Public-Private Partnership Policy Casebook/Sepulveda Transit Corridor

This case study reviews the Sepulveda Transit Corridor project as the collaborative work of Wossen Bekalu, Taylor Lucas, and Katie Thompson. The casebook is a George Mason University graduate program product as an assignment for the Public-Private Partnership Policy course. This course was taught under the leadership of Dr. Jonathan Gifford. The views expressed here are the product of student research. It does not represent the views of Dr. Jonathan Gifford or George Mason University.

The casebook explores key actors, event timelines, risks, financial structures, policy issues, and key takeaways.

Summary
Metro's Sepulveda Transit Corridor Project is part of a plan to make it easier to get around. It hopes to create better transit between the San Fernando Valley, the Westside, and Los Angeles International Airport (LAX). This high-capacity rail line will help take cars off the road and provide more travel options.

The natural barrier created by the Santa Monica Mountains makes the I-405 one of the busiest freeways in the nation. Metro recognizes that more than one solution will be needed to help reduce congestion. To address this, they are also pursuing the I-405 Multimodal Corridor Plan and I-405 Sepulveda Pass ExpressLanes in this area.

The first phase of this project is connecting the San Fernando Valley and Westside. The second phase is connecting the Westside and LAX. Without additional funding for this project, Phase 1 is slated to be completed and open for service between 2033-2035. Phase 2 is expected to be completed open for service between 2057-59.

Metro seeks to accelerate this timeline by using P3s with a projected completion date of 2028 in time for the Olympics. However, a more realistic timetable is 2033, even with the use of a private partner.

The focus of this case study will be Phase 1, the San Fernando Valley and Westside.

Annotated List of Actors
There are over 12,000 stakeholders that indicated their interest or concern regarding the implementation of the proposed Sepulveda Transit Corridor Project. Figures such as this indicate that there is high public interest. The following is a partial list that includes the primary stakeholders as well as some of the major stakeholders. The selection of the major stakeholders listed below is limited to those that have a more significant impact or say in how the project will be executed.

Primary Public Stakeholders
Los Angeles County Metropolitan Transportation Authority (Metro) is the agency that plans, operates, and coordinates funding for most of the transportation system in Los Angeles County. Metro has also coordinated, designed, built, and operated LA county's Transit system servicing more than 10 million people in the 1,433-square-mile service area.

California Department of Transportation or Caltrans manages the state's highway system. The Sepulveda Transit Corridor Project was proposed as a measure to reduce congestion on the I-405. Caltrans will have requirements and concerns regarding the construction for the Valley-Westside segment of the project. This is because the Valley-Westside segment alternatives cross over or under US 101 with one alternative running in or near Caltrans right-of-way along the west side of I-405 in the Sepulveda Pass. Since 2018, Caltrans has also been examining operational improvements and ExpressLanes in the I-405 corridor. Metro and Caltrans agreed that further coordination might be needed after the I-405 ExpressLanes project has begun.

Primary Private Stakeholders
BYD LA SkyRail Express is a proposal created by BYD Co. Ltd. ("Build Your Dreams"). BYD is a Chinese manufacturing company headquartered in Shenzhen, Guangdong, China, that entered the global rail transit market with a monorail system in 2016. BYD has chosen to partner with 33 Disadvantaged Business Enterprise as it performs pre-development work on this Project. This team includes John Laing, Skanska, Gensler, HDR, ACI, and Innova.

Sepulveda Transit Corridor Partners(STCP) - Bechtel is a proposal led by Bechtel Industries with Bechtel Development Company, Meridiam Sepulveda, and American Triple I (ATI) as equity partners in this venture. Bechtel will act as the Lead Construction Contractor and Lead Engineering Firm for this proposal because it is a globally trusted engineering, construction, and project management firm. Additionally, STCP will have the engineering expertise of Mott Macdonald, T.Y. Lin, and Systra with the infrastructure development experience of Meridiam. ATI and Meridiam also have a successful track record of developing, managing, and investing in complicated public-private partnerships.

