Meeting_Body
EXECUTIVE MANAGEMENT COMMITTEE
OCTOBER 15, 2026
Subject
SUBJECT: INNOVATIVE FINANCING STRATEGY AND IMPLEMENTATION ROADMAP PLAN
Action
ACTION: RECEIVE AND FILE
Heading
RECOMMENDATION
Title
RECEIVE AND FILE status report on the Innovative Financing Strategy Plan, including Public-Private Partnerships (P3).
Issue
ISSUE
At its March 2026 meeting, the Board approved Motion 26 by Directors Dutra, Sandoval, Najarian, Horvath, Yaroslavsky, and Dupont-Walker (Attachment A), which directed the Chief Executive Officer to return to the Board with a comprehensive P3 and Innovative Financing Strategy and Implementation Roadmap Plan. This report provides an update on the early work that is underway, outlining foundational activities planned that will shape the approach to innovative financing over the next several years.
Background
BACKGROUND
According to the U.S. Department of Transportation (USDOT), innovative financing encompasses techniques and mechanisms that go beyond conventional grant-based or pay-as-you-go funding, allowing transportation agencies to leverage resources, borrow funds, or generate new revenue streams to support infrastructure projects. Common mechanisms include, but are not limited to, P3 and value capture. The benefits of innovative financing include:
• Leverages existing funding to maximize impact;
• Accelerates project delivery, reducing delays and inflation-related cost increases; and
• Supports sustainable and equitable transportation
Metro’s exploration of P3 as an opportunity for major infrastructure projects is not new, but prior attempts have not been successful; the upcoming effort will build on lessons learned from those experiences. Metro performed P3 assessments in the mid-2010s that considered a comparison between traditional Design-Build models vs. full Design Build Finance (DBF) and Design Build Finance Operate Maintain (DBFOM) delivery models. In 2017, those initial P3 assessments, along with Unsolicited Proposals received, led to the decision to further explore advancement of full DBF/DBFOM P3 structures for two projects, the West Santa Ana Branch (later Southeast Gateway Line) and the Sepulveda Transit Corridor (STC).
In 2019, for STC, the Board authorized the solicitation of Pre-Development Agreement (PDA) contracts, with up to two private sector partners chosen by utilizing a competitive, objective selection criteria process. Benefits of the PDA process were identified as optimization of project performance, risk, constructability, affordability, and delivery schedule through early design solutions, innovation, and private sector rigor and resources. In 2021, for STC, early private sector engagement via the two PDA contracts was advanced in conjunction with the environmental process.
Also in 2019, Metro began to advance other types of collaborative contracting methods, including delivery models such as Progressive Design Build (PDB) and Construction Manager/General Contractor (CM/GC) for major infrastructure projects. Initial projects exploring these approaches included Link Union Station (LINK US), G Line Bus Rapid Transit Improvements, East San Fernando Valley (ESFV) Light Rail Transit, and I-105 ExpressLanes. These delivery methods also include the opportunity to benefit from private sector collaboration and innovation.
In 2024, further assessment of a DBFOM P3 model for the Southeast Gateway Project was concluded, resulting in the DBFOM P3 model being dropped from further consideration. This assessment recognized how changes in market conditions, along with significant project specific risks and challenges, including interface and third-party risks, diminished the potential benefits that could come from a P3 delivery structure, particularly in comparison to new collaborative contracting options.
In 2026, a Locally Preferred Alternative (LPA) for STC was selected, leading to work with a single PDA team to advance design refinements that align with the LPA, as well as the commercial and financial efforts to deliver the LPA.
At the March 2026 Board Budget Workshop, Metro staff presented a range of P3 workstreams as a potential means to address projected capital and operating funding gaps, manage delivery risk, and enhance long-term financial sustainability. Subsequently, Motion 26 was introduced in March 2026, affirming the Board’s interest in exploring P3 strategies that could drive value to the agency.
