Northern Borders PPP Workshop

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Exploring Public Private Partnerships!
Northern Borders PPP Workshop Detroit, MI Dec
12-13, 2006 Mr. Prabhat A Diksit FHWA Resource
Center
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PPPs in the highway world!

• In 2004 news of the sale of the Chicago Skyway
  burst upon an astonished highway world.
• The handsome prices offered captured all of our
  attention.
• Any question whether this was a unique,
  one-time event has certainly been laid to rest by
  subsequent concessions.
• Indiana Skyway
• Dulles Toll road
• Pocahontas Parkway
• SH 130 in TX
• New deals are proposed weekly it seems.

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Understanding PPPs

• As highway officials it behooves us to try to
  understand this new (to us) phenomenon.
• Firstly,
• Its not such a new phenomenon!

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Public Private PartnershipsA brief look back!
Deja-vu for some!

• Modern era for PPPs began in Britain under
  Margaret Thatcher in 1979.
• Privatizations of State owned companies-- undoing
  past nationalizations.
• British Telecom, British Gas, British Steel,
  British Airways, British Rail etc etc. the
  Water and electricity industries.
• Privatizations spread all around the world in the
  80s 90s.

November 20, 2009
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PPP in US under Reagan, 1980

• At the National level
• Limited government initiatives, lowering of
  marginal tax rates
• De-regulation of airlines, telecoms, and rail
  industries
• At the Local level-- outsourcing
• Contracting out of services to private sector
• Leasing of facilities
• Concessions for long term operations

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PPPs in the highway world

• Outsourcings, the public private partnerships
  of the 80s 90s, were in fields other than
  highways, and were for existing facilities
• Water sewer facilities
• Jails/schools hospitals
• It was not till the 1990s that the PPP approach
  first hit the highway world
• VA PPTA Act 1995
• CA AB 680 , 1989 (leading to the SR 91 SR125
  toll-roads)
• Highway 407 PPP in Canada in 1999
• And of course, it was with the proposed Chicago
  Skyway sale
• in 2004 that national attention was really
  focused on highway PPPs.

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So why consider PPPs?

• Consider these two national problems
• 1. Growing demand!
• VMT growth rate 2.5 annually (1993-2002)
• Additions of new capacity 0.2 annually
• 2. Insufficient funds!
• Capital outlays on existing capacity inadequate
  (8.3 below par in 2002)
• Federal gas taxes 18.4 c since 1993.
• HUTF negative by 2009.
• Raising new revenues at all levels of government
  difficult.

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Insufficient funds

• Inadequate funds for new capacity
• Virtually all State monies go for upkeep and
  maintenance of existing capacity.
• Often insufficient funds for rehab improvements
• Sometimes Inadequate funding of operations and
  routine maintenance.

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PPPs have broad scope.

• Leasing and operation of existing capacity
• Creation of new capacity new toll lanes, road
  extensions, new highways
• Funding and financing of major rehab. projects
• Partnerships with governments for the funding of
  interchanges, ITS systems, or acquisition of
  right of way
• Partnerships for maintenance or long term
  warranties of roadways
• Approaches to limiting/ sharing risks and costs
• And other creative ideas not yet considered..

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Over the next day and a half

• We will hear about the well known pioneering
  Canadian toll-road ETR 407 from Kim Lambert . An
  excellent project, (its 100 electronic tolling
  still excites American engineers ). But it has
  not always been smooth sailing and there are
  lessons to be learnt both positive and negative.

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We will hear about the VA PPP program

• VA, an early pioneer with its PPTA Act in 1995 is
  the home of several well known PPP projects such
  as the Dulles Greenway, the Pocahontas Parkway.
• It is also the home of interesting projects in
  progress I-95/I-395 toll lanes, US 460
  improvements
• It too has had an interesting history and its
  web site is one of the most comprehensive sources
  of information and experience.
• Tom Pelnik from VaDot will speak about the VA
  experience.

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New methods of financing

• One of the strong points for PPP is that it
  brings to the table non-traditional financings
  corporate equity debt, investment from pension
  hedge funds.
• Later today speakers from JP Morgan , Macquarie
  Goldman Sachs will bring their respective
  perspectives to this issue.

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Legislation legal issues

• Legal issues governing PPPs are always crucial,
  given governmental involvement.
• Only about half the States have specific
  legislation authorizing public private
  partnerships on their highway networks.
• The presence of PPP legislation is deemed to be
  crucial to the smooth development of PPPs.
• Ed Kussy from the FHWA, Nancy Smith of Nossaman
  Guthner will address these issues later today.

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Problems with the solution??

• PPPs certainly are one solution to the problems
  that are aggravating highway systems---- but are
  there any problems with the solution?
• Further, are there other issues regarding PPPs
  not yet considered?
• Tomorrow Dan Reagan of PBSJ will discuss both
  the pros and the cons of PPPs-- from the
  perspective of an FHWA DA now in the private
  sector.
• And the Roundtable Discussion later with the
  audience will further address these issues.

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Roundtable discussion with guests

• There are numerous issues for governments to
  consider in the actual implementation of PPPs,
  and hopefully the facilitated discussion tomorrow
  will bring them out
• Toll rates their regulation
• Stewardship Oversight
• Procurement methods
• Ownership options
• Allowable rates of return
• Customer protection mechanisms
• Safety under private management
• Bi-national issues

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• We hope you will take back useful ideas and have
  a good time..

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RC Innovative Finance Team ContactsFor
Specific Questions