Public Private Partnership

Union Station, Washington, D.C., United States

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PROJ E C T SUMMARY

At the time of its opening on 27 October 1907, Union Station was the largest train station in the world and a truly monumen- tal example of Beaux-Arts architecture (fig. 1). By the late 1970s, however, the building was in a serious state of disrepair, unoccu- pied and in danger of demolition. The Federal Government lacked funds to renovate or even maintain the station.

Citizen groups and politicians began searching for an alternative approach. As a result, the United States Congress enacted the Redevelopment Act of 1981. Under this Act, the United States Department of Transportation (DOT) took con- trol of the project and began to transform the station into a thriving transportation terminal and commercial centre. Because of the costs involved in the restoration and the potential com- mercial economic benefits, a public-private partnership (PPP) was immediately identified as the best tool to accomplish the restoration.

The transformation process included the efforts of the DOT, the District of Columbia municipal government, Amtrak (the National Railroad Passenger Corporation, a quasi-govern- mental entity) and a private developer. The $160 million project took almost five years to complete, including three years of

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70 VOLUME 15: EXAMPLES OF SUCCESSFUL PUBLIC-PRIVATE PARTNERSHIPS

renovation. The project goals encom- passed the authentic restoration of the original architecture, the reintroduction of train and urban mass transit services, and the addition of a wide range of retail, dining and entertainment options. As a result of a PPP, Union Station has been restored to its original grandeur and utility and is now the most visited site in the city, with over 25 million visitors each year.

PRO J E C T OB J E C T I V E S

Prior to the decision to renovate Union Station, it had become overwhelmingly expensive to maintain it. Both the Federal and District governments wished to find a financially viable option to fund the restoration of the station in order to cre- ate a transportation hub, stimulate eco- nomic development in the area and retain the historic quality of the Washington, D.C. landmark.

PRO J E C T DE S C R I P T I ON

PARTNERS

The Union Station Redevelopment Corporation, a non-profit entity, was formed with the goal of finding private- sector partners to complete the restora- tion process; it selected private-sector development partners through a national competition. The railway companies using the terminal, both intercity and the regional mass transit systems, also partici- pated. Ultimately, 12 State and federal agencies, each with varying levels of juris- diction over the project, and the private partners negotiated agreements that met each agency’s requirements and served the overarching goal of ensuring the station’s long-term commercial success.

IMPLEMENTAT ION ENVIRONMENT – LEG ISLAT IVE AND ADMIN ISTRAT IVE

Congress wanted the station to be restored as the primary tourist and trans- portation centre for Washington, D.C. and the Federal Government to withdraw from any active role in the operation and management of Union Station as soon as practical. Furthermore, the project was to be completed with the least possible feder- al expense. The project required careful coordination of code compliance, historic preservation methods and retail principles.

FINANC IAL AGREEMENT

The $160 million restoration cost was derived from a combination of public and

Figure 1 Union Station, Washington, D.C.

Union Station, Washington, D.C., United States 71

private financing. Amtrak contributed $70 million to the refurbishment. The District of Columbia contributed $40 million in surplus interstate highway funds. Finally, the private developer pro- vided the remaining balance through equity financing.

In order to generate an ongoing income stream, the agreement stipulated that the private developer would pay a base rent (indexed for inflation) and prof- its from the operation of the station would be shared by both the private developer and the Union Station Redevelopment Corporation. Finally, the funds provided by Amtrak would be repaid from the station's revenues.

CONTRACT PROV IS IONS

Agreements for 12 State and federal agencies were developed and conflicts were resolved through multi-party dis- cussions. Memoranda of Agreement with each of these agencies embodied con- cepts that allowed the design to proceed with a regular design review and a dispute resolution process. The final contract incorporated the needs of the transporta- tion function of the station and historic preservation while enabling Union Station to become a commercially viable operation. For instance, a significant component of making this project finan- cially viable was the addition of mezza- nine levels in the station to create more commercial space in order to generate more station revenue.

IMPLEMENTAT ION METR ICS

The Union Station Redevelopment Corporation was confident that the pro- ject would be successful if the combina- tion of traffic flow segments – intercity rail passengers, commuter rail customers, subway users, tour bus visitors and neigh- bourhood residents – all came to the newly renovated station in large num- bers. The renovation plan provided that the historic Main Hall be set aside as a restored space without commercial enter- prises. The Concourse became the rail- road's ticketing and baggage facility and was expanded into a three-level commer- cial retail centre.

A multi-deck, 1,500-space, public parking garage, a tour-bus level capable of handling 80 buses, and a rail service waiting room were added. More than 120 stores, restaurants, cafes and a nine- screen cinema were constructed, provid- ing over 210,000 square feet of retail space. Office space was also created, which accommodates Amtrak’s 100,000- square-foot national headquarters. The net effect of these changes was to double the commercially available space.

COMMEN TA RY

The successful collaboration of the public and private partners made the Union Station restoration a triumph that bene- fits not just the partners involved but every visitor to the unique historic site.

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The PPP succeeded owing to a combina- tion of factors that included commitment on the part of the political leadership to the project and public-sector involve- ment throughout the project. Moreover, the project followed a well-conceived, carefully executed plan that included a dedicated income stream, open commu- nication and dispute-resolution channels, and the right private partner.

The Union Station PPP incorporated the building’s transportation utility and unique architectural aspects to create a functional commercial destination that attracts train travellers, tourists and local customers alike and benefits the city of Washington, D.C.