lines, including:
Integrated development of urban rail transit infrastructure and land use, transit-oriented development (development at transit stations on the property of the transit agency or on adjacent properties)
Comparative analysis of economic, organizational and legal factors influencing the creation and success of public private partnerships
Calculation and evaluation of capital investment risks, organizational conditions influencing the success or failure of public private partnerships, public regulatory conditions to encourage or discourage public private partnerships
Topics and geographical context of the study:
First of all, an overview of areas, forms and results of private participation and co-funding of the construction or modernization of the urban rail infrastructure in the United States and Europe will be given. The trends of public funding and private participation on each side of the Atlantic will be described.
In Europe the process of deregulation and privatization of the entire public transportation system has led to a great variety of public-private partnerships to build, renew and operate transit systems or transit stations, in particular in countries with low public transit subsidies and advanced deregulation (e.g. Great Britain). In America there are relatively few examples of the private participation of rail extensions but a great variety of partnerships related to the land values created through public transportation.
The case studies will concentrate on the directly comparable partnerships between public transportation agencies and the real estate sector. The comparison of significant examples on both sides is supposed to enrich the mutual experience of the (potential) financial and political role of transit, and in particular station related partnerships and the regulatory, organizational and economic conditions necessary to make them successful.
Two different case constellations have to be examined:
The participation in the integrated development of urban rail infrastructure and land use, transit-oriented development adjacent to urban railway stations on private or municipal property.
Integrated urban rail transit and land use development
As the real estate values of rail infrastructure are highest at stations, the cooperation between transit agencies and real estate developers tends to focus on the station infrastructure. Adjacent real estate property of the transit agency can be used to foster such cooperation. The cooperation can exceed the station at the most real-estate-value-creating parts of new rail corridors, e.g. in CBDs and airport-connections. The existing differences of European and American investment priorities may help to find out, which are the economical and political driving forces and regulatory conditions to attract or prevent private participation. The following aspects will be analyzed: organization and funding of rail infrastructure-, station- and real estate development within the transportation companies, publication of the development possibilities and –conditions, requirements of the request for proposals about the integration of infrastructure and real estate development, motivations of investors to participate and the role of rail-transit-related real estate development in their investment decision, evaluation of the investment risk, obligations for developers after submitting a proposal, procedures of selecting developer proposals political and regulatory conditions on the local, regional and national level for such a cooperation, including the possibilities/ willingness of local jurisdictions to set up the legal frame for the proposed development.
Transit oriented development (TOD)
In case of an existing rail corridor and an existing rail station, the sustainability of the transit system and its role in the regional/metropolitan transportation network depends heavily on the urban development around these stations. As a consequence it relies indirectly on private real estate investments. It needs to be examined what makes a transit-oriented development attractive and which direct and indirect financial contributions the transportation-company may draw from it. The following aspects will be analyzed: How to create activity near stations that increase the market for public transport? How to capture potential development values 'in advance', which regulatory conditions are needed? What skills do operators and authorities need to promote transit-oriented development, and what is the influence of the organizational framework in which they operate (= 'the distance between them')? Who is initiating, who is managing the process?: Participation, roles and project development involvement of the transportation companies, the communities, the state government and private investors Involved real-estate properties – public or private, interests of the land-owners, motivation of the investors to develop projects adjacent to transit stations, financial participation of the private and the public sector, Evaluation of the investment-risk, results of transit oriented development (TOD) – user-mix, urban density, TOD-share of the local real estate market, TOD-contribution to ridership numbers.
The study will be conducted in metropolitan regions with comparable traffic problems in the United States, Canada and Europe, including France, Germany, Austria, Great Britain and other countries. The overview as well as the selection of case studies will concentrate on the following metropolitan areas where significant public-private-partnerships at rail transit lines and stations are expected:
Last modified: May 27, 2001