North America: Trump plan to divest airports, highways faces complications

13 February 2018 - 12:00 am UTC

Privatization of certain federally-owned assets proposed as part of President Donald Trump’s infrastructure plan could boost the operation of these assets, but there could be complications, according to P3 industry professionals.

The plan calls for the divestiture of Ronald Reagan National, Washington Dulles International, George Washington Memorial Parkway and the Baltimore-Washington Parkway. Both roads are managed by the National Park Service.

The plan to dispose of some federally-owned properties could mean that new assets and programs will benefit from operational efficiencies provided by the private sector, according to Marcus Lemon, head of Polsinelli’s Infrastructure and P3 Practice group. 

The Baltimore-Washington Parkway is a good example of a facility that could benefit from private congestion management and dynamic pricing through tolls, and is currently a “mixed bag” to travel on, he said, as drivers must deal with congestion at certain points in the road, and the facility is in poor condition in some areas, he said.     

The airports would attract plenty interest, but the nuance would be which assets are being sold, said Peter Kirsch, partner at Kaplan Kirsch Rockwell.  While the federal government owns the airports, they are operated by the Metropolitan Washington Airports Authority (MWAA), an independent airport authority created by Virginia, Maryland, and Washington, D.C., with Congress’ consent. In 1987, an act of Congress transferred the airports to MWAA, with the federal government retaining title to the lease. The original lease was extended from 50 years to 80 years, meaning it now expires in 2067.

“What is the federal government selling? Are they selling the real estate?” said Kirsch.

Reagan National is a good airport, Lemon said, but capacity expansion is needed, and future upgrades could be more easily accomplished through the new Trump proposal.

Privatization at US airports have been mostly concentrated on components of airports, such as LaGuardia’s Central Terminal and Denver Airport’s Great Hall project, rather than full privatization, Kirsch said. This also included the recent DBFOM contract won by a Fluor-led consortium to operate and maintain Los Angeles Airport’s automated people mover (APM) project.

“Airports are highly regulated, and are subject to a great deal of federal oversight,” Kirsch said.

Sen. Mark Warner (D-Virginia.) criticized the privatization plan.

“Selling off property like the GW Parkway, Dulles Airport, and Reagan National will not improve our infrastructure—it will only mean higher costs for the traveling public,” Warner said in a statement. “And, as with the rest of the president’s budget request, the administration does nothing to describe how it would pay for its own transportation proposal.”

Separately,   Tom Osborne, executive director of IFM Investors, said the Trump plan’s focus on incentivizing state and local governments to identify and implement new revenue sources, such as user fees, taxes, or the recycling of existing operational infrastructure through long-term leases, with the proceeds invested in new infrastructure, is positive

“This is a novel approach versus traditional ‘direct spend’ grants from the Federal government and will be a positive catalyst for bringing both sides of the aisle together to develop a workable plan for closing the infrastructure investment gap,” Osborne said.    

Lemon said he thought Trump’s plan was excellent, and praised the plan for going beyond transportation to look at other areas, such as federal buildings, fiber, energy, water and Veterans Administration facilities.

 

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