Tolling and P3 Trends in 2009

byRobert W. Poole, Jr.Director of Transportation Policy,Reason Foundationwww.reason.org/transportationbobp@reason.org

Overview of Presentation

Financing after the credit crunch State-level interest and activitiesProject opportunitiesPolitical issues and opportunities

Credit crunch impacts

Miami port tunnel: delayed, team restructured, financed Oct. 14, 2009.Midway airport: cancelled; might be revived.Mississippi airport toll road: on hold, might be revived.I-95/395 HOT lanes: on hold, likely to be revived.

Deals that are getting financed are far less leveraged

Global Via purchase of Chile toll roads: 41% equity.Portugal Baixo Alentejo toll road: 31% equity (but partly availability payments).Abertis bid for PA Turnpike—reported to be 50% equity.Florida I-595 rebuild—only16% equity (but funding is via availability payments, hence no revenue risk).

Lots of equity available in infrastructure investment funds

Probitas estimates $84.5B as of end-2008, and another $92B being sought in 2009.Prequin estimates $115B as of early 2009; 94 funds seeking additional capital. U.S. pension funds now following the lead of Canadian and Australian funds.Problem is relative dearth of deals, not lack of capital.

States continue passing P3 enabling legislation

Enacted in 2009 so far:AlabamaArizonaCaliforniaMassachusettsPuerto Rico

Pending (and likely):MichiganPennsylvania

U.S. toll projects, 1992-2008

Stage Value ($B) Lane-miCompleted $40.0 3,900Construction 17.8 1,734Design/finance 19.4 1,887Enviro review 23.3 2,266Planning 60.5 5,900Totals: $161.0 15,687Source: FHWA, 2009

Types of projects (1): urban congestion relief

Rebuilding inadequate freeways (I-595)Adding Managed Lanes (LBJ, NTE, Beltway in northern Virginia)Building/operating Managed Lanes networks (Atlanta, San Francisco)Port-related toll truckways (Los Angeles, Miami, Tampa)

Types of projects (2):bridge repair & replacement

MO, NY bridge rehab programsVA—Jordan and Dominion bridgesCA—two LA port bridgesNY—Tappan Zee, Port Authority bridge replacementsMI—new Detroit River crossing

Types of projects (3):new and aging Interstates

New routes (tolled):Las Vegas to PhoenixI-69 Texas to Indiana

Rebuild with tolls + added capacity:Key long-haul truck routesMissing links in LCV network (see map)

Long-haul, multi-state TTWs

Debates over P3 concessions

Both national commissions said this tool should be encouraged.NCHRP synthesis 391: how to protect the public interest in P3s.Pew Center report: lessons learned from failed PA Turnpike lease.TX Legislative Study Committee report.

Federal surface transportation reauthorization

House bill (Oberstar) provisions include:

Federal regulation of all toll roads, public and private.Federal emphasis on reduced driving, increased transit.Possible new goods-movement program.

Need for P3 process reforms

Best practices, value-for-moneySeparate entities, as in Australia, Canada:

California’s Public Infrastructure Advisory CommissionMichigan’s new P3 officePuerto Rico’s new P3 agency

Principles for concession agreementsProject selection via Public Sector Comparator

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Assessing Value for Money via PSC

Basic methodologyDevelop conceptual framework

Estimate costs and revenues

Identify and analyze risks

Assess uncertainty around the inputs to arrive at risk-adjusted values

Develop financial model and calculate net present value

Perform sensitivity analyses

0

200

400

600

800

1,000

1,200

PSC PPP Delivery

Risk Transfer

Cost

ConclusionsCredit crunch has slowed deal closure; debt less available and more costly.State interest in P3 continues to grow.Large backlog of project needs:

Urban congestion reliefBridge replacementInterstate modernization

Need to address political challenges via process reform and best practices.