Northern Borders PPP Workshop Detroit, MI Dec 12-13, 2006 Mr. Prabhat A Diksit FHWA Resource Center

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

2. 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.

3. Understanding PPPs • As highway officials it behooves us to try to understand this new (tous) phenomenon. • Firstly, • It’s not such a new phenomenon!

4. 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 80’s & 90’s. March 12, 2014

5. 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

6. PPPs in the highway world • “Outsourcings”, the public private partnerships of the 80’s & 90’s, were in fields other than highways, and were for existing facilities: • Water & sewer facilities • Jails/schools & hospitals • It was not till the 1990’s 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.

7. 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.

8. 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.

9. 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……..

10. 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, (it’s 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.

11. 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.

12. 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.

13. 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.

14. 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 PBS&J 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.

15. 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

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

17. RC Innovative Finance Team ContactsFor Specific Questions