Financing and Partnerships

New Directions in Financing and Partnerships

Shift Toward a New Model for Financing the U.S. Transportation System

• Faced with budget constraints and deficits, governments will need to turn further to innovative financing mechanisms to meet many of their transportation capital investment needs. The cost of ensuring infrastructure capacity and system performance over the next two decades will be increasingly expensive. New financing solutions will be sought nationwide.

• There is overwhelming recognition that the U.S. needs a new model for financing the National transportation system. The current gas-tax-dependent model does virtually nothing to directly address the growing costs of congestion and system unreliability. Revenues from airport passenger and user fees are also lagging behind. Sole reliance on approaches from the past cannot continue.

• Some of the evolving financing mechanisms will fall entirely within the realm of either the public or private sectors, but many will involve some form of public-private partnership. These partnerships will allow the government to draw upon private sector equity and expertise in the delivery, operation, and maintenance of the transportation system.

Pathway to the Future

Expand Public-Private Partnerships: Reduce existing impediments and provide incentives to States willing to partner with industry to develop transportation projects. Partnerships can supply a vast amount of investment resources, add discipline to the project selection process, and promote innovation.

© istockphoto.com

Direct Pricing of Road Use: Permit States and localities to implement direct, cost-based pricing of road use on all highways. This can be achieved through tolling, metering devices, and other innovations. The costs of congestion, maintenance, construction or reconstruction, and environmental impacts can be considered when developing pricing strategies. Revenues can be leveraged to fund major system improvements and attract additional investment.

Simplify Programs and Increase Flexibility: Promote fewer, more focused Federal programs that simplify process requirements and target congestion reduction and safety. Remove restrictions that add limited value and simply frustrate States attempts to implement their own transportation programs. Reward jurisdictions that are willing to use creative approaches and new technologies to tackle congestion and highway safety.

Make Decisions Based on Merit: Federal funding priorities should be given to merit-based, cost-beneficial projects, not pet political projects.

See figure: The U.S. Congestion Problem.

Realizing the Vision: Spotlight on Progress

Reducing Delays through Congestion Pricing

Congestion pricing benefits society as a whole. It benefits drivers and businesses by reducing delays and stress, by increasing the predictability of trip times, and by allowing for more deliveries per hour.

It benefits mass transit by improving transit speeds and the reliability of transit service, increasing transit ridership, and lowering costs for providers.

It benefits State and local governments by improving the quality of transportation services without tax increases or large capital expenditures, by providing additional revenues for funding transportation, by retaining businesses and expanding the tax base, and by shortening incident response time for emergency personnel, thus saving lives.

All of us benefit from the reduction of fuel consumption and vehicle emissions. Examples of effective congestion pricing programs in the U.S. include:

© istockphoto.com

Tolling: Single-occupant vehicles pay a per-trip fee each time they use the I-15 High Occupancy Toll (HOT) lanes. Tolls vary with the level of traffic demand on the lanes. Half of the revenue from the HOT Lanes in San Diego supports transit service in the corridor.

Bridge Pricing: On the Midpoint and Cape Coral bridges in Lee County, Florida, travelers were offered a 50% discount on their toll if they traveled during specific periods and paid their toll electronically. The toll structure encouraged drivers to shift from peak periods to off-peak discount periods.

Mileage-Based Pricing Test: The State of Oregon is studying mileage-based fees and peak-period driving charges designed to reduce traffic during the most congested periods while raising revenue to replace existing fuel-based fees. Global Positioning System (GPS)-based technology is being tested.

Expanding Public-Private Partnerships

© 2007 Metro Transit

Public-private partnerships (PPPs) refer to contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery of transportation projects. Today, 23 States have some form of legislation that authorizes PPPs in transportation.

Expanding the private sector role allows public agencies to tap private sector technical, management, and financial resources in new ways to achieve certain public agency objectives such as greater cost and schedule certainty, supplementation of in-house staff, innovative technology applications, specialized expertise, and access to private capital.

The private partner can expand its business opportunities in return for assuming the new or expanded responsibilities and risks. Some of the primary reasons for public agencies to enter into public-private partnerships include:

• Accelerating the implementation of high-priority projects by packaging and procuring services in new ways.
• Turning to the private sector to provide specialized management capacity for large and complex programs.
• Enabling the delivery of new technology developed by private entities.
• Drawing on private sector expertise in accessing and organizing the widest range of private sector financial resources.
• Encouraging private entrepreneurial development, ownership, and operation of highways and/or related assets.

PPPs specify the roles, risks, and rewards contractually so as to provide incentives for maximum performance and the flexibility necessary to achieve the desired results.