1. Rail Investment and Public/Private Partnerships September 2014 David P. Simpson David P. Simpson Consultants LLC

2. Rail Investment and Public Private Partnerships Can states be more than observers to the process? September 2014 David P. Simpson David P. Simpson Consultants LLC

3. Discussion Sequence Who are the players? What do we know about them? What are the dimensions of the issue? Hotels, apartments or condos? Next steps – building a business model that works! September 2014 David P. Simpson David P. Simpson Consultants LLC

4. Who are the players? State DOT’s FHWA / FRA MPO’s (Large Cities) Class I carriers September 2014 David P. Simpson David P. Simpson Consultants LLC

5. Who are the players? State DOT’s FHWA / FRA MPO’s (Large Cities) Class I carriers Short line Carriers Large Trucking Firms New Rail Franchisees September 2014 David P. Simpson David P. Simpson Consultants LLC

6. What do we know about the the public stakeholders? Very limited funding for rail Not part of mainstream planning efforts Traditional “Niche” focus – – Public safety / grade crossings – Shortlines/branchline preservation – Passenger/commuter rail September 2014 David P. Simpson David P. Simpson Consultants LLC

7. What do we know about the private stakeholders? Rail carriers in capacity rationing mode – Long-haul, high volume corridor emphasis – Threshold volumes for new services rising – Trainload traffic opportunities a priority – Little appetite to broaden market scope – Domestic intermodal becoming more important September 2014 David P. Simpson David P. Simpson Consultants LLC

8. What do we know about the private stakeholders? Real pricing increases – Financials strong – Little incentive to change business model September 2014 David P. Simpson David P. Simpson Consultants LLC

9. What do we know about the private stakeholders? Motor carriers under duress – hours of service and job structure issues – Extreme labor turnover issues – Hours of service regs impact availability – Drug testing – Willingness to explore new structures – Large vs. small firms September 2014 David P. Simpson David P. Simpson Consultants LLC

10. What are the dimensions of the issue? September 2014 David P. Simpson David P. Simpson Consultants LLC

11. Public is sympathetic to freight rail AASHTO Freight Rail Bottom Line Report September 2014 David P. Simpson David P. Simpson Consultants LLC

12. Public is sympathetic to freight rail AASHTO Freight Rail Bottom Line Report Motorist frustration with truck volumes September 2014 David P. Simpson David P. Simpson Consultants LLC

13. Public is sympathetic to freight rail AASHTO Freight Rail Bottom Line Report Motorist frustration with truck volumes Corridor studies confirm importance of freight congestion issue September 2014 David P. Simpson David P. Simpson Consultants LLC

14. Public is sympathetic to freight rail AASHTO Freight Rail Bottom Line Report Motorist frustration with truck volumes Corridor studies confirm importance of freight congestion issue No public sector model to move forward with freight rail September 2014 David P. Simpson David P. Simpson Consultants LLC

15. Public is sympathetic to freight rail AASHTO Freight Rail Bottom Line Report Motorist frustration with truck volumes Corridor studies confirm importance of freight congestion issue No structural model to move forward with rail Geographic scope a big challenge for states September 2014 David P. Simpson David P. Simpson Consultants LLC

16. Challenges of Public Rail Investment Whose assets are they? September 2014 David P. Simpson David P. Simpson Consultants LLC

17. Challenges of Public Rail Investment Whose assets are they? What are we buying? September 2014 David P. Simpson David P. Simpson Consultants LLC

18. Challenges of Public Rail Investment Whose assets are they? What are we buying? How do we measure capacity? September 2014 David P. Simpson David P. Simpson Consultants LLC

19. Challenges of Public Rail Investment Whose assets are they? What are we buying? How do we measure capacity? Who will guarantee service? September 2014 David P. Simpson David P. Simpson Consultants LLC

20. Challenges of Public Rail Investment Whose assets are they? What are we buying? How do we measure capacity? Who will guarantee service? How do we track investment? September 2014 David P. Simpson David P. Simpson Consultants LLC

21. Challenges of Public Rail Investment Whose assets are they? What are we buying? How do we measure capacity? Who will guarantee service? How do we track investment? How to allocate ongoing investment? September 2014 David P. Simpson David P. Simpson Consultants LLC

22. Public Sector Evaluation Criteria Confidence in forecasted impacts September 2014 David P. Simpson David P. Simpson Consultants LLC

23. Public Sector Evaluation Criteria Confidence in forecasted impacts Clarity of value equation – Capacity vs. investment – Service quality and market fit September 2014 David P. Simpson David P. Simpson Consultants LLC

24. Public Sector Evaluation Criteria Confidence in forecasted impacts Clarity of value equation – Capacity vs. investment – Service quality and market fit Conservative market approach September 2014 David P. Simpson David P. Simpson Consultants LLC

25. Public Sector Evaluation Criteria Confidence in forecasted impacts Clarity of value equation – Capacity vs. investment – Service quality and market fit Conservative market approach Capital vs. subsidy bias September 2014 David P. Simpson David P. Simpson Consultants LLC

26. Private Sector Evaluation Criteria Return to shareholders September 2014 David P. Simpson David P. Simpson Consultants LLC

27. Private Sector Evaluation Criteria Return to shareholders Cash versus annuity value September 2014 David P. Simpson David P. Simpson Consultants LLC

28. Private Sector Evaluation Criteria Return to shareholders Cash versus annuity value Relationship to core business focus September 2014 David P. Simpson David P. Simpson Consultants LLC

29. Private Sector Evaluation Criteria Return to shareholders Cash versus annuity value Relationship to core business focus Regulatory risk September 2014 David P. Simpson David P. Simpson Consultants LLC

30. Private Sector Evaluation Criteria Return to shareholders Cash versus annuity value Relationship to core business focus Regulatory risk Commercial risk September 2014 David P. Simpson David P. Simpson Consultants LLC

31. So What? September 2014 David P. Simpson David P. Simpson Consultants LLC

32. Hotels, Apartments or Condos? September 2014 David P. Simpson David P. Simpson Consultants LLC

33. What are structural options? ASSETNETWORK STRIPPINGINTEGRATION Easement sale/leaseBroaden Core Biz Limited CorridorsMultiple Use Assets Market IsolationMarketing Integration September 2014 David P. Simpson David P. Simpson Consultants LLC

34. Next Steps – Building a Business Model That Works! September 2014 David P. Simpson David P. Simpson Consultants LLC

35. Next Steps – Building a Business Model That Works! Identify key advantages and liabilities for various PPP business structures – Carrier perspectives – Public sector perspective September 2014 David P. Simpson David P. Simpson Consultants LLC

36. Next Steps Identify key advantages and liabilities for various PPP business structures – Carrier perspective – Public sector perspective specific Develop two or three specific business models that may have application to corridor needs. September 2014 David P. Simpson David P. Simpson Consultants LLC

37. Next Steps Identify key advantages and liabilities for various PPP business structures – Carrier perspective – Public sector perspective specific Develop two or three specific business models Engage in collaborative effort to secure funding and initiate pilot project(s) September 2014 David P. Simpson David P. Simpson Consultants LLC

38. Thank You! September 2014 David P. Simpson David P. Simpson Consultants LLC