Innovations in Transportation Infrastructure Development:

A Road Less Traveled

Perspectives of the Public Owner

Trends in State Highway Funding, National Historical Trend (1978 – 2004)Percent

0

10

20

30

40

50

60

70

80

90

100

1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Fuel Taxes Vehicle Taxes Tolls General Fund Other

Source: 2004 Highway Statistics, Table HF-10.

Facility pricing (tolls) a small – but growing – method of financing transportation in the United States

2005 Gas TaxRental Car Tax

23¢ Gas Tax

5¢ Gas Tax

Federal Revenues

Licenses, Permits, and Fees

TNB and Other Toll RevenueFerry Fares

Miscellaneous

Vehicle Sales Tax

Local Revenues

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

Direct User Fees

$400 Million

Indirect User Fees

$4,535 Million

Special Taxes

$176 Million

General Taxes

$49 Million

Billions (Current Dollars)

Current Transportation Funding Sources in Washington State

Fiscal Years 2007 - 2009

Tacoma Narrows Bridge

TNB under construction: 6th largest D/B project in the world (as of 2005)

Realigning the traditional roles: Tacoma Narrows Bridge project

Public Sector Private Sector

Acquire Right-of-Way (ROW)Design Design

BuildFinance Finance Operate OperateMaintain MaintainOwn (reversionary)

“Cost Savings” by reversing the financing of TNB

Mortgage Statement: Total Principal and Interest Over 24 Years Estimated at $1.572 billion

To

tal B

orr

ow

ing

$711

m

Mortgage Statement: Total Principal and Interest Over 34 Years Estimated at $1.908 billion*

To

tal B

orr

ow

ing

$7

94 m

*United Infrastructure Washington (UIW) Preliminary Financing Plan dated January 25, 2001.

It is estimated that toll-payers will save at least $336 million over 24 years. But there is a price associated with these savings: more risk.

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

Original TNB “Private Public Partnership”: 63-20 financing

**Seattle Northwest Securities, assumptions as of May 10, 2005 (interest rates as of 5/10/2005 + 50 BP with CABs issues 7-9).

Traditional State Bond Financing**

“…A review of 23 new turnpikes nationwide shows that a clear majority are failing to meet revenue projections to justify their costs.

Even with adjustments for the break-in period in the opening years, 86 percent of new toll roads in states failed to meet expectations in their first full year.

By year three, 75 percent – 15 of the 20 that have been open that long – remained poor performers.”

Truth be tolled first in a three-part series

Roads to richesPaved with bad projections

Denver Post June 1, 2006

Proposition Bet: what are the chances of being “right” about traffic revenue forecasts?

Revised policy (and political) considerations in PPP deals

• Subsidy level from statewide tax sources (no longer “lowest tolls possible”)

• Amount of funds raised relative to discount paid (no longer lowest cost of borrowing)

• Ownership of facility by private sector

• Willingness to “fail”

Camino Columbia TollroadLaredo, TXProject Start: 1999 Project Complete: 2000Project Cost: $90,000,000

Traffic only 10% of forecast

Defaulted on debt; sold at auction for 13 cents on the dollar

BUT: State purchased and operates as toll road – with much lower cost basis. Failure, or success?