Discussion
DISCUSSION
All transit agencies in the United States are facing the growing challenge of funding their major capital projects when traditional revenue streams are being outpaced by growing cost pressures. Metro’s initiatives within Program Management, Program Control, and Countywide Planning and Development have helped address some of the impact of project cost drivers, however, they cannot overcome all project challenges, particularly ones outside of Metro’s control. As a result, Metro is continuing to explore innovative financing structures, inclusive of P3 models, in ways that could help to offset some of the current funding needs.
Succinctly, a P3 is a long-term contractual arrangement between a public agency and a private entity to deliver and/or operate a public asset. A well-structured P3 can improve risk allocation, incentivize innovation, and enhance cost and schedule certainty. However, a P3 is not a source of free money; it is a financing mechanism that requires repayment with interest, does not transfer ownership of public assets, and does not suit all projects.
In line with the Board Motion and based on the lessons learned from Metro’s prior assessments of P3 delivery opportunities, Metro has initiated the P3 Innovative Financing Strategy and Implementation Roadmap Plan (Plan). Attachment B provides a high-level timeline for key activities and decision points, which was introduced at the March Budget Workshop. This Plan is structured around three major P3 workstreams and is supported by engagement of a P3 Tiger Team to ensure alignment across the agency as staff explore potential benefits, challenges, and risks of the different P3 approaches. The P3 workstreams include:
1. DBFOM analysis of STC, including upcoming work in developing a Preliminary Business Case for P3 implementation, leveraging the PDA team deliverables including updated cost estimates, construction methodologies, project delivery approach, and a financial model and financing plan. A DBF or DBFOM is a long-term P3 arrangement that includes private sector financing, final design, construction and for the latter, operations and maintenance.
2. Metro P3 Assessment explores opportunities to leverage P3 components which could add value on upcoming projects via an assessment of planned transit line extension projects, including Southeast Gateway Line - Slauson to Union Station, Eastside Transit Corridor Phase 2 to Whittier, K Line Extension to Torrance, and K Line Northern Extension.
3. Opportunistic initiatives align with agency needs but are not tied to major transit line expansion projects. This workstream includes consideration of P3 delivery for the Center for Transportation Technology Excellence (CTTE) in the Antelope Valley and an assessment of how P3 models might support enhancement of existing Metro stations and adjacent property while generating long-term revenue.
The formation of the P3 Tiger Team, composed of senior Metro staff from across the agency, ensures future P3 decisions are informed by their input early and protects against decisions being made in isolation, with perspectives on opportunities and risks shared before any critical decisions are made. By regularly sharing analysis and encouraging open dialogue, the P3 Tiger Team organically builds consensus in a transparent and traceable way, ensuring success is shared across the agency. Figure 1 visually represents the P3 Tiger Team and the P3 workstreams.
Figure 1 - P3 Tiger Team and P3 Workstreams
Motion 26 Status
In line with the attached roadmap, P3 activities are currently focused on engagement with the private sector and evaluation of where P3 models can provide value for each of the workstreams. Staff is introducing Metro’s P3 workstreams to the market and conducting market soundings to develop a refreshed understanding of industry appetite, delivery model viability, and risk allocation trends, leading towards an understanding of where innovation and value creation opportunities exist.
This renewed engagement on delivery models across candidate projects and strategic initiatives will inform future identification of ways to package/phase projects (e.g., bundling, segmenting) to improve market competitiveness and future success. Additionally, this engagement will increase understanding of how risk allocation boundaries have evolved, sharing perceptions of risks, constraints, and value levers affecting delivery approaches, and elaborating on contractor and investor constraints related to the P3 workstreams.
Finally, this market engagement is seeking to encourage the sharing of innovations that can leverage P3 structures to minimize whole-life costs and/or accelerate delivery and potentially integrate joint development (JD)/transit-oriented development (TOD) opportunities into transit infrastructure procurement models. This component of the engagement is looking to explore innovative value creation solutions, including long-term leases, development rights (air rights/adjacent parcels), and revenue-sharing.
