VZCZCXRO3485
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #1391/01 2041733
ZNR UUUUU ZZH
R 221733Z JUL 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 3865
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUCPDOC/USDOC WASHDC
INFO RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 03 PARIS 001391 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/TRA AND EUR/WE 
TRANSPORTATION FOR FTA LITTLE/DAGUILLARD/BORINSKI 
DOC FOR ITA JLEVINE/PBUCHER 
 
E.O. 12958: N/A 
TAGS: ELTN ETRD EAIR EWWT FR
SUBJECT: Public-Private Partnerships in Transportation - July 16-18 
Joint USG/GOF Conference in Lyon 
 
Summary 
------- 
 
¶1. (U) On July 6-8, Federal Transit Deputy Administrator Sherry E. 
Little led a delegation of Federal Transit Administration (FTA) 
officials, Congressional Representatives, and private sector 
participants to a conference in Lyon that FTA co-sponsored with the 
GOF on public-private partnerships (PPP) in the development of 
transportation networks.  Representative John Mica (R-FL), Ranking 
Minority Member of the House Transportation and Infrastructure 
Committee, noted that he sponsored legislation providing for the 
development and financing of a high speed rail link between New York 
and Washington.  He supported a five-year transportation plan that 
would set priorities and designate projects for the nation's 
transportation needs covering road, rail, the ports, and air. 
According to various French presenters, the GOF set guidelines for 
how PPPs should work and cataloged the needs for their municipal or 
regional transportation systems.  The private sector designed, 
built, and operated concessions, based on government specifications 
for a set length of time.  FTA announced that it will cosponsor a 
follow-up conference in San Diego in October with the GOF.  FTA 
Deputy Administrator Little is also organizing four PPP conferences 
this autumn throughout the U.S. to discuss new ways of incorporating 
private sector involvement. End summary. 
 
Background 
---------- 
 
¶2. (U) The Federal Transit Administration (FTA) is a 500-member 
agency that administers and overseas the USD 9 billion federal 
assistance program to the nation's public transportation operators. 
This sum includes FTA's USD 1.4 billion New Starts program, which 
aims to ensure the greatest return on investment in major capital 
transit projects. 
 
Public Transportation Usage Up; Federal Funding Down 
--------------------------------------------- ------- 
 
¶3. (U) On July 6-8, FTA Deputy Administrator Sherry E. Little led a 
delegation of FTA officials, Congressional Representatives, and 
private sector participants to a conference in Lyon that FTA 
co-sponsored with the GOF on public-private partnerships (PPP) in 
the development of transportation networks.  Little opened the 
conference, noting that high gas prices have decreased demand for 
petroleum as consumers have shifted to more gas efficient vehicles, 
such as hybrid automobiles.  High petroleum prices have pushed 
public transport usage to an all time high, as many opted to stop 
driving.  At a time when FTA needed to fund the expansion of public 
transport projects to cope with increased demand, federal funding 
for municipal and regional transportation systems has come under 
pressure.  The FTA derived 80 percent of its funding from gas taxes. 
 As the demand for gas has gone down, so has FTA's resources. 
Little estimated that the UFTA would need USD 22 billion/year to 
maintain and improve transportation through 2040, a 40 percent 
increase over 2004 spending levels.  In addition, the cost of 
multi-modal transportation systems would climb because of the rise 
in commodities prices. 
 
¶4. (U) Little noted that she drafted the PPP test law while she was 
Senior Professional Staff Member on the Senate Committee on Banking, 
Housing, and Urban Affairs.  Since then, Texas, Colorado, and 
California have shown that PPP projects were built faster, were more 
efficient, and were more consumer-oriented than traditional public 
sector built and managed projects.  To increase awareness of and 
interest in the PPP model, the FTA planned to hold four workshops 
this autumn in Denver, San Francisco, Philadelphia, and Dallas.  In 
October, the FTA would also co-host with the GOF a follow-on PPP 
workshop in San Diego. 
 
Congressional Call for Transportation Plan 
------------------------------------------ 
 
¶5. (U) Representative John Mica (R-FL), Ranking Minority Member of 
the House Transportation and Infrastructure Committee noted that he 
sponsored legislation (H.R. 6003, the Passenger Rail Investment and 
Improvement Act of 2008 passed on June 11, 2008) that instructed the 
DOT to solicit bids for the development and financing of a high 
speed rail link between New York and Washington.  He supported a 
five-year transportation plan that would set priorities and 
designate projects for the nation's transportation needs covering 
road, rail, the ports, and air.  The plan would define the role of 
the federal government, the states, and business.  A key issue was 
finding innovative financial solutions to improve and maintain 
transportation infrastructure, which would necessitate a 
transitional and flexible tax system on fuel that would consider 
 
PARIS 00001391  002 OF 003 
 
 
factors such as environmental issues.  He expressed support for 
innovative solutions such as leasing portions of the interstate 
highway system to the private sector to ensure upkeep. 
 