Narrative of the Case
Commuter transport and congestion is a significant problem in the Sepulveda Pass. In 2012 LA’s Metro team initiated plans to improve the situation via the Sepulveda Pass Systems Planning Study. More than one solution will be needed to help reduce congestion, so they are also pursuing the I-405 Multimodal Corridor Plan and I-405 Sepulveda Pass ExpressLanes in this area. With the passage of the transportation sales tax in 2016, Metro identified $9.5 billion in government funding to connect the San Fernando Valley to LAX. The subject of this report is the first phase of the project. The first phase is intended to connect the San Fernando Valley to the Westside. In order to design this phase, Metro entered into a PDA with LA SkyRail Express and Sepulveda Transit Partners-Bechtel.LA SkyRail Express will propose a Monorail solution, and Sepulveda Transit Partners-Bechtel will propose a Heavy Rail transit solution. Their goal is to have the first section open for service between 2033 and 2035 and hope to have Phase 2 open for service between 2057 and 59.

The LA SkyRail plan would cost roughly $6.1 billion, with an estimated $221 million coming from outside investment and an annual operating cost of $63 million thanks to budget cuts from unattended train operating systems. Bechtel’s proposal would cost around $10.8 billion, with $634 million coming from outside investment. The operating cost would be close to $118 million annually. More financing information will become available with the progression of the project.

Government officials and community leaders have a number of policy questions regarding the project. These questions will begin to have answers once the ERI is published. Metro will have to address any wildlife and natural world impact, including pollutant concerns and earthquake safety. Initial projections believe that pollution will decrease with the completion of the project as cars will be taken off the road when those computers switch to the new rail system. The new rail system is also projected to be more energy efficient. Metro will also need to account for: how they plan to serve minority communities who have greater need of public transit; how long and where construction will go on; and the particulars of the financing situation. The Monorail system has tremendous community pushback because it is above ground, resulting in more noise, more land needed, and unsightly structures in their neighborhoods. The heavy rail option is expected to have a significant portion underground to avoid these issues.

Timeline of Events
The following is the proposed timeline for executing the Sepulveda Transit Corridor Project if Metro decides to go with the P3 model.

Maps of Locations
Click here to view the map of the Sepulveda Transit Corridor Project.

The above map shows the proposed routes of the Sepulveda Transit Corridor Project. The route is unconfirmed and still needs to undergo several rounds of evaluation before the final refinement of project plans and construction.

It is expected that the line would begin at the Van Nuys Metrolink Station, where it would connect with the future East Fernando Valley Light Rail. It is expected to end with a connection at the E Line. This line would include stops at future G & D line connections along the way.

Risk Matrix
Currently, a risk matrix does not exist as there is no P3 contract in place.

The following is a hypothetical risk matrix derived from existing documents and information released to the public by Metro.

Contract Type
In March of 2021, The Los Angeles County Metropolitan Transportation Authority awarded PDA contracts to LA SkyRail Express and Sepulveda Transit Partners-Bechtel.

The PDA will analyze the geography and existing build environment along the Sepulveda Pass to identify potential project design and construction challenges. It will also facilitate more possible innovations while accelerating the scheduled development and construction portion of the project.

The ultimate goal of the PDA is to increase the affordability of the proposed transit solutions. This will ensure that the project is cost-effective in the design and build phase and in the operate and maintain phase.

The LA SkyRail Express PDA contract for the proposed Monorail transit solution was awarded in the amount of $63,605,132.

The Sepulveda Transit Corridor Partners Bechtel PDA contract for the proposed Heavy Rail transit solution was awarded in the amount of $69,882,427.

Cost
The two competing contract bidding teams, LA SkyRail Express and Sepulveda Transit Corridor Partners (led by construction and engineering giant Bechtel Corp. of Reston, VA), have each submitted a bid for this project. LA SkyRail Express submitted a bid for a $6.1 billion aerial monorail. In comparison, the Sepulveda Transit Corridor Partners submitted a bid for a $10.8 billion combination of heavy tunnel and aerial rail.