Informed by this engagement, staff will begin qualitative assessments, commercial development evaluations, and identification of policy tradeoff considerations that may arise A forum with organized labor is also being planned. Future updates will transition from information related to these initial engagements and qualitative assessments to more robust quantitative evaluation and advancement of corresponding procurement(s) in line with project-specific updates. This may include review and revisions to Metro’s standard project delivery practices, potential development of Implementation Agreements (IA), and continued procurement for select components from some of the workstreams.
Industry Engagement
As part of the initial engagement with the private sector, staff attended the 2026 P3C Conference and Expo in Dallas, Texas in March, which enhanced renewed engagement and encouraged broader interest in the market of P3 delivery opportunities at Metro. This annual event connects public and private leaders to collaborate on alternative project delivery methods for U.S. infrastructure. At the conference, Metro provided a focused Metro P3 Overview Session to industry attendees, discussing the pipeline of capital projects, and outlining its P3 workstreams approach. This was followed by multiple breakout sessions with various P3 consultants, investors, infrastructure builders, and financial advisors, as quasi-market soundings. Additionally, Metro’s previous Chair Dutra participated in a main stage panel discussion entitled From Projects to Programs: Building a Sustainable P3 Pipeline, and a panel session was jointly held with participants from Metro’s PDA partners titled Reimagining Regional Connectivity: The Sepulveda Transit Corridor.
Engagement with the industry continued in July with staff attending the American Road and Transportation Builders Association (ARTBA) P3 Conference in Washington, D.C. This annual event facilitates connections between project owners, private executives, contractors, and public officials to discuss infrastructure finance, project delivery, and policy. Metro staff participated in the Closing Town Hall Session with other transportation agencies to further inform the industry on Metro’s P3 workstreams, including continuing work with the Sepulveda Transit Corridor PDA team on the LPA. Continued engagement with the private sector includes market soundings, with future updates to the Board reporting on key outcomes from this continued and ongoing engagement process.
P3 Workstreams
As previously outlined, and fundamental to the Plan, is the identification of P3 opportunities within Metro’s capital program. The following section provides greater detail on each of these P3 workstreams as well as corresponding key activities.
DBFOM (Sepulveda Transit Corridor)
As work by the PDA team progresses, including advancing the engineering of the selected mode, configuration, and alignment, Metro will continue assessment of a DBFOM P3 approach for the STC project. This will be informed by updated financial information, including costs, funding, financing and risk, from the PDA. Figure 3 visually represents key activities for this P3 workstream and the planned timeline under the existing approach. Staff are actively evaluating opportunities to streamline and accelerate this process while maintaining critical data and analysis-informed decision points.
Figure 2: DBFOM Workstream
Qualitative Assessment & Market Trends Analysis
With support from Metro’s P3 Financial Advisor, work this year will include developing a transit market and alternative delivery trends summary outlining best practices, commercial and financial terms, and implementation approaches, highlighting any material differences between STC’s approach and current market conditions. Additional early work will also include qualitative risk identification and screening of non-negotiable risks to support streamlined delivery method selection or elimination of certain methods from further consideration and identify opportunities and risks to be quantified during future Value for Money (VfM) analysis.
Preliminary Business Case, Request for Implementation Agreement Proposal, and Implementation Agreement Execution / Financial Close
Subsequent implementation activities include several major decision points. Metro staff will develop a Preliminary Business Case comparing the PDA-proposed DBFOM P3 approach against a Public Sector Comparator (PSC) delivery scenario through quantitative VfM. This analysis will determine which delivery model is likely to generate greater value per dollar of public investment. Additional analysis will include a project funding and affordability evaluation and qualitative assessment, analyzing further aspects that drive project viability and success.
