TO: HONORABLE MAYOR FROM: John Ristow
AND CITY COUNCIL John Aitken
Matt Cano
SUBJECT: AIRPORT CONNECTOR DATE: April 4, 2022
PROCUREMENT ORDINANCE
Approved Date
4/6/2022
COUNCIL DISTRICTS: 3 & 6
RECOMMENDATION
Approve an ordinance authorizing the use of alternative project delivery methods and to establish certain requirements for procurements and contracts related to the proposed Airport Connector Project (Project).
OUTCOME
This action will authorize an alternative procurement process for the proposed Project.
BACKGROUND
In November 2000, the voters in Santa Clara County approved Measure A, a 30-year half-cent sales tax devoted to specified public transit capital improvement projects and operations. The Airport Connector was identified as one of the public transit capital improvement projects. The Airport Connector is proposed to connect the Norman Y. Mineta San José International Airport and Diridon Station.
In June 2016, the Santa Clara Valley Transportation Authority Board of Directors reaffirmed its support of the Project by approving an additional $3 million of Measure A funding, which brought the total allocation of Measure A funding to $5.03 million. In July 2019, the City of San José (City) partnered with Santa Clara Valley Transportation Authority, City of Santa Clara, City of Cupertino, and County of Santa Clara to issue a request for information to obtain information about the various transit solutions, route alignments, and financial feasibility for this Project.
COUNCIL AGENDA: 4/19/22
FILE: 22-514
ITEM: 2.12
HONORABLE MAYOR AND CITY COUNCIL
April 4, 2022
Subject: Airport Connector Procurement Ordinance
In August 2020, staff brought to City Council findings from the request for information analysis.
City Council subsequently directed staff to continue to develop the Project along two parallel paths: 1) a traditional public project and 2) a Public-Private Partnership (P3). At this time, the City is interested in advancing the P3 approach to the Project, requiring the commitment of private and public funds, property, and other resources.
In April 2021, the City contracted with Arup North America Ltd. to develop a request for proposals (RFP) for the Airport Connector Project. Arup has been working with the City’s project team, the City Attorney’s Office, and outside counsel to develop the legal framework for a privately funded and operated project.
Funding remains a challenge because 2000 Measure A is underfunded, and Santa Clara Valley Transportation Authority has indicated a limited amount of Measure A funding available for the Project. Therefore, the City may have to rely on other funding sources to advance the Project. An alternate delivery method is proposed for the Project in order to move it forward without the level of public funding normally needed for project development. In October 2021, the Metropolitan Transportation Commission and the Association of Bay Area Governments adopted Plan Bay Area 2050, which includes potential funding of $500 million for the Airport Connector and $2.8 billion for high-capacity transit along the Stevens Creek Line. A project listed in Plan Bay Area 2050 does not guarantee funding, but it lays the groundwork for future federal, state, and/or regional funding for these projects in future years.
ANALYSIS
With the increased development in Silicon Valley and continued growth of San José, the City seeks to provide another transit option to mitigate traffic congestion, meet the diverse needs of its growing population, and achieve the City's environmental goals and equity concerns. Because of the rising costs and extended timelines associated with traditional transit projects, the City desires to explore an alternative delivery model for the Airport Connector Project.
Pursuant to City Council's direction from August 2020, Department of Transportation staff explored two options: to publicly fund and operate the Airport Connector and to privately fund and operate the Airport Connector. Based on the available information, staff determined a P3 would be the most viable option to advance the Project at this time.
With the P3 delivery model, the City can: (1) utilize a combination of public and private funds to finance the Project; (2) develop the Project more quickly than a traditional publicly funded transit project; (3) leverage technical expertise and advanced technology solutions to develop an efficient and innovative transit solution; and (4) identify an experienced long-term operator to maximize system performance and service delivery. Staff recommends the P3 alternative delivery method for a private partner to develop, implement, operate, and maintain the Airport Connector.
