The up-gradation of Union Station is termed as a highly successful PPP project. The successful collaboration of the public and private sectors made the Union Station restoration a triumph that benefits both the partners and visitors to the unique historic site. The Union Station public-private partnership incorporated the building’s transportation utility and unique architectural aspects to create a functional commercial destination that attracts travelers, tourists and local customers and benefits the District of Columbia. Because of this success, the model has been replicated in a number of other agency railway stations.
Project Location: Washington, D.C.
Public Sector Partner: U.S. Department of Transportation
Private Sector Partner: Jones Lang LaSalle
Project Completion: 1988
Background: At the time of its opening on October 27, 1907, Union Station was the largest train station in the world and displayed a monumental example of Beaux-Arts architecture. By the late 1970s, the building had deteriorated to the point it was uninhabitable and in danger of demolition. Citizen groups and politicians began searching for an effective rehabilitation approach, one that could overcome the District and Congress’ funding troubles. As a result, Congress enacted the Redevelopment Act of 1981. Under the Redevelopment Act, Union Station’s lease was transferred from the Department of the Interior to the Department of Transportation (USDOT), which began the process to transform the station into a thriving transportation terminal and commercial center. Because restoration costs and the potential commercial economic benefits, a public-private partnership was identified as the best tool to accomplish the restoration. The transformation process involved the efforts of USDOT, the District of Columbia, Amtrak and private developers. The $160 million project took almost five years to complete, including the three year renovation. The project goals included 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 the public-private partnership, Union Station has been restored to its original grandeur and utility and is now the most visited site in the District, with over 25 million visitors each year.
The Redevelopment Corporation was confident that the project would be successful if the combination of traffic flow segments—intercity rail passengers, commuter rail customers, subway users, tour bus visitors and neighborhood residents—all came to the newly renovated station in large numbers. The renovation plan provided that the historic Main Hall be set aside as a restored space without commercial enterprises. The Concourse became the railroad’s ticketing and baggage facility and was expanded into a three-level commercial retail center.
A multi-deck, 1500-space public parking garage, a tour bus level capable of handling 80 buses, and a rail service waiting area were added. More than 120 stores, restaurants, cafes and a nine screen cinema were constructed to provide 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.
Why PPP? Costs to maintain the station had become overwhelmingly expensive. Both the Federal and District governments wished to find a financially viable option to fund the restoration of the station, both architecturally and functionally, in order to create a transportation hub and restore passenger rail service, stimulate local economic development and retain the historic quality of the Washington, DC, landmark.
Partners: The public sector partners for this project were the District of Columbia, the U.S. Congress and Amtrak. Forming the Union Station Redevelopment Corporation (Redevelopment Corporation), the nonprofit entity set out to identify funds from private sector partners to complete the restoration process. These participants were selected through a national competition.
The private sector partners for the marketplace development were Jones Lang LaSalle, Williams Jackson Ewing and Benjamin Thompson Associates. Jones Lang LaSalle currently acts as the leasing firm for the retail centers found within the station.
The railway companies using the terminal, both intercity and the regional mass transit systems, also participated. Ultimately, twelve state and federal agencies, each with varying levels of jurisdiction over the project, and private partners negotiated agreements that met each agency’s requirements and served the over-arching goal of ensuring the station’s long-term commercial success.
Financial Arrangements: The $160 million restoration cost was derived from a combination of public and private financing. Amtrak contributed $70 million in part for the construction of a new ticketing and passenger facilities. The District of Columbia contributed $40 million in interstate highway funds for the construction of a parking deck. These funds guaranteed a bond, whose debt service is paid by parking garage fees. Finally, the private sector partners provided the remaining $50 million balance through equity financing, serviced by revenues from commercial, rental and sales. In order to generate an ongoing income stream, the agreement stipulated that the private developer would pay a base rent (indexed for inflation) and profits from the operation of the station are shared by both the private developer and the Redevelopment Corporation. The funds provided by Amtrak repay the station’s revenues.
(Source: The National Council for Public-Private Partnerships)