If the District succeeds in rolling out a 22-mile network of streetcars in the next seven years, the ka-ching of the farebox may mean profits for private investors.
The city is trying to entice private companies to construct and operate the planned system as well as to take over operation of the DC Circulator’s fleet of 49 buses.
Ronaldo “Nick” Nicholson, chief engineer for the District Department of Transportation, pointed to Nationals Park and the Walter E. Washington Convention Center as examples of successful public-private partnerships.
“As far as transit is concerned, this is our first major effort,” he said. “We’ve done a few smaller ones, but what we’re talking now is major league.”
Decades after financially beleaguered private transit systems fell into the lap of municipal governments, transit authorities are turning to private companies to build, maintain and operate their rail and bus lines.
“At one time, this would have been unusual, but increasingly they are looking to the private sector to get some help with the financing,” said Ed Crooks, a vice president who heads infrastructure project financing at Booz Allen Hamilton.
New Jersey’s Hudson-Bergen Light Rail Line has been called a model public-private partnership. In contrast, the Massachusetts Bay Commuter Rail Co., a private consortium that has run Boston’s rail system since 2003, was reviled for breakdowns that stranded thousands of riders on cold, snowy days.
Denver’s Regional Transportation District, which has leveraged private money for a multibillion-dollar transit system, was scrutinized by D.C. planners as they considered seeking private-sector financing.
In laying out its plans to potential investors, the DDOT said the system would cost about $1.2 billion to build and equip with 50 streetcars, and about $65 million a year to operate. Operating and maintaining the Circulator buses would cost about $70 million a year.
“That’s going to get people’s attention,” Crooks said. “There are a lot of ways for the private sector to make money on a situation like this.”
The document DDOT put out Tuesday was intended to divine the level of private-sector interest rather than serve as a formal request for proposals. It says that the District, not the investors, will set the streetcar and Circulator fares.
“They’re doing this the right way. They’re trying to see what the market interest is,” Crooks said. “The private sector will look at that fare-setting schedule and determine the level of risk and how to make a profit.”
Overall, DDOT envisions a 37-mile streetcar system. The 22 miles that would come first include two segments that are already being built along H Street and Benning Road in Northeast and in Anacostia.
The DDOT request was issued the same day Mayor Vincent C. Gray (D) met with officials from the Export-Import Bank of China in Beijing to continue discussions about whether the bank would be interested in funding all or part of the city’s streetcar system.
Gray said he was intrigued by suggestions that Chinese investors could fund the $1.5 billion project in exchange for the proceeds once the system is built out. Without private investment, Gray said, it could take decades for the streetcar system to get built because the city is nearing its debt cap.
“It’s got to be something that works for them, but it’s got to be something that works for us, too,” Gray said. “What is the structure of the deal? But there is certainly an interest in the streetcar system here.”
But D.C. Council member Tommy Wells (D-Ward 6), a proponent of the streetcar system, said that he’s “very skeptical of privatization of public transit.”
Wells said he is concerned that a private entity would establish fares so high that the system becomes unaffordable for low-wage residents. He also questioned whether a private firm would prioritize lines that reach into disadvantaged neighborhoods.
Wells said the highest percentage of District residents without cars live in Ward 8 in Southeast. He worried that a private firm or bank wouldn’t think broadly about how best to connect those residents with jobs in neighborhoods other than downtown.
“I’m concerned that privatization will work against our public-policy goals of viewing transit as connecting people to opportunity,” Wells said.
Although Gray stressed that his talks with Chinese officials are preliminary, he said the question is how quickly residents want to move forward. Chinese officials, he said, were stunned when Gray told them in earlier meetings that it would take at least 20 years for the city to build the streetcar system on its own.
Mark Berman contributed to this report.