In addition, the QSCB’s come with several requirements which may make them costly to implement.  The first requirement, and most punitive, is the requirement to utilize Davis Bacon Wage Labor rates.  Depending on the locality, this requirement alone can increase construction costs significantly.  It is not inconceivable that any interest savings achieved by using the QSCB’s could be eaten away via higher construction costs.  Secondly, there are significant and severe reporting requirements that go along with several of the ARRA created bonds, not just QSCB’s.  We have heard of some municipalities that are having to dedicate a full time staff person to handle the reporting requirements.  In a fiscal environment where every costs is being scrutinized, adding a position may not be palatable.

Much like most things in life, there are always pro’s and con’s associated with any decision.  Municipalities are well advised to lean heavily on their financial advisors as they work through the various funding options for new projects.

The Story: The Port of Oakland is soliciting proposals from interested private groups to provide “the master operation and maintenance, and long-term design, construction and finance of facilities of approximately 168 acres to support and enhance maritime activity”.

The Analysis: The opportunity in question is the redevelopment of a former Navy facility on land which is currently owned by the Port of Oakland.  As I understand it, the Port would like a private group to come in and sign a 30-year master lease on the parcel, to begin January 1, 2010.  The private group would then design, construct, finance and operate the facility.  At the end of the 30 year lease, the property and it’s improvements would revert back to the Port of Oakland.

The Public Private Partnership (PPP) idea is an interesting one and has been used very successfully internationally.  Several domestic ports are currently considering the structure to finance new capital programs.  However, the program is still young in the United States and there are issues that need to be worked out.  One issue that stood out to me with the Oakland proposal was the short duration (30 years).  I would want a longer horizon to amortize down my improvements.  This will be a significant capital outlay and a strong selling point for Oakland.  30-years seems a little too short.

The Story: Last year VDOT received three plans to construct the new highway 460 running from Hampton Roads to Petersburg, south of Richmond.  When those plans were received they contained provisions for massive amounts of public money to make them a reality.  VDOT is now asking those bidders to revisit their proposals to potentially reduce the amount of public money required.  While making 460 a toll road was a possibility in the first round of proposals, it will almost certainly be a component of the revised bids.

The Analysis: Few realize just how vital highway 460 is to the economy of Virginia.  In addition to being an additional hurricane evacuation route, it is a critical link in the global supply chain that comes through the Port of Virginia.  While Interstate 64 might seem like the logical way for containerized goods to leave the area, anyone who has attempted to traverse the bridge-tunnel at 3pm knows it can be a slow process.  460 offers a convenient way for trucks to leave the area without having to go through that bottleneck.  Before you start complaining, yes, 664 is better but still not great.

America’s global supply chain is a very low margin business where every penny matters.  VDOT needs to be very careful that they don’t price 460 out of the market.  Any additional cost associated with getting goods through the Port of Virginia is a competitive disadvantage.  Planning 460 as a toll road could have the unintended effect of pushing more trucks through the tunnel or pushing port business further south to Charleston or Savannah.

Highway 460, if done correctly, has the potential to be a significant relief valve for Hampton Roads traffic.  If tolls are the answer, I would hope that VDOT would at least make some considerations for fast toll lanes and/or a toll exemption for trucks.