The LA SkyRail Express' $6.1 billion cost includes an estimated $221 million in outside equity investment. Once construction is complete, the proposal will give an annual operating cost estimate of $63 million. One cost saver is the plan for unattended train operations. The LA SkyRail Express bid scored highest on Metro's bid evaluation, mainly in the area of diversity and inclusion.

The Betchel led bid chose a single-bore tunnel design to keep the cost as low as possible. The total $10.8 billion project cost includes $634 million in anticipated outside equity investment. Once construction is complete, annual operating expenses are expected to be around $118 million, which is nearly twice the LA SkyRail Express proposal.

According to the most recent community update meeting held on October 28, 2021, this project will be very competitive. They do not currently know what they will do if they do not get federal or state funding. However, they are hopeful of receiving it.

* Currently proposed stations are only designed for 6 train cars, proposals do not include price for later additions to increase capacity.

Financial Structure
Currently, a financial structure for the Sepulveda Transit Corridor Project does not exist as there is no P3 contract in place. The tables below illustrate the financial breakdown of the PDA Contract awarded to BYD and SCTP- Bechtel as well as the possible funding sources of the Project when it nears execution. The following are possible funding sources that would facilitate the expedition of the project's completion as derived from existing documents and information released by Metro.

Institutional Structure
As previously stated, there is no P3 contract in place, so the framework below describes the organizational structure of the Sepulveda Transit Corridor Project.

BYD and SCTP- Bechtel as the awardees of the PDA contract report to Program Management Consultants Working under the PDA Project Manager, Kavita Mehta.

The Environmental Consultant Team reports to the Environmental Project Manager, Peter Carter.

Kavita Mehta works hand-in-hand with Colin Peppard from the Office of Extraordinary Innovation, Carolina Coppolo from Vendor/Contract Management, and Peter Carter. He works with Karen Swift, the Communications Lead.

Kavita Mehta answers to Rick Meade, the PDA Director.

Peter Carter reports to Deputy Executive Officer of Mobility Corridors, Cory Zelmer. He reports to the Project Director, David Mieger.

Rick Meade works in conjunction with the County Counsel and David Mieger.

Rick Meade & David Mieger report to the Executive Leadership Board that contains: Phil Washington, Rick Clarke, Jim de la Loza, and Joshua Schank.

Debra Avila and Yvette Rapose serve as SLT Advisors to the Executive Leadership and are outside the above chain of command.

Clear Identification of Policy Issues
There are some key policy issues of concern to community leaders regarding the Sepulveda project:


 * 1) The Environmental Impact Report (ERI), scheduled to be released on November 30, 2021, will contain numbers regarding wildlife impact, pollution, and earthquake readiness.
 * 2) Community activists want to ensure that the line is servicing at-risk communities. Minority communities need greater access to public transit in order to have greater opportunities. Any option that enters development must consider how to serve those communities best. This aspect could be key as some nonprofit organizations have expressed interest in assisting with the project's financing as long as the neighborhoods they must care about are well serviced.
 * 3) There is a general question of how the passage of the infrastructure bill would impact this project. In short, funding is not expected to be impacted. However, more details are expected to become public with the publication of the ERI.
 * 4) Many community leaders and homeowners are worried about the length of time construction will go on and what land will be needed to build the rail system. Again, more information will become public with the publication of the ERI.

Takeaways and Points of Discussion
The planning and procurement process involves a great number of actors. At every phase of the process, the number of people who need to be consulted or give unsolicited opinions is astounding. This shows Metro’s commitment to finding the best solution to the transit problems the communities face as well as ensuring the public has the information they need. With that in mind, there is not a great deal of clarity or forthrightness in this phase of a project because everything is in a very larval stage. That being said, here are a number of questions to consider.


 * 1) What project should be chosen given current information?
 * 2) Is the cost-consideration more or less important than community reaction?
 * 3) Are there other steps that need to be taken to ensure a successful project?

Additional Readings
Los Angeles County Transportation Expenditure Plan, November 2016 (1pg, Line Items 15 & 16 for Phase 1; Line Items 22 & 23 for Phase 2)

Feasibility Report, November 2019(184pg)

Sepulveda Transit Corridor Project Frequently Asked Questions, November 2021(8pg)