If the P3 approach provides clear value to Metro, staff will work to finalize requirements in the Request for IA (RFIA) Proposal, defining the P3 transaction, including, but not limited to, concession term, design and O&M standards, hiring/employment requirements, and payment mechanisms. Once RFIA requirements are sufficiently advanced, staff will request Board authorization to issue the RFIA to the PDA team resulting in a firm fixed-price proposal, or other pricing model leading to cost certainty, for Project Implementation. Staff will then prepare a Final Business Case and return to the Board prior to executing an Implementation Agreement, culminating in Commercial Close (establishing contractual rights) and Financial Close (all conditions precedent are met and the P3 partners’ obligations formally take effect).
Metro P3 Assessment
Through this workstream, staff are expanding the vision of P3 opportunities beyond just DBF/DBFOM models to infuse other forms of innovative private sector financing and test the potential benefits that could be realized. The Metro P3 Assessment workstream analyzes a P3 delivery strategy for all or portions of upcoming line-extension projects. To directly align this effort with upcoming project opportunities and needs, while also informing benefits that could apply elsewhere, Metro is evaluating P3 potential on four upcoming projects:
• Eastside Transit Corridor Phase 2 to Whittier
• K Line Extension to Torrance
• Southeast Gateway Line - Slauson to Union Station
• K Line Northern Extension
Figure 3 visually represents this P3 workstream and a general timeline associated with key activities, which are subject to change.
Figure 3: Metro P3 Assessment Workstream
Phase One
With the assistance of Metro’s P3 Financial Advisor, early Metro P3 Assessment activities include engagement with private sector vertical and horizontal contractors, JD/TOD/real estate developers, and equity investors. In parallel, a benchmarking of recent domestic and international P3 transit projects is being conducted. These activities will culminate in tailored recommendations for P3 delivery models suitable for these project needs that would align with Metro’s objectives and priorities.
Phase Two
Metro may then elect to advance tasks which would include project-specific quantitative assessment of one, or more, of the upcoming projects to inform future Business Case(s). Additional work to advance the procurement strategy and pre-procurement support is also possible, which would later result in the development of a project-specific Business Case leading to possible P3 procurement(s).
Key insights resulting from this P3 workstream would include confirmation of industry interest and conditions for successful P3 delivery, best practices and lessons learned from comparable P3 transit projects, and identification of innovative funding and financing strategies, such as station rights, TOD, and land value capture.
Opportunistic
This workstream recognizes that a P3 contracting structure could also be leveraged for some of Metro’s objectives by supporting projects which are not tied to future transit expansion. Two opportunities are currently considered under this workstream, and are visually represented in Figure 4, including a general timeline associated with key activities, which are subject to change:
Figure 4: Opportunistic Workstream
Current actions related to each of these opportunities are described below. As these initial stages progress, staff will confirm if they warrant further consideration of P3 delivery strategies.
Center for Transportation Technology Excellence
The CTTE is a proposed manufacturing facility of up to 1,500,000 square feet in the Antelope Valley for bus and/or rail. The CTTE aims to shorten Metro’s vehicle procurement timelines, strengthen the national transit vehicle supply chain, accelerate zero-emission technology adoption, and generate significant regional economic benefits, estimated at $11.5 billion in economic impact and more than 114,000 jobs.
In 2018, the Los Angeles County Board of Supervisors directed the County CEO to partner with Metro to identify incentives for establishing a rolling stock manufacturing facility in the County and to develop a workforce plan emphasizing local hiring, training, internships, and apprenticeships. Since then, Metro, Los Angeles County, and the City of Palmdale have advanced a shared vision for the CTTE, formalized through a 2024 Memorandum of Understanding (MOU) outlining roles, governance development, financial planning (including incentives and grant strategies), entitlement support, and stakeholder engagement. Also in 2024, Director Barger allocated $500,000 in discretionary funding to support the project.
