public private partnerships: their limits and potential for the private provision of transportation...

Public Private Partnerships: Public Private Partnerships: Their Limits and Potential for the Their Limits and Potential for the

Private Provision of Private Provision of Transportation InfrastructureTransportation Infrastructure

Adrian Moore, PH.D.Adrian Moore, PH.D.Vice PresidentVice PresidentReason FoundationReason FoundationAdrian.moore@reason.orgAdrian.moore@reason.org

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22

Mind the GapMind the Gap

Existing Highway and Transit Needs Estimates

$73 $73 $73 $73

$39 $85 $94

$159

$0

$50

$100

$150

$200

$250

Maintain Improve Medium High

Billio

ns (2

008 $

s)

FHWA C&P Report Policy Commission

Average Annual Highway Capital Needs & Gap Estimates2008-2035

Current Revenues Funding Gap

$ 112

$ 158$ 167

$ 232

$14 $14 $14 $14

$7

$17

$8

$16

$0

$5

$10

$15

$20

$25

$30

$35

Billio

ns (2

008 $

s)

FHWA C&P Report Policy Commission

Average Annual Transit Capital Needs & Gap Estimates2008-2035

Current Revenues Funding Gap

$ 21

$ 31

$ 22

$ 30

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The gas tax is not a viable funding The gas tax is not a viable funding alternativealternative

(Decline in real value of the fuel tax $1997)(Decline in real value of the fuel tax $1997)

1950 1960 1970 1980 1990 2000 2010

Average

5.00

4.00

3.00

2.00

1.00

0

Cen

ts p

er m

ile

Where will the money Where will the money come from?come from?

• Federal level interstate and Federal level interstate and goods movement needs are goods movement needs are appreciableappreciable• But, most of the gap is state and But, most of the gap is state and

locallocal• More state and local commitmentMore state and local commitment• Public Private PartnershipsPublic Private Partnerships

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Transportation’s Transportation’s “Brave New World”“Brave New World”

Open road tollingOpen road tolling Dynamic tolling Dynamic tolling Private equityPrivate equity Public funds focus on Public funds focus on

“untollable” projects“untollable” projects

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66

Technology, pricing and stages Technology, pricing and stages of road privatizationof road privatization

Local roads(20 Years?)

Major arterials(10 years)

Limited Access Highways(now)

12

3

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77

Paris A86 Extension ($1.5 billion)Paris A86 Extension ($1.5 billion)

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Viaduc de Millau: $500 millionViaduc de Millau: $500 million

Main Lanes

Managed Lanes

Direct TransitAccess Ramps

Direct AccessRoad to Arterial

BRTStation

1010

Capitol Beltway HOT Lanes

New Toll Roads: ExtensionsNew Toll Roads: Extensions• South Bay Expressway (SR 125), San South Bay Expressway (SR 125), San

Diego (in operation)Diego (in operation)• Dulles Greenway, No. Virginia (in Dulles Greenway, No. Virginia (in

operation)operation)• SH 130, Austin to San Antonio SH 130, Austin to San Antonio

(financed)(financed)• Mon-Fayette Expressway, Pittsburgh Mon-Fayette Expressway, Pittsburgh

(pre-proposal stage)(pre-proposal stage)

New Toll Roads: Missing LinksNew Toll Roads: Missing Links• Triangle Expressway, Raleigh, NC (pre-Triangle Expressway, Raleigh, NC (pre-

RFQ stage)RFQ stage)• Outer Beltway, Jacksonville, FL (RFQ Outer Beltway, Jacksonville, FL (RFQ

stage)stage)• Southern Beltway, Pittsburgh (pre-RFQ) Southern Beltway, Pittsburgh (pre-RFQ) • Grand Parkway, Houston (2 unsolicited Grand Parkway, Houston (2 unsolicited

proposals)proposals)

Managed Lanes, ConventionalManaged Lanes, Conventional• I-15 ML expansion, San DiegoI-15 ML expansion, San Diego• Katy I-10 MLs, HoustonKaty I-10 MLs, Houston• I-495 Beltway HOT lanes, No. VirginiaI-495 Beltway HOT lanes, No. Virginia• I-95/395 HOT lanes, No. VirginiaI-95/395 HOT lanes, No. Virginia• I-95 express toll lanes, BaltimoreI-95 express toll lanes, Baltimore• I-595 express toll lanes, Ft. LauderdaleI-595 express toll lanes, Ft. Lauderdale• I-70 toll truck lanes (MO, IL, IN, OH)I-70 toll truck lanes (MO, IL, IN, OH)

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What are PPP’s?What are PPP’s?

Lease, not sale of assetLease, not sale of asset Source of Source of newnew capital capital

• Typically raise Typically raise moremore money than public money than public agenciesagencies

• Upfront fees and/or toll revenue sharingUpfront fees and/or toll revenue sharing Better managementBetter management

• Life cycle managementLife cycle management New infrastructure fasterNew infrastructure faster Minimize risks to taxpayersMinimize risks to taxpayers

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1515

How They WorkHow They Work

Private firm designs, finances, builds, Private firm designs, finances, builds, operates for N yearsoperates for N years

Concession agreement protects Concession agreement protects public interestpublic interest• Length of leaseLength of lease• Credible toll revenue streamsCredible toll revenue streams• Timeline for improvementsTimeline for improvements• Specify toll rate increasesSpecify toll rate increases• Competitive selection processCompetitive selection process

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1616

Changes in ResponsibilitiesChanges in Responsibilities Traditional Long-Term PPP

Funding Source Highway trust funds Toll revenue bonds,

equity

Procurement Process

Design-Bid-Build Design-Finance-Build-Operate

Cost Overruns? Taxpayers Investors

Schedule Slips? Drivers Investors

Traffic Risk? Taxpayers Investors

Maintenance Funds Annual appropriations

Toll revenues

Maintenance Incentive

Public complaints Asset value

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Concerns about PPPsConcerns about PPPs

““Real”Real”• PrivacyPrivacy• Property rights/Eminent domainProperty rights/Eminent domain• Rent SeekingRent Seeking• ““Efficient” socialismEfficient” socialism

Red herringsRed herrings• Foreign ownershipForeign ownership• Monopoly pricingMonopoly pricing

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Adrian Moore, Ph.D.Adrian Moore, Ph.D.

Reason FoundationReason Foundation

Adrian.moore@reason.orgAdrian.moore@reason.org