HONORABLE MAYOR AND CITY COUNCIL
April 4, 2022
Subject: Airport Connector Procurement Ordinance
Legal Authority
As a Charter city, the City Council can exercise discretion to approve expenditures and authorize the procurement and contract of services. The City Charter (Charter) and San José Municipal Code (SJMC) do not include provisions that expressly address a progressive procurement process that provides a pre-development process or a project's delivery via the Design-Build- Finance-Operate-Maintain (DBFOM) alternative delivery model.
Pre-Development Agreement
Regarding the pre-development process, the Charter and SJMC contain provisions that authorize the City to procure a contract for technical and professional services and grant a franchise to furnish transportation, with sufficient discretion as to how that franchise is granted. Under the currently contemplated scope, the pre-development services would be conducted under a pre- development agreement that would fall within technical or professional services. As the services provided under the pre-development agreement would exceed $100,000, City Council would need to authorize the Department of Transportation to procure and execute the pre-development agreement.
Procurement of a Design-Build-Finance-Operate-Maintain Agreement In addition, the SJMC and Charter authorize the City to procure major public works projects with a minimum value of $1,000,000 using a design-build process. Chapter 27.14 of the SJMC further specifies that the City can procure a Design-Build Contract in accordance with the procedures and requirements of California Public Contract Code Sections 22162 through 22168. However, those provisions of state law are limited to design-build contracts and do not include financing, maintenance, or operation of the contract.
The proposed ordinance will expressly allow the City to procure a DBFOM contract that starts with a Predevelopment Agreement (PDA) phase. The proposed ordinance will only apply to the Project, and as a result it will not be codified in Title 27 of the SJMC.
The Charter and SJMC outline procurement requirements for Major Public Works Projects.
Here, the City seeks a private entity to design and build the transit solution. Under the Charter, the City has the authority to conduct an alternative procurement method, and to procure, negotiate and award a design-build contract, so long as the City Council makes findings that 1) the contract has a value over $1,000,000 and 2) using the design-build method would save money or result in faster project completion. When staff brings the PDAs forward for approval, the City Council will be asked make such findings. This authority can serve as the basis for the City Council to adopt an ordinance authorizing staff to procure and contract for a Project that includes a design and build scope element.
HONORABLE MAYOR AND CITY COUNCIL
April 4, 2022
Subject: Airport Connector Procurement Ordinance
Procurement and Project Delivery Structure
The Department of Public Works is responsible for procuring major public works projects and will conduct the process used to select the private partner which will develop the Airport Connector. The procurement process will include:
(1) issuance of a RFP that establishes objective criteria for various categories including, but not limited to, technical requirements, commercial viability, experience, innovation, and scalability;
(2) a pre-development process in which the City collaborates with up to two private partners to conduct pre-development services to refine the project scope, identify service routes, analyze the commercial and financial viability of the Project, conduct technical feasibility studies, perform preliminary design services, conduct an environmental review and other project pre-development services; and
(3) selection of one private partner to design, build, finance, operate and maintain the Project.
The structure of the procurement authorized by this Ordinance and the overall P3 process is further described and visualized below in the Airport Connector Public-Private Partnership Framework. The P3 framework is a multi-phase process that gives the City flexibility to proceed or use off-ramps to exit the Project responsibly. The process will have three steps: RFP, PDA, and DBFOM.
The RFP will define the Project scope and desired outcomes, the type of relationship the City wishes to establish with a potential partner, and the way in which the City will evaluate proposals. Interested parties will submit information that includes but is not limited to project delivery experience, technical experience, financial capacity, technology maturity, commercial approach, and PDA Phase 1 cost cap. The proposals will be evaluated by subject matter experts, including those from the Department of Transportation and the Department of Public Works. At the conclusion of the RFP, which is estimated to be occur in mid to late 2022, City staff will recommend that the City Council enter into a PDA Agreement with up to two private parties whose proposals receive the highest scores.
During the second step of the project process, the PDA phase, the City will have time to vet the top proposers (if needed). Once the City has carried out the vetting process, the City will select a preferred private partner. The City and its private partner will progress the Project from its high conceptual form through preliminary engineering, environmental review, funding strategies, and extensive public outreach. This PDA phase is part of the project management innovation that will propel this Project. This step will bring together private and public resources and aligned interests early in the Project, cutting out many steps in the design process. This step also brings the private resources and advanced technology needed to develop the Project from the beginning.