¶6. (U) Representative Loretta Sanchez (D-CA), Chairwoman of the 
Subcommittee on Border, Maritime and Global Counterterrorism, noted 
that, if the private sector played a larger role in the development 
of transportation systems, it would need to protect against 
terrorist attacks or it "would feel the weight of regulation." 
 
Transportation in the Rhone-Alpes Region Improved 
--------------------------------------------- ---- 
 
¶7. (U) Rhone Alpes Regional Council First Vice President for 
Transportation Bernard Soulage said that private participation in 
transportation projects guaranteed that market considerations would 
reign.  The Rhone-Alpes Region spent 25 percent of its budget on 
transportation.  It recently developed a smart card that could be 
used on all of the province's regional transportation, including 
bicycle rental.  It made train schedules more consistent with 
demand, which affected SNCF schedules throughout Western France, 
since Rhone-Alpes was a main transportation hub.  The Region was 
also developing a regional transportation authority to coordinate 
all transportation issues.  The Region's big project is a tunnel 
under the Alps linking Grenoble with Turin.  The cost of this tunnel 
will exceed that of the Chunnel and is a project appropriate for 
private equity participation. 
 
¶8. (U) Lyon Greater Lyon Transit Authority (SYSTRAL) President 
Bernard Rivalta noted that SYSTRAL was a public sector company that 
provided public transport for the 57 towns comprising Greater Lyon 
and seven adjoining towns, covering 1.3 million inhabitants and 613 
square kilometers.  SYTRAL's Board comprised 10 members of the Rhone 
Department General Council and 16 members of the Greater Lyon 
Council.  SYSTRAL's role was to define and implement urban 
transportation policy, finance network operations, maintain, design, 
finance, and build network extensions, delegate network operations 
to the private sector, control the quality of service, decide on 
routes, schedules, and fares, monitor traffic flow, and maintain 
rolling stock, buildings, tracks, and tunnels.  Systral selected 
Keolis Lyon to operate its transportation network following 
competitive bidding for the period 2005-2010.  Lyon's transportation 
system is intermodal, comprising underground metros, cable cars, 
tramways, trolleybuses, and busses.  Electricity powers 73 percent 
of the network. 
 
Transportation Project Planning, Development and Implementation 
--------------------------------------------- ----- 
 
¶9. (U) University of California at Berkeley Urban and Regional 
Development Institute Director David Dowall said that PPPs had an 
advantage of obtaining new funding sources, utilizing global 
expertise, and exposing projects to market discipline.  Potential 
funding sources included mutual funds, pension funds, strategic 
equity investors, insurance companies, and vendor financing.  Key 
issues were estimating demand of projects correctly and taking care 
of right of way and other legal issues. 
 
¶10. (U) Veolia Transportation Business Development North America 
Senior Vice President Ronald Hartmann said that annual expenditures 
in the United States on public transportation totaled USD 15 
billion, and 10 percent was under contract to private operators. 
 
¶11. (U) Alstom Concession Director Didier Traube said that PPPs 
benefited the public sector because they transferred risk to the 
private sector, provided better budgetary control, and resulted in 
on-time delivery.  The government's role was to draft transportation 
regulations, set guidelines for how PPPs should work, secure rights 
of way, and catalogue the needs for their municipal or regional 
transportation systems.  The private sector could then play a 
comprehensive role, designing, financing, building, and operating 
concessions built to government specifications for a set length of 
time. 
 
¶12. (U) Acumen Ltd. Director Simon Murray noted that PPPs in the 
United Kingdom have had mixed success.  The UK has had difficulty 
forecasting capital costs, and many PPP transportation projects have 
required ongoing subsidies.  Successful PPP transportation projects 
have strong leadership and community support, interface with other 
infrastructure, use proven engineering systems, and include a robust 
business plan with accurate capital costs.  The CEOs of the San 
Francisco and Charlotte provided background on their PPP experience 
involving their metro systems.  Aside from the networks themselves, 
these cities have used PPP models to finance the development of 
shopping malls, museums and other developmental projects around the 
 
PARIS 00001391  003 OF 003 
 
 
metro stations. 
 
STAPLETON