Public-Private Partnerships and Infrastructure
By Sean Slone, CSG Senior Transportation Policy Analyst
As states ponder a future that includes declining gas tax revenues and most likely a reduction of federal dollars for transportation, many policymakers are wondering whether private investment can be an important tool to help them meet their infrastructure needs in the years ahead.
Public-private partnerships–known as P3s–in infrastructure will be the focus of a conference next month in New York City. InfraAmericas, a news organization that provides in-depth analysis of P3s, is hosting the two-day forum June 14-15, and will bring together state and federal transportation officials, as well as representatives of global investment firms and others to discuss the future of P3s in the United States.
The use of such partnerships in the U.S. dates back to the early 1990s and more than half the states now have the authority to enter into P3s. Ohio became one of the latest states to get that authority when Gov. John Kasich signed legislation in March. Kasich has spoken about the possibility of leasing the Ohio Turnpike to a private company.
Indiana lawmakers also approved legislation last month to give the governor and the state department of transportation authority to enter into partnerships for toll roads. But a study committee will spend the next two years analyzing how to proceed with P3s before any new agreements go forward.
Indiana is no stranger to public-private partnerships, however. In 2006, the state entered into an agreement with a Spanish/Australian consortium under which the consortium agreed to operate and maintain the Indiana Toll Road for 75 years and make an upfront payment of $3.8 billion to the state. That payment allowed Indiana to address a transportation funding gap and fund a 10-year improvement plan known as the Major Moves program.
Long-term lease agreements with upfront payments–such as those for the Indiana Toll Road and a similar one for the Chicago Skyway, which have been one of the most common forms of P3 in the United States–have fallen out of favor to some degree in recent years. States and private companies are exploring other models that seek to share the revenues, responsibilities and risks more equitably.
Texas, Virginia and Arizona have had some unique P3 experiences and will be highlighted at the New York meeting.
In Texas, where P3s are known as Comprehensive Development Agreements or CDAs, state transportation officials have partnered with private companies to share the risks and responsibilities not only for operation and maintenance of some tolled highways, but also for design and construction of some projects. The state has a 2009 agreement with the LBJ Infrastructure Group to design, construct, finance, operate and maintain the 13-mile LBJ-635 corridor in Dallas County for 52 years, for example.
But Texas also has had a partial moratorium in place since 2007 that prevents new toll projects from moving forward unless they are launched by public-sector toll authorities. Projects like the LBJ are allowed since they involve only the addition of managed toll lanes to an existing toll-free road.
The moratorium was put in place as a reaction to the Trans-Texas Corridor project, an ambitious plan by Gov. Rick Perry that would have had private contractors build and operate billions of dollars of toll roads around the state. The moratorium is set to expire Aug. 31,and Texas lawmakers are in the midst of deciding how much CDAs may be a part of their state’s future. A House-Senate conference committee is considering a major transportation bill (Senate Bill 1420) that could roll back the moratorium and allow more privately owned toll road projects to move forward.
Conference attendees in New York will hear about the next generation of Texas P3 projects from officials with the Texas Department of Transportation and the Texas Transportation Commission, as well as the chair of the Texas House Committee on Transportation, Rep. Larry Phillips.
Virginia is already looking to greatly expand its use of public-private partnerships. While the state’s last notable P3 transaction was signed in 2008 (an agreement to design and build High-Occupancy Toll lanes on the Capital Beltway), Gov. Bob McDonnell has made streamlining processes, reinvigorating the P3 program and speeding up projects priorities of his administration. Virginia Transportation Secretary Sean Connaughton and others will be on hand in New York City to talk about what may lie ahead for the commonwealth.
In addition, meeting attendees will hear from Arizona Department of Transportation Director Gail Lewis about how her state, which only legalized P3s in 2009, is moving ahead with procuring agreements. Lewis’ department is working with the Maricopa Association of Governments to identify the potential for using P3s to fund toll-managed or High-Occupancy Toll lanes in Phoenix and other projects.
Speakers at the conference will also address a number of other issues, including:
How state legislators and agency officials can speed up the procurement process;
What voters think about private companies investing in infrastructure;
What deteriorating state and municipal budgets could mean for the P3 industry; and
What the federal government may be working on to advance the cause of P3s.
The Council of State Governments is a supporting organization for the InfraAmericas U.S. P3 Infrastructure Forum. A special conference rate of $400 is available for public sector members. To find out if you qualify for the rate and/or to register for the event, email Kate Salkeld at firstname.lastname@example.org with ‘CSG’ in the subject line to receive the appropriate booking form.