The outcome of the PDA phase will be an Implementation Agreement between the private party and the City, for Council's consideration. The Implementation Agreement will define the terms of the Project's final phase, DBFOM. The Implementation Agreement will spell out funding and
HONORABLE MAYOR AND CITY COUNCIL
April 4, 2022
Subject: Airport Connector Procurement Ordinance
project development responsibilities, solidify project governance, and standards for maintenance and operation of the Project. The PDA phase of the Project is estimated to take 18 to 36 months to complete.
In Step 3, the DBFOM step, the City and private party will execute the Implementation Agreement. This step will start with securing financing, final design efforts, and constructing the Project. The private party will obtain needed approvals and safety certifications before entering the Project's operational life. After all certifications are complete, the private party will operate and maintain the service under the governance structure proposed in the project RFP and refine through negotiation in the Implementation Agreement.
Airport Connector Public-Private Partnership Framework
HONORABLE MAYOR AND CITY COUNCIL
April 4, 2022
Subject: Airport Connector Procurement Ordinance
CONCLUSION
This proposed Ordinance authorizes the City to procure and deliver the Airport Connector Project via an alternative DBFOM method, which staff believes will result in lower cost and faster delivery than if we used a traditional design-bid-build, or even a design-build, method.
EVALUATION AND FOLLOW-UP
Staff will return to City Council for approval of the Predevelopment Agreement(s). Staff will also return to City Council for approval of the environmental review and an Implementation Agreement. Adopting the CEQA considerations and Implementation Agreement will authorize the Project and create a long-term contract with the private partner.
CLIMATE SMART SAN JOSE
The recommendation in this memorandum aligns with one or more Climate Smart San José energy, water, or mobility goals.
PUBLIC OUTREACH
The City has undertaken outreach with potential alignment stakeholders, the labor community, members of the public who may be affected by the Project, and BART Silicon Valley community working groups. The project team has published all project materials and recordings of public meetings on the project website1. Stakeholder meetings have included one-on-one sessions with landholders along the Project's potential path. Staff has held two meetings with the South Bay Labor Council and is discussing further meetings. There have also been two virtual public meetings on the Project.
Staff has also presented to and/or received direction from City Council and the Transportation and Environment Committee on the development and progress of the Project in February 2019, August 2020, June 2021, and December 2021.
COORDINATION
This memorandum has been coordinated with Planning, Building, and Code Enforcement Department, the City Attorney's Office, and the City Manager’s Budget Office.
1 https://www.sanjoseca.gov/your-government/departments-offices/transportation/transit/airport-diridon-stevens- creek-connector
HONORABLE MAYOR AND CITY COUNCIL
April 4, 2022
Subject: Airport Connector Procurement Ordinance
COMMISSION RECOMMENDATION/INPUT
This item was presented at the Airport Commission on February 14, 2022.
COST SUMMARY/IMPLICATIONS
There are no immediate budget implications of adopting the procurement ordinance, although the procurement method recommended in this memorandum should reduce projects costs and implementation time. The City’s current funding programmed for the project is $2.95 million, which includes $2.5 million from the Santa Clara Valley Transportation Agency and $453,000 from construction tax revenue as part of the Traffic Capital Improvement Program. The current funding will enable the City to get through the RFP phase and a portion of the PDA phase of the project. The rest of the PDA phase is currently unfunded and is anticipated to cost approximately $25 million in public funds. The City will seek outside funding, such as grants, to complete the PDA phase of the project and will program new funding as part of future budget processes. The recommended alternative delivery method for a private partner to design, build, finance, operate, and maintain the Airport Connector is expected to be funded mostly by the private partner and is anticipated to cost in the realm of $500 million.
CEQA
Not a Project, File No. PP17-008, General Procedure and Policy Making resulting in no changes to the physical environment.
/s/ /s/
JOHN RISTOW JOHN AITKEN
Director of Transportation Director of Aviation
/s/
MATT CANO
Director of Public Works
For questions, please contact Ramses Madou, Department of Transportation Division Manager, at [email protected] or J. Guevara, Deputy Director of Public Works, at [email protected].