A Metro RFI will be issued to gauge market interest and when doing so, Metro will test industry interest and ideas to explore potential benefit for advancement of a P3 model on this project. As a P3 opportunity, the CTTE can offer long-term development opportunities on a large, publicly controlled site, colocation with specialized testing infrastructure and alignment with federal priorities such as Buy America and the CHIPS and Science Act. Clear risk allocation, phased development, and incentives tied to innovation and workforce development could potentially further strengthen CTTE as a P3 value proposition. Later this year, Metro will review responses to the RFI, potentially leading to the development of P3 procurement documents for future Board consideration.
Reimagining Existing Stations
Since 1990, Metro’s rail and BRT network has expanded to 144 stations across the County with 115 of those being rail stations. Potential new revenues would be explored by pursuing an analysis of existing stations and adjacent property for overbuild, air-rights, and other revenue-generation opportunities. As a first step, and in response to the Unlocking Possibilities Motion 19 introduced by Directors Yaroslavsky, Bass, Dutra, Sandoval, and Solis (Attachment C) in March 2026, staff are assessing potential pilot opportunities for a Metro Station Commercial District Strategy across the Metro system, to position stations as active commercial hubs with retail, services, and potentially mixed-use development integrated above, within, and adjacent to stations to support long-term non-fare revenue generation. Once this strategy is advanced further, and if locations are identified that could benefit by leveraging a P3 approach, this effort would be supported by the P3 Tiger Team . By the first quarter of 2027, the roadmap anticipates the potential identification of a pilot station to advance leveraging a P3 structure.
Equity_Platform
EQUITY PLATFORM
While the Plan is primarily focused on evaluating delivery models and financing structures, its implementation has possible implications for how benefits and burdens are distributed across the County. As Metro advances the Plan, staff will leverage prior project-specific equity assessments for individual transit projects and whether P3 structures can support more cost-effective and timely delivery of transit projects that expand access to opportunity, reduce travel times, and improve regional connectivity for historically underserved communities.
Additionally, as the Plan progresses into implementation, specific considerations for P3 models will be required to ensure new pathways are created for workforce development, small business participation, and local hiring. As P3 models are explored, Metro will consider opportunities to embed inclusive hiring standards, targeted worker programs, and small business participation goals into future P3 agreements. This includes assessing how long-term operations and maintenance responsibilities under a DBFOM structure could support stable, high-quality jobs consistent with Metro’s labor commitments.
This Plan supports Metro’s broader equity goals by strengthening the agency’s ability to deliver its capital program. More cost-effective and timely project delivery enables Metro to expand mobility options, reduce travel burdens, and support economic opportunity in communities that have historically experienced underinvestment. As the Plan advances, staff will continue to ensure that P3 strategies contribute to a more accessible, inclusive, and equitable transportation system for Los Angeles County.
Vehicle_Miles_Traveled _Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as the development and implementation of this Plan allows Metro to consider project delivery approaches that can provide more cost and schedule conscious delivery of the capital program, including transit investments leading to VMT reductions. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The development of this Plan supports the following strategic plan goals primarily by assessing optimal planning and delivery options for multiple transit capital projects to help achieve on time and on budget performance:
Strategic Plan Goal #1 - Provide high-quality mobility options that enable people to spend less time traveling.
Strategic Plan Goal #5 - Provide responsive, accountable, and trustworthy governance within the Metro organization.
Next_Steps
NEXT STEPS
Staff will provide updates on the Plan and the activities and preliminary findings from each P3 Workstream bi-annually.
Attachments
ATTACHMENTS
Attachment A - Board Motion 26
Attachment B - P3 Workstreams and High-Level Roadmap
Attachment C - Board Motion 19
Prepared_by
Prepared by: Julio Perucho, Deputy Executive Officer, Capital Program Initiatives, (213) 922-4387
Reviewed_By
Reviewed by: Sharon Gookin, Deputy Chief Executive Officer, (213) 418-3101
