September 25, 2013

Canada and USA are poles apart on transit funding

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Having won its first contract for LRVs in North America earlier this year, Alstom has high hopes of winning more business. Guillaume Mehlman, president of Alstom Transport North America, explained his strategy and some of the nuances of this market to David Briginshaw.

THE Canadian capital Ottawa awarded a $C 2bn ($US 2.1bn) design, build, fund and maintain contract in February for the 12.5km Confederation Line to Rideau Transit Group. The consortium includes Alstom which is using the project to launch its Citadis Spirit LRV aimed at the North American market.

As Mehlman explained, the Confederation Line will be more like a light metro with underground stations in the city centre, 100-second headways and CBTC train control. Citadis Spirit is based on Alstom's Dualis tram-train but will be adapted to meet North American requirements such as load levelling for step-free boarding at stations, and changes to the propulsion system to adhere to braking and acceleration parameters.

It will also be winterised to cope with temperatures as low as -40°C. "This is not a huge redesign," Mehlman explained. The sub-assemblies for the vehicles are likely to be manufactured at Alstom's plant in Hornell, United States, with final assembly in Canada.

While Alstom's Citadis LRV will be the brand offered in North America, the same philosophy of adapting it to meet local needs will be applied in other tenders. Mehlman believes there is plenty of potential in North America. He says statistics compiled by the American Public Transportation Association (Apta) during the last 10 years, show orders for 100 LRVs, construction of 80km of line, and one new system opening on average each year.

MehlmanAt the heavier end of the market, Edmonton is likely to go out to tender for a new LRT project next year, along with new lines in Baltimore and Maryland. "Washington DC has been preparing procurement for a streetcar project for the last two years, and there are several cities which have partial funding for projects and should get their remaining funds next year," says Mehlman.

Kinki Sharyo and Siemens are the market leaders of the heavy light rail market, while the more traditional streetcar or tram market is led by United Streetcar and CAF.

Mehlman says Alstom is able to serve both markets, but North America has yet to embrace developments such as 100% low-floor LRVs and wireless technology. Nevertheless, the consultants, which play an important role in establishing performance and vehicle specifications for LRT projects, are looking at such innovations.

The model chosen to implement the Confederation Line in Ottawa is typical of the approach adopted in Canada, which Mehlman says is leading the world in public-private partnership (PPP) procurement both at the federal and provincial level.

"Canadian cities don't use PPPs simply as a means to fund projects, because they could afford to pay outright, but as a way of getting value for money, assurance of delivery, and better value for their capital dollar," Mehlman explains. "By leaving around 15% for the private sector to finance and therefore forcing private investors to put some of their equity at stake, Canadians believe the project will be completed on time while the operating and maintenance costs of the project will be optimised over its whole life-cycle because the contractor will have to run it for 30 years."

Mehlman says North American PPPs do not include ridership risk because the financial institutions would be averse to it. PPPs are funded through a mixture of milestone payments and payments based on system availability. Mehlman expects to see Alberta, British Columbia, Ontario and possibly Quebec offering rail projects as concessions.

Historically a totally different approach to funding and procuring LRT projects has been followed in the United States. "The US has adopted a design, bid and build approach," explains Mehlman. All the main sub-systems for a project are procured piecemeal in order to get the best price. But this does not encourage a turnkey approach or necessarily optimise the overall cost of ownership and operation.

Growing interest

Nevertheless, interest in PPPs is growing in the United States. "The first rail PPP project was finalised in Denver in 2011 with the contract being awarded as a concession," says Mehlman. "States that have built toll roads as PPPs are now thinking about adapting their legislation for rail. Virginia has had such legislation in place for many years and states like Florida and Maryland have recently adapted their legislation."

While there is considerable interest in the Canadian model, many Americans have yet to be convinced of the benefits of PPPs. "Vive la différence," as the French would say.

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