By Jon Hilkevitch
6:59 PM CST, January 28, 2013
The CTA is receiving strong and enthusiastic feedback from the private sector about investing in two mega-projects along the Red and Purple lines that the transit agency could not afford to undertake on its own for many years, CTA President Forrest Claypool said Monday.
CTA officials and financial adviser Goldman Sachs are studying potential public-private partnerships to construct the proposed Red Line extension to 130th Street, and to demolish and rebuild track, aging stations and crumbling viaduct structure on the North Side, from north of the Belmont station through Evanston, Claypool told a gathering of transportation experts at Northwestern University.
"We believe that partnerships with the private sector are one piece of the key to keeping mass transit healthy,'' especially in a period of declining federal and state funding, Claypool said.
The response to the CTA's outreach to the financial industry on the two Red Line projects has been "overwhelmingly enthusiastic,'' Claypool said. The CTA's goal is not to sell off assets but rather to lower costs by 10 percent to 20 percent on major projects, he said.
Both proposed Red Line projects are in planning stages, but they are unfunded for the construction phase, officials said.
The approximately five-mile south extension of the Red Line, from the current terminus at 95th Street to 130th, is estimated to cost at least $1.5 billion. Mayor Rahm Emanuel said when he was campaigning for office that the Red Line extension was his top transit priority and he expected construction would begin within a few years.
Cost estimates on the Red Purple Modernization project range from about $2 billion to more than $4 billion, depending on the scope of the work that would be undertaken to replace infrastructure that is more than 90 years old, officials said. The north branch of the Red Line serves the largest ridership in the CTA rail system, and the transit agency is spending $86 million on temporary repairs to shore up dangerously dilapidated infrastructure.
Claypool said the CTA was not interested in privatizing the operation of the Red Line or selling it off to the private sector. Instead, any deals would involve a public-private partnership to design, build, finance and maintain the rail line, but CTA employees still would run the trains, he said. In return, the venture partners would assume part of the financial risk of building two complicated projects and receive "a small potential share'' of profit.
Claypool pointed to a $454 million contract that the CTA signed last year with Cubic Transportation Systems to design a new fare-payment system as a solid model for future CTA public-private partnerships.
Under the Cubic deal, the CTA is getting out of the fare-collection business, and Cubic is developing an open fare system in which CTA and Pace customers will use a new transit card, called Ventra, or their personal credit or debit cards to pay fares. The new system is scheduled to debut this summer, officials said.
CTA Chicago Cards and Chicago Card Plus cards will be phased out in 2014, officials said. The CTA expects to save about $50 million over the life of the Cubic contract compared with the cost of the CTA continuing to administer fare cards, officials said.
"This deal will be a poster child for the way to structure P3s (public-private partnerships), provided that the new fare equipment works as expected,'' Thomas Lanctot, a partner at William Blair & Co., told attendees at the William O. Lipinski Symposium on Transportation Policy & Strategy on Northwestern's Evanston campus.
But experts cautioned that public-private partnerships are not a substitute for shrinking public funding.
"P3s are an excellent tool to stretch the money we have, but they are not free money,'' said Samara Barend, a vice president and strategic development director at AECOM, a technical and management support services firm. And public-private partnerships will only be attractive to business if the risk is not too high and the partners can make a respectable return on investment, she said.
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