Friday, November 21, 2014

Playing Three Card Monte on Public-Private Partnerships for Trains

Three weeks ago we told readers about the effort by the Metropolitan Transit Commission to gain support for its upcoming legislative agenda in Raleigh. That agenda included requests for three items:

1. Legislative permission to use Public-Private Partnerships (P3s) to finance transit projects.
2. Permission to access certain Federal loan programs for transit projects.
3. Repeal of the sunset provision for existing Special Assessment District (SAD) legislation.

These items had all been presented as critical to financing future transit line development including the stalled Red Line commuter rail project.  We raised concerns about why the MTC was pushing this along so quickly - asking local commissioners to approve supporting resolutions by it's November 19th meeting.  Of particular concern was the idea of using P3s as a mechanism to finance rail development.  With all of the controversy around the P3 project for the I77 HOT Lanes, it seemed this was being rushed along too fast for the public interest.

Then something unusual happened at Davidson's board meeting on Tuesday November 11th when the resolution was to be discussed.  Two of the three critical items disappeared - the P3 and Federal loan program requests had been removed.  Only the request to remove the SAD sunset provision remained.

Davidson's Board unanimously approved the slimmed down resolution with little debate.  On Monday of this week the Huntersville and Cornelius Boards passed the same resolution 4-2 and 4-1 respectively.

So, the obvious question...

"Why was the resolution trimmed to just one item?  Specifically, how did the controversial P3 provision disappear?"

In a November 6th email on behalf of CATS CEO, Carolyn Flowers, to MTC members, Flowers had this to say regarding the authorization to use P3s to finance transit projects:

"With respect to the public private partnership (P3) position, legislation enacted in the 2013 regular session, SL 2013-401 established a statutory framework for local governments to enter into P3 arrangements. Initially, CATS staff believed the 2013-401 framework was of limited use in implementing 2030 Plan projects and we started considering a new framework.  Over time, staff understanding of what types of P3 arrangements would be utilized for 2030 Plan projects evolved to the point where it is believed SL 2013-401 will provide a sufficient framework. For this reason, the proposed public-private partnership position may be removed from the agenda."

In response to an emailed question regarding this change, Flowers said “outside counsel recently confirmed that 2013-401 can be used for any capital project, including transit infrastructure projects”.  Flowers confirmed the outside counsel was law firm Parker Poe.

Parker Poe has a long history of connections to Charlotte transportation issues.  One of its partners, Anthony Fox (no relation to US Transportation Secretary and former Charlotte Mayor Anthony Foxx) served on Charlotte's "Committee of 21" regarding local road needs.  He was also appointed by Charlotte to the proposed new Charlotte Douglas Airport commission.  Parker Poe is also the same firm where former long-time Charlotte City Attorney, Mac McCarley, went after leaving his job with the City.

Prior to receiving input from outside attorneys, there was good reason for CATS staff to not think this session law was applicable to building rail lines.  SL 2013-401 was spawned by House Bill H857.  When H857 was written, it was not intended to create law to be applied for transportation projects.  This was confirmed by Rep. DeanArp (R-Union) who was one of  H857's primary sponsors in the General Assembly.

In fact, one of the “whereas” clauses in H857 specifically states it does not impact projects administered by NCDOT, and NCDOT helps administer rail projects where State money is involved.  However, the whereas clauses of a bill only describe the intent of the bill.  They do not become part of the law itself.  H857 was intended for public buildings, not transportation infrastructure.  Somewhat ironically, according to Rep Arp it was meant to bring more transparency into the use of P3s, but he agreed in this case is sounded like the law generated from his bill was being used beyond its original intent.

In this case, the legal eagles in CATS’s employ seem to be sacrificing the spirit of the law by following the letter of the law.  For CATS and the MTC it is much easier to claim they have the authority they need, rather than going through the messy process of actually being granted that authority.  In doing so, the public is once again deprived of participating in the discussion.  As importantly, if this position stands, the Republican-led General Assembly would not have to vote on allowing CATS to use P3s for rail transit financing - bypassing an opportunity for more legislative oversight.

Regardless of how you feel about rail transit in general or the proposed Red Line specifically, we should expect more from our government agencies than a game of three cardmonte using legal loopholes to get what they want.

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